MECHANIC’S LIEN TRAP FOR THE UNWARY
In 1992 the Virginia legislature made a change to Virginia’s mechanic’s lien law that can be a trap for the unwary. Here’s how it works. Anyone who obtains a building permit for a one or two-family residential dwelling unit can designate a “mechanic’s lien agent” (MLA) on the building permit. The MLA can be an attorney, title insurance company, or financial institution, with certain restrictions. If a MLA is designated on the permit, anyone who wishes to preserve their rights to a mechanic’s lien must give a particular written notice to the MLA within the first 30 days after they began to furnish labor or materials to the property. This is a change from previous law, in which the crucial time limitations were measured from the dates when labor or material was last furnished.
The purpose for the notice is to advise the MLA that a potential lien claimant exists and should be contacted before settlement on the property. Many contractors are troubled by this new rule, however, because it requires them to give a notice at a time when there likely is no payment problem. Some feel that giving the notice at such an early stage in the project will hurt their relationship with the owner or a contractor. Unfortunately, the notice requirement is mandatory, and a claimant who fails to give notice or gives a late notice will either forfeit its right to claim a mechanic’s lien or have reduced lien rights.
If no MLA agent is designated on the building permit, the 30-day notice requirement does not apply. The requirement also does not apply if the project involves something other than one or two-family residential construction. But if the requirement does apply to the project, suppliers of labor or materials would be wise to issue a notice within the first 30 days after beginning work, regardless of whether their account is delinquent.