Construction Law Insights

Leesburg Building Partners, LLC v. Mike Berger Incorporated d/b/a MBI Concrete, Inc., Civil No. CL 115479 (Cir. Ct. Loudoun Cnty. Aug. 22, 2018)

On April 13, 2017, Leesburg Building Partners, LLC (“LBP”) contracted with Lansdowne Construction (the “Contract”) for Lansdowne Construction to construct an 18-unit condominium project known as the Ironsides Square Condominium (the “Project”). Lansdowne Construction subcontracted the concrete portion of the Contract to Mike Berger Incorporated d/b/a MBI Concrete, Inc. (“MBI”). In February of 2018, Lansdowne Construction completed the Project. On February 28, 2018, LBP paid Lansdowne Construction the full Contract price, including amounts for change orders. By April 27, 2018, LBP had conveyed all of the 18 units to third parties. On May 18, 2018, MBI recorded a Mechanic’s Lien against all of the condominium units in the amount of $48,180.00. On June 5, 2018, LBP filed a Petition for Release of Mechanic’s Lien, asserting that MBI’s Mechanic’s Lien was unenforceable under Va. Code § 43-7. On June 12, 2018, MBI filed a Petition to dismiss LBP’s Petition, asserting (i) that LBP lacked standing to bring the proceeding because it no longer had any interest in the property at issue and (ii) LBP’s Petition was not ripe for adjudication.

The Court held that LBP had standing. In every instance, LBP conveyed a condominium unit with a “Special Warranty” deed, wherein LBP covenanted that it would forever warrant and defend the property “unto the grantee ... against the claims and demands of ... all persons claiming ... through ... [the grantor].” Thus, LBP retained an interest in the Project’s condominium units through the “Special Warranty” and had standing to challenge the validity of MBI’s Mechanic’s Lien by filing a separate proceeding under Va. Code § 43-17.1. Regardless, a mechanic’s lien is an inchoate lien that exists from the time the work or material is provided. The filing of a mechanic’s lien is the perfection of that inchoate lien and relates back in time to the performance. It makes no difference how many times title is conveyed after the work or material is provided because the lien attaches when the work is done. Therefore, MBI’s Mechanic’s Lien attached while LBP held title to the Project and was a claim through or under LBP as grantor pursuant to Va. Code § 55-69. 

The Court found nothing in Va. Code § 43-17.1 that prohibited LBP from raising its lack of indebtedness in a petition challenging the validity of MBI’s Mechanic’s Lien. The fact that Va. Code § 43-7(A) permits, but does not require, LBP to present its lack of indebtedness as an affirmative defense does not preclude LBP from using its lack of indebtedness as a grounds for challenging the validity of MBI Mechanic’s Lien. Furthermore, condominium owners should not have to wait until MBI decides to file a suit to enforce its lien before they can challenge the validity of MBI’s Mechanic’s Lien because this could prevent the sale of the property or its availability as security for a loan. Because the documents stipulated to by the parties supported LBP’s claim that it had paid Lansdowne Construction in full under the terms of the Contract and because Lansdowne Construction did not negotiate the payments, file a mechanic’s lien, or indicate that it had not been paid in full, the Court granted LBP’s Petition. 

PLDR Law Mark Burgin 1 PLDR Law Scott Kowalski 1 Wolf Tom v2 Stout Kenneth 2016

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