Do Not Lose Your Lien: The 150-Day Rule In Virginia Mechanic’s Lien Law
Under Virginia Mechanic’s Lien law, there are actually two distinct time limits operating from the last day labor is performed or material is furnished. You may know that the time limit for filing the mechanic’s lien is 90 days from the last day of the month in which the claimant last performed labor or furnished material (last day of work). [1] The claimant must also count backwards 150 days from their last day of their work. The claimant is not allowed to include any labor or materials supplied earlier than this in the mechanic’s lien, except for retention up to ten percent (10%) or sums held because of a “pay when paid” clause. The entire lien may be invalid if it includes a single dollar claimed for work outside this 150-day window. So, the penalty can be huge if this rule is ignored.
The 90-day deadline for filing the mechanic’s lien does not count from the exact same date as the 150-day rule, unless the project has been completed or terminated. [2] The claimant’s deadline for filing the mechanic’s lien would continue to shift to a later time as long as the claimant continues to supply labor or material. On the other hand, the 150-day window still counts back from that day of last labor or materials supplied by the claimant preceding the filing of the mechanic’s lien, whether or not the claimant continued to work after the lien filing. Supplying additional labor or material will change the deadline for filing the mechanic’s lien, but will not change the 150-day window. [3]
Code of Virginia Section 43-4 states the following:
The lien claimant may file any number of such memoranda, but no memorandum ... shall include sums due for labor or materials furnished more than 150 days prior to the last day on which labor was performed or materials furnished preceding the filing of such memorandum. Provided however, any memorandum may include sums withheld as retainages with respect to labor performed or materials furnished at any time before it is filed, but not to exceed 10% of the total contract price and (ii) sums which are not yet due because the party with whom the lien claimant contracted has not yet received funds from the owner or another third party.
This means that each mechanic’s lien can only include labor and materials supplied within a window going back 150 days from the last day labor or material is furnished by that lien claimant immediately preceding the lien filing. The 150-day rule does not apply to retention up to 10% of the total contract price and does not apply to money not yet due because of a “pay when paid” contract clause.
The 150 days counts back from the last day any labor or material was supplied, not the last day of labor or material included in the lien amount. [4] In other words, even if the claimant has been paid for that last labor or material or if the claimant continued work and that last labor or material is not included in the lien, the 150-day window still counts back from that day of last labor or material preceding the filing of the mechanic’s lien. On the other hand, the 150 days may only count back from the last day any labor or material added value or was billable to the project.[5]
It does seem clear that each individual contractor would usually have a different 150-day window, the same as each could have a different filing deadline, depending on their individual last day of work. In other words, there is no “unitary” 150-day window for all contractors on the project.[6]
The Virginia Supreme Court has ruled that an entire lien is invalid if the lien includes dollar amounts outside the 150-day window. The 150-day requirement is not a filing deadline like the 90-day rule; rather, it is a limitation on how far back in time a lien claimant can reach in any given memorandum of mechanic’s lien.
The rule is a requirement of the statute, and failure to abide by it will violate one of the prerequisites required by Virginia Code § 43-4 to perfect a mechanic's lien. This can result in a total invalidation of the mechanic’s lien.[7] The court cannot simply subtract claim amounts beyond the 150-day period,[8] although a claimant may have the opportunity to show that any lien amounts outside the 150-day window were an “inaccuracy” that was not “willfully false.”[9]
Contractors will rarely be on the project more than 150 days without receiving progress payments. Often, only retention is held for labor and materials supplied more than 150 days earlier. Therefore, older retention is not a problem, as long as total retention does not exceed 10% of the total contract price. The problem sometimes appears in change order work performed, but unpaid for a long period of time, while awaiting change order approval. For retention, and especially change order work, the focus should be on whether the claimant can legitimately say the funds held are not yet due to the claimant because of a “pay when paid” contract clause. Would the owner, the bank and any general contractor agree that the funds are not yet due? Would they dispute this later if a mechanic’s lien is filed?
We have learned that clients usually simply do not focus on the 150 day rule. If we ask them, they will say they have no problem with this rule and none of their work is that old. But if we push them to show us, we can often see that they have change orders or other work that is more than 150 days old. This creates a risk that the entire lien will fail. Reviewing the 150 day rule issue takes time for both the client and the lawyer and increases the cost of a lien, but it is worth every penny if a large dollar amount is involved. In any event, if a contractor is approaching 150 days on the project and has not received progress payments on all work performed, it may be necessary to file a mechanic’s lien and then continue work. This may be necessary to preserve all lien rights, even if the payment is not yet contractually due (even if the claimant could not sue for the funds and successfully obtain a judgment).
Another choice is to simply wait until there is a payment problem, but then exclude work from any mechanic’s lien later filed, if it was performed prior to the 150-day window. In other words, simply waiting until there is a payment problem may result in a need to be unsecured as to part of the debt. A claimant would still have the right to sue their contract debtor on their contract for the total amount due.[10] A contractor’s only other choice is explaining to an owner that a mechanic’s lien must be filed to preserve mechanic’s lien rights, even though the money is not yet due and that the contractor intends to continue to work on the project. This may be an incentive to an owner or general contractor to expedite payments or approve change orders.
There is no problem with filing more than one mechanic’s lien. The Code makes it clear that “a claimant may file any number of Memoranda,”[11] and it is sometimes necessary to do so in order to comply with the 150-day rule. If a construction contract calls for retention greater than 10% or if progress payments under the contract are not due for many months after work is performed, it may be necessary to file a mechanic’s lien and continue work in order preserve security rights.
[1] But in no event later than 90 days from the time project is completed, or the work thereon otherwise terminated. This means any claimant other than the general contractor always has at least ninety (90) days after their last work to file and may have up to 120 days, depending on what day of the month is the claimant’s last work and whether the entire project is complete. Va. Code Anno. §43-3 (Michie 1950). A general contractor always has only ninety (90) days after their last work to file, since the entire project is complete or terminated when the general contractor (and all subcontractors) stop work. However this difference does NOT impact the 150 day Rule as discussed in this article.
[2] Glasser & Glasser, PLC v. Jack Bays, Inc., 285 Va. 358, 371-75, 741 S.E.2d 599, 606-10 (2013).
[3] Here is another reason the deadline for filing the mechanic’s lien does not always count from the exact same date as the 150-day rule. As discussed below, the 150-day rule window always counts from the claimant’s last work. However the deadline for filing the mechanic’s lien can change because of work by someone other than the mechanic’s lien claimant, since the entire project is not complete or terminated until ALL contractors have stopped work. However this difference does NOT impact the 150 day Rule as discussed in this article.
[4] Carolina Builders Corporation v. Cenit Equity Co., 257 Va. 405, 512 S.E.2d 550 (1999).
[5] Glasser & Glasser, PLC v. Jack Bays, Inc., 285 Va. 358, 371-75, 741 S.E.2d 599, 606-10 (2013).
[6] Glasser & Glasser, PLC v. Jack Bays, Inc., 285 Va. 358, 371-75, 741 S.E.2d 599, 606-10 (2013) [The argument that the 150-day rule does not apply separately for each claimant ignores the language of the statute, which plainly states that the period is calculated according to the actions of the lien claimant. Because time is calculated in this fashion, it cannot be "unitary" for all lien claimants.
[7] Smith Mt. Bldg. Supply, LLC v. Windstar Props., LLC, 277 Va. 387, 672 S.E.2d 845 (2009).
[8] Carolina Builders Corporation v. Cenit Equity Co., 257 Va. 405, 512 S.E.2d 550 (1999); Johnson v. Tadlock, 39 Va. Cir. 436 (Fairfax County, 1996); Westburg Constr. v. Zuckerman, 43 Va. Cir. 38 (Fairfax County, 1997).
[9] Va. Code Anno. §43-15 (Michie 1950), Reliable Constructors v. CFJ Properties, 559 S.E.2d 681, 263 Va. 279 (2002); but see Smith Mt. Bldg. Supply, LLC v. Windstar Props., LLC, 277 Va. 387, 672 S.E.2d 845 (2009).
[10] Johnson v. Tadlock, 39 Va. Cir. 436 (Fairfax County, 1996) [Release of these liens does not imply that the contract claims asserted are invalid. The Plaintiff still has whatever contract remedies may otherwise be available to him].
[11] Va. Code Anno. §43-4 (Michie 1950).