Revisions to Virginia’s Mechanic's Lien Agent Statute
In order to preserve Mechanic's Lien rights on residential projects in Virginia, a material supplier or subcontractor usually needs to give notice to a Mechanic's Lien Agent (MLA) within thirty days after they begin work. For more detail on the workings of this Mechanic's Lien Agent statute, click here: Construction Law Survival Guide: Mechanic's Liens in Virginia
The Virginia Mechanic's Lien Agent statute has been amended, effective July 1, 2010. To see a complete copy of the amendments, click here: Virginia Mechanic's Lien Amendments
It has probably always been possible to amend a building permit to add or change a Mechanic's Lien Agent, but this has always been one of the questions since this MLA statute was enacted in 1992. It has now been clarified that a building permit can be amended to add or change the MLA.
The real issue continues to be timing. When does a claimant have the obligation to check whether the MLA has changed, compared to when the claimant begins work, or compared to when a claimant sends an MLA notice, or compared to when a building permit is amended. The MLA statute states:
no person other than a person claiming a lien under [Virginia Code § 43-3(B) for streets, storm or sanitary sewer, waterlines or roads] may claim a lien . . . with respect to a one or two family residential dwelling unit if such person fails to notify any mechanics' lien agent identified on the building . . . (i) within thirty days of the first date that he performs labor or furnishes material to or for the building or structure or (ii) within thirty days of the date such a permit is issued, if such labor or materials are first performed or furnished by such person prior to the issuance of a building permit.
What if there is no MLA on the building permit when the claimant starts shipment, but the permit is amended to add an MLA within 30 days after the claimant begins shipment? Do you determine whether there is an MLA and a need to send notice as of the day shipments begin, 30 days after shipments or at the end of a construction project? Can an owner eliminate any rights to lien for any claimant by simply amending the building permit at the end of a construction project to add an MLA, when all suppliers are complete and it is already too late to send notice? There are still no answers to these questions.
Hopefully the Courts will give us some clarification and prevent abuses of this statute. As a practical mater, however, these amendments will not cause a significant change for most labor and material suppliers. The original MLA statute in 1992 severely reduced the number of residential mechanic's liens filed in Virginia. The vendors that decided not to incur the expense of sending MLA notices will not be affected by the change. They still will not send notices.
On the other hand, we think it will be very unusual for a property owner to amend permits for the purpose of thwarting mechanic's liens. Naming any MLA on the original building permit will severely reduce the number of mechanic's liens. The owner still has a defense of payment. As long as the owner pays its contractors if full, no lower tier subcontractor or suppliers will have lien rights. Owner builders do not really have a motivation to amend building permits to thwart mechanic's liens. The MLA statue was passed to protect subsequent consumer purchasers (and their title insurance companies). That is who was and is concerned about insolvent builders that do not pay their contractors.
Labor and material suppliers that want to send MLA notices already have to contact building departments or use a notice service to find out if a project had an MLA. Building permits are almost never posted on a construction site. Material vendors cannot take the time to travel to a project just to see the building permit. With these amendments, it is all the more important for a claimant to contact building departments or use a notice service to make sure they have current MLA information.
If there are big continuous shipments, it may be advisable to check for MLAs more than once on a project. In the past, we have advised clients to send MLA notices when they start shipments, to help make sure they did not forget. With these amendments, however, it may be better to check the current building permit and send MLS notices closer to the deadline of thirty days after you start shipments. If you send a proper notice to the MLA agent on the building permit at your deadline to preserve your rights, it would be hard to believe that a court would rule that an owner could eliminate your rights retroactively after that by amending the permit.