- Virginia Mechanic’s Lien Law Update
- January 4, 2013 | Authors: Maureen E. Carr; Andrew N. Felice; Mark P. Graham; Bruce E. Titus
- Law Firm: Rees Broome, PC - Tysons Corner Office
Effective July 1, 2012, the Virginia mechanic’s lien law became a little clearer for owners, developers and site improvement contractors.
In Virginia, contractors who perform site development work, such as installing streets, storm water facilities, sanitary and storm sewers, and/or water lines to individual lots in a development or condominium community have the ability to assert a mechanic’s lien against all of the lots/units in the development for the proportional value of the total amount that may be due the contractor. See Va. Code §43-3B. This provision is unique to Virginia and allows site development contractors to enjoy the benefit of statutory lien rights.
Otherwise, it would be difficult for them to assert a mechanic’s lien because: (1) their work is either performed over a great number of lots and often the contractor cannot accurately quantify the amount of work performed on an individual lot for purposes of ascertaining a lien amount for the individual lot and/or (2) their work is performed on a parcel incapable of being liened for one reason or another (i.e., streets in a development) -- even though the entire development benefits from the work on that parcel.
The Virginia mechanic’s lien law allows the site improvement contractor to obtain a mechanic’s lien against each lot in the development in a proportional amount based upon the total number of lots in the development. To obtain the benefit of Va. Code §43-3B, the lien claimant is required to record a “disclosure statement” in advance of recording its mechanic’s lien. The disclosure statement is intended to give notice of the extent of a mechanic’s lien which may be potentially recorded against the property by virtue of a site improvement contractor’s work. Thereafter, prospective purchasers of the property are on notice that a mechanic’s lien may later be claimed against the property by a contractor for site improvement work.
As with most statutes, implementation and interpretation of Va. Code §43-3B left contractors and their attorneys with more questions than answers. First, the law did not define what was meant by the word “lot” in the statute and, thus, it was not clear whether outlots, common areas and unbuildable parcels would be considered “lots” under the statute. Since a party’s mechanic’s lien would be proportioned among the “lots” in the development, knowing the number of “lots” was an important element to a lien claim. Second, before the recent amendment, Va. Code §43-3B required that in preparing its “disclosure statement” the contractor must identify the “total cost of the labor or materials.” Questions arose as to whether the contractor was required to use the full amount of its contract value or whether the contractor was required to use only the balance left to be paid out on its contract.
These two issues were litigated in the recent case, Hazel v. Sycolin Ctr., Ltd., which resulted in an unpublished Virginia Supreme Court decision in favor of the contractor who asserted a mechanic’s lien against a development. While the case was pending, the General Assembly enacted legislation amending Va. Code §43-3B to address the very issues presented in the Hazel case. As a result of the recent amendments, Va. Code §43-3B now provides that parcels of land which are common areas or which are being developed for the benefit of development as a whole and not for resale are not to be counted as “lots” in the disclosure statement. In addition, the amendment clarified that the lien claimant should include in its disclosure statement the total value of the work contracted for by the claimant not simply the balance that may be left on its contract at the time the disclosure statement is prepared. While claiming and perfecting mechanic’s liens is never an easy task, the Hazel case and the recent amendments to Va. Code §43-3B have now clarified an important aspect of the lien law.