Imagine that you are a contractor in Virginia with an active book of business. You specialize in affordable home renovations, and your profit margins on each job are relatively slim. You have just completed a job, yet the homeowner still owes you $10,000 on the contract. She never complained about your workmanship or productivity, but has nevertheless refused to pay the balance. This has caused you financial hardship.
Fortunately, Virginia law gives you an important tool: mechanic’s liens. Liens are a useful for contractors, subcontractors and suppliers to ensure that they receive payment for the labor or materials they provide to repair or improve real property. What rights and remedies does your company have under Virginia’s lien laws?
Not receiving payment can be incredibly frustrating. After all, you and the owner of the property had a deal, and the owner seems to have disregarded it. But before you file a lien on the owner’s property, and certainly before you sue the owner for breach of contract, be sure you have exhausted all possible options. In addition to mailing additional copies of your final invoice and/or statements, telephone the owner. Send an email. And try writing a formal demand letter on your company’s letterhead.
Alternatively, hire a lawyer to write a demand letter on law firm letterhead, which will sometimes prompt a response more quickly.
These initial steps are helpful to show the owner that you are serious about guarding your rights; you do not intend to let the nonpayment “slide” (which is what she may be hoping). Strongly worded letters are often enough to save you the time, cost, and aggravation of a lien filing or lawsuit.
Unfortunately, calls, emails and letters are not always enough to force an owner to pay for your work. So what can you do? Virginia law allows you to sue a homeowner who has not paid you for simple breach of contract, or other related causes of action (such as quantum meruit). But the state also allows you to file a mechanic’s lien.
Why file a lien? The lien becomes a cloud on the owner’s home title, meaning that the title is subject to your company’s interest in it. This will make it difficult for the homeowner to sell the property or refinance it through a bank or other institutional lender. In other words, the lien can incentivize the homeowner to settle with you in order to get you to clear the title.
A mechanic’s lien is a short document, generally just a few pages. A model form for a mechanic’s lien is freely available on the Virginia Court system’s website. The form asks you to indicate your company’s name, the homeowner’s name, the location of the property, and the amount of money still due, among other pieces of information. You must also describe the labor or material you provided (in other words, how did you improve the property?). You will see that your signature needs to be notarized.
Liens are governed by Virginia Code § 43-1 et seq. Like with most states’ lien statutes, Virginia’s lien law is complex. It contains many rules and exceptions, depending on the type of property involved that the work performed. But there are some general important concepts to remember as you consider filing a lien:
As you can see from these short bullet points, the timing of lien filing is critical. Virginia’s legislature is clearly trying to incentivize potential lienors to make (or settle) their claims quickly, and not allow liens to be filed years after a construction project is completed. While this gives owners some comfort in knowing that lien periods have expired, it means that you must act quickly to ensure that you do not lose any lien rights.
Two reminders. First, consider the message that it sends when you file a lien with a Virginia circuit court. Doing so is likely to be perceived as an aggressive action by homeowners. If you take this step, it might put the homeowner on the defensive, and encourage the homeowner to get lawyers involved, or to retaliate by publicly claiming that you did shoddy work. Perhaps this is the direction that you need to take, unfortunately, if the homeowner is refusing to pay.
Second, remember that liens and the laws surrounding them in Virginia can be highly technical. If you are owed a substantial sum of money, it might be worth your investment in a consultation meeting with an experienced construction attorney who can advise you of your rights.