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Remember that Second Deadline - the 150 Day Rule

 

Subcontractors in Virginia are usually aware of the 90-day deadline running from last work in which a claimant must file a mechanic's lien. However, there is another, equally important, deadline. That deadline is called the "150 day rule." The 150 day rule provides a window for what is included in a mechanic's lien. The claim must be for work done in the period ending 150 days before last work. The only exceptions to the 150 day rule are (i) retention of up to 10%, and (ii) monies not yet due because of a pay-when-paid clause. With the 150 day rule, your lien rights may be slowly disappearing as you continue to work on the project.

It may be rare that a subcontractor allows 150 days to go by without asserting lien rights, but it is important to keep track of the deadline. You may be losing lien rights. Also, it is important to remember that the exception for retainage is for a maximum of 10%. If you enter into a contract providing for 15% retainage, you may have a 150 day rule problem on at least 5%.

The consequences in failing to follow the 150 day rule can be very harsh, as one supplier recently learned in Carolina Builders v. Cenit Equity, 257 Va. 405 (1999). In that case, a supplier lost its entire mechanic's lien because two shipments were outside the 150 day rule. Carolina Builders shipped materials from December 6, 1995 through April 16, 1996, and filed a mechanic's lien on July 16, 1996. If those were the only facts in the case, Carolina Builders would have had a good lien. That is because the lien was filed within 90 days from the last day of the month in which the last of materials were provided, and it only included sums within the 150 day rule. Sounds good. Unfortunately, there was one other crucial fact. Carolina Builders continued shipping after April 16. Even though it was not liening for anything after April 16, its actual last day for shipping materials was May 23, 1996.

The Court ruled that the 150 day rule must be calculated back from May 23, 1996. It made no difference that the lien was only for materials delivered from December 6, 1996 to April 16, 1996. The Court held that to meet the 150 day rule, you count from the last day of labor or materials preceding the filing of the memorandum, whether or not your claim includes the last work. The Carolina Builders decision is counterintuitive to how most subcontractors think about mechanic's lien deadlines. Most subcontractors ask their attorneys what can be considered "last work" in order to extend the time they are on the project. In Carolina Builders' case, however, they would have been better off for mechanic's lien purposes if they had not continued shipping. The longer you are on a project, the more time you have to file a lien, but the more likely your claims might shrink because of the 150 day rule.

Carolina Builders argued that the amount of the lien should simply reduced by the shipments in violation of the 150 day rule. Thus, only part of its claim would be invalid, and the rest would be a lien against the property. However, the Court ruled that because the mechanic's lien claim included shipments in violation of the 150 day rule, the entire lien was invalid.

If you find yourself coming upon a 150 day rule deadline, all is not lost. Keep in mind that the Virginia Mechanic's Lien Statute authorizes "any number of memoranda" to preserve your rights. File a lien before the project is done, if necessary. You can always file another lien for the rest. And if you can no longer lien for part of you claim, you can also sue on the contract.

Whatever you do, remember that second deadline - the 150 day rule!

 

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