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Mechanics Lien Waiver Form

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					THE MECHANIC’S LIEN
     IN VIRGINIA




       Gerald I. Katz, Esquire
       KATZ & STONE, L.L.P.
    8230 Leesburg Pike, Suite 600
        Vienna, Vrginia 22182
            703.761.3000
         703.761.6179 - fax
       www.katzandstone.com
                                THE MECHANIC'S LIEN IN VIRGINIA


I. THE MECHANIC'S LIEN LAW.

        A.        The General Purpose of the Mechanic's Lien Remedy

                  The concept of “mechanic’s liens” was unknown at common law and has

        been created by statute. VA. CODE ANN. §§ 43-1 through 43-23.2 and §§ 43-70

        through 43-71 (Michie 1999).1 As early as 1792, Virginia recognized that the

        mechanic was a person deserving special consideration (for example, tax

        exemption). However, not until 1843 did Virginia give the mechanic preference

        as a creditor.

                  The purpose of the mechanic’s lien is to provide to a contractor who has
        furnished labor or materials adding to the value of real property a remedy for the
        collection of his debt. The security for the debt owed to the contractor is the
        property to which the mechanic's lien attaches.
                  Liens created by the mechanic’s lien statutes are inchoate, meaning that
        they are potential liens and must be perfected in the manner and within the time
        limitations specified in the statutes. United Masonry Inc. of Virginia v. Riggs
        National Bank of Washington, D.C., 233 Va. 476, 357 S.E.2d 509 (1987).
                  While the theory behind the establishment of the statutory remedy of
        mechanic’s liens is to provide the mechanic or laborer a secure remedy for the
        collection of the amount due him, the pursuit of a mechanic's lien by a mechanic
        or materialman does not foreclose attempts to collect the debt owed to him




        1
                  Unless otherwise noted, all references to the Virginia mechanic’s lien law refer to the Code of Virginia as
        updated through the 1999 Replacement.

“The Mechanic’s Lien in Virginia”
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        through other common law remedies, such as a suit on the contract to recover a
        personal judgment, or suit on a payment bond. The remedies afforded by the
        mechanic’s lien statutes are cumulative in nature and should not be considered
        to be in lieu of any other legal or equitable remedies.           Although statutory
        mechanic’s lien remedies and the other common law remedies available to the
        contractor may be pursued simultaneously, the contractor can have only one
        satisfaction of his debt. Michie’s Jurisprudence, Vol. 12 “Mechanic’s Liens,” § 2
        (Repl. Vol. 1978).

        B.       Definitions - The Parties

                 1.      “Owner”: The term “owner” as applied in Virginia’s mechanic’s lien

                         statutes is the person who requires, contracts for, or authorizes the

                         work to be done or the materials to be furnished.           Michie’s

                         Jurisprudence, Vol. 12 “Mechanic’s Liens,” § 10 (Repl. Vol. 1978).

                         Naturally, an agent of the owner may authorize repairs or

                         improvements to be made on an existing structure and the property

                         repaired or improved will be subject to a mechanic's lien. VA. CODE

                         ANN. § 43-3(a).

                                  However, if a lessee contracts for a building to be

                         constructed on the lot of a lessor, the interest of the lessor is not

                         subject to a mechanic's lien unless the lessor ordered the building

                         to be so erected. Atlas Portland Cement Co. v. Main Line Realty

                         Corp., 112 Va. 7, 70 S.E. 536 (1911).

                 2.      Laborers and Materialmen.         Under § 43-3(a), all persons

                         performing labor on or furnishing at least $50 in materials for the

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                         construction, removal, repair or improvement of any permanent

                         building, structure, or railroad shall have a lien, if properly

                         perfected.

                 3.      General Contractor. Under § 43-1, the term “general contractor”

                         includes contractors, laborers, mechanics, and persons furnishing

                         materials, who contract directly with the owner. Therefore, there

                         can be more than one general contractor on an individual job site.

                                  In Northern Virginia Savings & Loan Association v. J. B.

                         Kendall Co., 205 Va. 136, 135 S.E.2d 178 (1964), for example, the

                         lender sought to defeat the lien claims of a number of contractors

                         and suppliers on the grounds that all claimants were subcontractors

                         who, in view of the lack of money owed to the general contractor,

                         were not entitled to liens on the project. The Virginia Supreme

                         Court ruled that all claimants (suppliers, sub-contractors, etc.) who

                         contract directly with the owner on a project are considered

                         “general contractors” under § 43-1. Id.

                                  The question of whether a lien claimant is a general

                         contractor or subcontractor is critical with regard to whether the

                         claimant must give notice to the owner since notice is required of a

                         subcontractor but not a general contractor. VA. CODE ANN. §§ 43-3,

                         43-7. The problem of properly identifying the status of the lien

                         claimant occurs primarily in three situations: (1) on “multi-prime”

                         projects where contractors normally accustomed to thinking of


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                         themselves as subcontractors actually function as separate prime

                         or general contractors; (2) where the contract identifies the owner

                         of the project as both owner and general contractor; or (3) where

                         the record owner is actually a different entity than what the

                         contractor thought, so instead of working for the owner, the

                         contractor was actually a subcontractor since it did not have a

                         contract with the record owner.

                                  If the potential lien claimant has any doubt as to his proper

                         status, he should give notice when his lien is filed and place himself

                         in the category of a subcontractor. Since a subcontractor may

                         recover no more than the owner is indebted to the general

                         contractor at the time the notice is given (and can thus recover as

                         much as the general contractor), there would appear to be no harm

                         in a lien claimant placing himself in the role of the subcontractor for

                         the purposes of claiming a lien. VA. CODE ANN. § 43-7.

                 4.      Subcontractor. Section 43-1 defines the terms "subcontractor" to

                         include all contractors, laborers, mechanics and persons furnishing

                         materials who did not contract with the owner, but contracted with

                         the general contractor.

                 5.      Sub-subcontractor. Sub-subcontractors are not specifically defined

                         in § 43-1. However, the form for a Memorandum for Mechanic’s

                         Lien set forth in § 43-10 is specifically titled a “memorandum for

                         Mechanic’s lien claimed by a Sub-subcontractor.” VA. CODE ANN.


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                         §43-10 (emphasis added). Generally, a sub-subcontractor is a

                         person who furnishes or supplies labor or materials pursuant to a

                         contract directly with a subcontractor.

        C.       Who Has Lien Rights?

                 1.      Laborers and Materialmen.       As mentioned above, all persons

                         providing labor or materials for the construction, removal, repair or

                         improvement of any permanent building or structure annexed to the

                         real estate or a railroad, are entitled to a mechanic's lien. Section

                         43-2 provides a partial listing of the types of construction and

                         improvements which are subject to mechanic's liens.

                 2.      Architects and Engineers. In Cain v. Rea, 159 Va. 446, 166 S.E.

                         478 (1932), the Supreme Court of Virginia held that, as a general

                         rule, architects who supervise the construction are entitled to

                         mechanic's liens. Thus, architects and, presumably, engineers may

                         file a lien for work done pursuant to § 43-3. See also V N B

                         Mortgage Corp. v. Lone Star Industries Inc., 215 Va. 366, 209

                         S.E.2d 909 (1974) (architects may file mechanic's lien and institute

                         suit to enforce the lien).

                 3.      Construction Managers and Consultants. Would the above apply to

                         construction managers or consultants? Alternatively, would Cain

                         extend to architects who prepare drawings but do not supervise

                         construction?     While there are no reported Supreme Court of

                         Virginia cases directly on point, cases in other jurisdictions often


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                         focus upon whether the architect or engineer actually performs

                         work in connection with the construction project other than merely

                         preparing drawings. In Cain v. Rea, supra at 5, the court referred

                         to “one who puts his labor into plans for the erection of a building

                         and actually supervises its erection . . . .” 159 Va. at 451, 166 S.E.

                         at 480 (emphasis added). However, in the immediately preceding

                         sentence, the court stated that the mechanic’s lien statute, “in our

                         opinion, embraces all persons who perform ‘any labor.’” Id. Thus,

                         while it appears that the mere preparation of plans (without

                         supervision of construction) does not result in lien rights, the

                         question is not fully resolved. In contrast, the preparation of plans

                         for a project that is never commenced would probably not result in

                         lien rights both because there was no supervision over the erection

                         of the building and because the architect’s work resulted in no

                         actual “construction, removal, repair, or improvement of any

                         building or structure permanently annexed to the freehold.” VA .

                         CODE ANN. § 43-3.

                 4.      S URVEYORS .    Surveyors are at somewhat of an advantage in

                         establishing a lien insofar as § 43-2 specifically refers to “any

                         surveying . . . required for the improvement of the grounds upon

                         which such building or structure is situated.” (emphasis added)

                         However, the reference to “improvement” in § 43-2 suggests that

                         surveying done in the absence of construction would not result in a


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                         lien (although it could be argued that the act of surveying a piece of

                         property is a step in its construction and therefore an

                         “improvement”). VA. CODE ANN. § 43-2.

                 5.      Off-site Laborers and Materialmen. Section 43-3(b) allows any

                         person providing labor or materials for site development

                         improvements or the installation of streets, storm water facilities,

                         sanitary sewers or water lines for the purpose of providing access

                         or service to the individual lots in a development to have a lien on

                         each individual lot in the development for that fractional part of the

                         total costs of such labor or materials.

                                   In order for such a lien to be valid, however, the person

                         providing such labor or materials must, prior to the sale of such lot,

                         file with the clerk of the circuit court (of the jurisdiction in which the

                         land is situated) a document setting forth a full disclosure of: (1) the

                         lien to be claimed; (2) the amount claimed against each lot; and (3)

                         a description of the development. VA. CODE ANN. § 43-3(b). This

                         document is in addition to the memorandum of lien itself, which also

                         must be filed to create the lien.

                                  The 1980 session of the General Assembly revised this

                         subsection to include not only lot developments but also

                         condominium units. A suggested sample form of the § 43-3(b)

                         disclosure document is reproduced on the following page (italicized

                         text is included for illustration purposes only):


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                DISCLOSURE STATEMENT

                         1.       Date:

                          2.       Type of structure on which work done or materials furnished:
                          A residential subdivision development consisting of 20 lots and "Outlot A" and "Outlot B", and
                known as “Whiteacres” dated and recorded in Deed Book _______, Page ______, among the land records
                of Fairfax County, Virginia.

                         3.       Name of Owner:

                         4.       Address of Owner:

                         5.       Name of Claimant:

                         6.       Address of Claimant:

                           7.      Nature of the Lien to be claimed:
                           The lien given by Va. Code Ann. § 43-3(b), to persons providing labor or materials for site
                development improvements or the installation of streets, storm water facilities, sanitary sewers or water
                lines for the purpose of providing access or service to the individual lots in a development.

                         8.       Amount claimed against each lot:
                         The amount provided by Va. Code Ann. § 43-3(b) that is, that fractional part of the total cost of the
                materials provided by the Claimant as is obtained by using "one" as the numerator and the number of lots
                as the denominator, there being 20 lots in the Whiteacres subdivision as set forth in the above-referenced
                Deed of Dedication. Id.

                         9.        Description of the development:
                         25 acres located in the Providence District of Fairfax County, Virginia and being all of the property
                conveyed to [Name of Owner] by Deed recorded in Deed Book ________, Page ______ among the land
                records of Fairfax County, Virginia.

                                                              [Name of Claimant]
                                                              By:_________________

                       Sworn and certified before me,_________________, a Notary Public, this ______ day of
                ___________________, 20    .

                                                              _____________________________
                                                              Notary Public

                                                              My Commission Expires:________




                 6.      Joint-Venturers. In West Alexandria Properties, Inc. v. First Va.

                         Mortgage and Real Estate Investment Trust, 221 Va. 134, 267

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                         S.E.2d 149 (1980), the Virginia Supreme Court considered the

                         mechanic's lien claim of a joint venturer who was a party to an

                         agreement to develop certain property in the City of Alexandria.

                         After a dispute arose, the joint venturer filed several memoranda of

                         liens. One of the arguments the owner made against the liens was

                         that a joint venturer was not a "general contractor" under Title 43.

                                  The court, however, concluded that in order to claim the

                         benefit of a lien, a party does not have to be either a “general

                         contractor” or “subcontractor.” The court noted that § 43-1 defines

                         the term “general contractor” to include, among other things,

                         “persons furnishing materials, who contract directly with the owner.”

                         Thus, for purposes of the mechanic's lien provisions of Title 43, the

                         term "general contractor" is definitively broader than its colloquial

                         counterpart. Id. at 140, 267 S.E.2d at 152.

        D.       Dedicated Property

                         In West Alexandria Properties, Inc., supra at 10, the subsequent

                 owner of a property upon which a lien had been filed objected to the lien

                 on the grounds that a portion of the benefits had been conferred upon

                 dedicated property which could not be liened. The lienor had furnished

                 certain utility work, including work performed in streets which were

                 dedicated during the progress of construction. The lienor contended that it

                 was entitled to enforce a joint lien against the liened land alone for half the




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                 value of all work done on the entire tract, including the dedicated land.

                 The Supreme Court of Virginia disagreed.

                         While the court acknowledged that a joint lien was proper under

                 certain circumstances, it refused to permit a joint lien when doing so would

                 injuriously affect the interests of third parties.   Id. at 141, 267 S.E.2d at

                 153. The owner of the liened property, who was not in contractual privity

                 with the lienor, was a third party whose interest in the land remaining after

                 dedication would be injured by enforcing the lien. As such, the court

                 limited the lien to the value of the work done on the liened land.

                         Of course, to some extent, this rule has been ameliorated by § 43-

                 3(b) which was added to § 43-3 by the 1979 General Assembly for the

                 express purpose of dealing with liens arising by virtue of utility and site

                 development work.

        E.       Public Property and the Mechanic’s Lien

                         It is fundamental that a lien cannot be filed against public property.

                 A mechanic's lien may not be filed on public property constructed pursuant

                 to a contract with the United States or the Commonwealth of Virginia or

                 any of its political subdivisions or agencies such as cities, counties, water

                 and sewer authorities, schools, parks, etc. See, e.g., Phillips v. The

                 Rector and Visitors of the University of Virginia, et al., 97 Va. 472, 34 S.E.

                 66 (1899).

                         For subcontractors on federal or state property, however, the

                 federal Miller Act (40 U.S.C. § 270(A)-270(D ) and Virginia’s “Little Miller


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                 Act” (V A . CODE ANN. § 11-58) operate as a substitute for lien rights. In

                 sum, these Acts essentially require payment bond coverage for most

                 public projects and a means for subcontractors to institute suit on the

                 payment bonds.



II.     STRICT CONSTRUCTION OF MECHANIC’S LIEN STATUTES
        A.       General Overview

                         Although a mechanic’s lien is a creature of statute, it must have its

                 foundation in, and correspond to, a contract. United States v. 5,382

                 Acres, 971 F. Supp. 880 (W.D. Va. 1994), aff’d, 61 F.3d 901 (4th Cir.

                 1995). As such, “where there are questions concerning the existence and

                 perfection of such a lien, the mechanic’s lien statutes will be strictly

                 construed.” Roundtree, L.L.C. v. RAM Development Corp., 45 Va. Cir.

                 458, 459 (1998) (quoting Woodington Electric v. Lincoln Savings, 238 Va.

                 623, 630, 385 S.E.2d 872 (1989)).

                         The Virginia Supreme Court has justified strict interpretation of the

                 mechanic’s lien statutes on public policy grounds by noting that:


                          In our view, the statutory scheme . . . is one which places
                         great power in the hands of mechanics but which
                         purposefully contains that power within carefully
                         circumscribed limitations. The aim of the statutory scheme
                         is to aid the mechanic while protecting the owner from
                         abuse.




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                 Woodington Electric v. Lincoln Savings, 238 Va. 623, 634, 385 S.E.2d 872

                 (1989).

                         Thus, each step of the statutory process must be carefully followed

                 since omitting any step can prove fatal to the lien. See also Mills v.

                 Moore’s Super Stores, 217 Va. 276, 227 S.E.2d 719 (1976).

        B.       Notice Requirements

                 1.        General Overview. There is no lien created without proper notice.

                         The requirement for the notice to be given is precise and must be

                         followed by the mechanic's lien claimant. If the notice given is

                         improper, the mechanic’s lien claimant may lose his lien rights as a

                         result.     The lien claimant must record the Memorandum of

                         Mechanic’s Lien at the courthouse, a process called “perfecting” the

                         lien. Sections 43-4, 43-4.1, 43-7.

                                   The memorandum is recorded in the Lien Books or Deed

                         Books in the Clerk’s Office to ensure that anyone searching the title

                         of the real estate on which the lien is claimed will have notice of the

                         lien. Failing to file within the period of time required by the Code

                         results in the loss of lien rights. VA. CODE ANN. § 43-4.1.

                                   Virginia's lien laws differ from those of other jurisdictions in

                         one significant area: except for certain residential dwelling units,

                         Virginia does not require that contractors, prior to commencing

                         work, file a Notice of Intention to claim a lien. VA. CODE ANN. §§ 43-

                         4, 43-7. All attempts to add such a requirement (which, obviously,


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                         makes it more difficult for contractors to exercise their lien rights) to

                         Virginia's lien laws have failed.        Importantly, however, both

                         subcontractors and sub-subcontractors must give a notice of lien in

                         accordance with §§ 43-7 or 43-9, respectively.

        C.       The General Contractor and the Subcontractors

                         The owner, general contractor and subcontractor need to be

                 distinguished by the lien claimant so that the parties understand their

                 respective identities in accordance with the definitions in § 43-1.

                         The mechanic’s lien claimant, whether he is in the category of a

                 general contractor or subcontractor, must be entitled to payment for the

                 work done or the materials furnished. VA . CODE ANN. § 43-4. A lien

                 claimant who files a lien prior to the time when payment is actually due

                 can be liable for damages for an improper filing of lien, though there is

                 only one reported case in Virginia that recognizes such a claim.

        D.       How to File a Lien

                         The Code of Virginia contains forms which, due to the strict

                 construction of the lien statutes, must be followed exactly when filing a

                 mechanic's lien. These are set forth in §§§ 43-5, 43-8, and 43-10 and are

                 reproduced in the Appendix.

                 1.      When? The lien should be filed by the lien claimant as soon as the

                         work has been done and the materials furnished and it is clear that

                         payment is due but may not be forthcoming. Due to the outside




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                         limitations on when a lien can be filed, the claimant should not wait

                         until the last possible time to file its lien.

                 2.      Wrongfully Filed Liens.

                         a.       Actions for Libel. Despite the need to timely file a lien,

                                  contractors should take care to not file prematurely.        In

                                  Moore v. Rolin, 89 Va. 107, 15 S.E. 520 (1892), a plaintiff-

                                  general contractor filed suit against the defendant-

                                  subcontractor who, before completing his work, filed a lien

                                  against the owner’s property and notified the owner not to

                                  pay the general contractor without the subcontractor's prior

                                  approval.     The Supreme Court held that the general

                                  contractor’s complaint, since it pled special damages, stated

                                  an action for libel, though the court noted that the filing of a

                                  wrongful lien is not libelous per se. The court stated, as a

                                  matter of law, that the filing of a mechanic’s lien by a

                                  subcontractor cannot be taken as imputing insolvency or

                                  dishonesty to the general contractor, nor as necessarily

                                  intending to injure him in his business. Id. at 111, 15 S.E. at

                                  522. Thus, if a general contractor is to recover in such

                                  situations, he must plead and prove special damages.

                         b.       Slander of Title.     Until 1988, it was a somewhat open

                                  question whether a wrongfully filed lien exposed to claimant

                                  to an action for slander of title by the owner.       In 1988,


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                                  however, the Supreme Court of Virginia held that the filing of

                                  a mechanic’s lien is a judicial proceeding which entitles a

                                  lienor to an absolute privilege against an owner’s claim of

                                  slander of title. See Donohoe Constr. Co., Inc. v. Mount

                                  Vernon Associates, 235 Va. 531, 539, 369 S.E.2d 857, 861

                                  (1988) (holding that the filing of a memorandum of

                                  mechanic’s lien is a judicial proceeding and so long as the

                                  words used in the lien memorandum are relevant and

                                  pertinent to the case, the statements are absolutely

                                  privileged).

                 3.      Outside Limitations on When a Lien May be Filed.         According to

                         § 43-4, a general contractor or any other lien claimant

                         (subcontractor, materialman or laborer) must file his lien within 90

                         days from the last day of the month in which he last performed

                         labor or furnished material. In no event, however, may the lien be

                         filed later than 90 days after the project is completed or the work

                         thereon otherwise terminated. Id.

                                  Note how this last clause affects later trades. While earlier

                         trades (i.e. concrete foundation subcontractors) often have more

                         than 90 days in which to file a lien (unless they have completed

                         work on the last day of the month), trades who actually are present

                         at project completion must file within 90 days of that date.




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                                  Further, the lien may only include the value of the labor or

                         materials furnished within 150 days from the last day labor was

                         performed or materials furnished on the job prior to recording the

                         lien (retainage up to ten (10) percent is excepted from this

                         provision).

                                  In other words, while the subcontractor has 90 days from the

                         last day of the month in which he furnishes materials or performs

                         labor on the job in which to file his lien, this lien only covers 150

                         days prior to the last date the labor or materials were furnished on

                         the job. If a subcontractor has not been paid 150 days subsequent

                         to the time that he began work on the job but continues to have

                         work to perform, he must make a decision.

                                  The subcontractor can either: (1) file a lien for the work that

                         he performed during the first 150 days and continue work; (2) stop

                         work and then have 90 days to perfect his lien; or (3) continue to

                         work and not file his lien but lose the right to claim labor or material

                         for any period of time earlier than the 150 days prior to when he last

                         performs work on the job.

                                  Obviously, this is a very difficult decision to make when a

                         potential lien claimant is unpaid for work already complete but

                         continues to have work to do after 150 days. Note that § 43-4, in

                         line with the other mechanic’s lien requirements, is strictly

                         interpreted. In Carolina Builders Corp. v. Cenit Equity Co., 257 Va.


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                         405, 512 S.E.2d 550 (1999), for example, the Virginia Supreme

                         Court invalidated a memorandum of mechanic’s lien which included

                         sums for materials furnished outside of 150 days from the last day

                         the claimant furnished material to the job preceding the filing of the

                         memorandum. The court held that a lien request which includes

                         any sum beyond the 150-day period will be held unenforceable

                         because “the 150-day limitation period is one of the prerequisites

                         required by § 43-4 in order to perfect a mechanic’s lien.” 257 Va. at

                         411, 512 S.E.2d at 533 (emphasis added).

                 4.      Retention Exception.     Retention is excluded from the 150-day

                         limitation. However, this exclusion does not obviate the need for a

                         subcontractor or supplier to file a lien within 90 days of the last day

                         of the month in which he furnishes labor or material to the job. Put

                         simply, even if all that is due the subcontractor is retention, the

                         subcontractor still must file his lien in a timely manner even though

                         he merely seeks to secure only the payment of retention.

                  5.     When is the Work Completed? The contract between the parties

                         may stipulate when the work is completed and this stipulation will

                         be honored by the court in determining whether a mechanic's lien

                         was filed in a timely manner. See, e.g., Cain v. Rea, 159 Va. 446,

                         166 S.E. 478 (1932). For example, if the contract states that the

                         project will be considered completed upon the issuance of a

                         Certificate of Substantial Completion by the architect, then the


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                         issuance of such a certificate may be viewed as the event which

                         triggers the filing period for a mechanic's lien, particularly for the

                         general contractor. Note that subcontractors whose contracts (with

                         the general contractor) incorporate by reference the terms of the

                         general contract could find themselves bound to provisions bearing

                         upon their lien rights (such as waiver, release of liens, and the

                         definition of “completion”).

                                  In addition, where the work is terminated due to default of

                         the contractor, bankruptcy of the contractor, abandonment of the

                         project by the contractor, abandonment of the project by the owner,

                         etc., this event triggers the commencement of the 90-day filing

                         period, E.g., Mills v. Moore's Super Stores, 217 Va. 276, 227

                         S.E.2d 719 (1976).       Contractors on projects that experience

                         financial difficulty have a particular burden in determining when the

                         filing period begins to run since, in most cases, it is not until well

                         after the filing period has expired that such contractors learn there

                         has been a default or termination of the project by either the owner

                         or general contractor.

                 6.      Punch List and Warranty Work. As noted above, the lien must be

                         filed within 90 days from the last day of the month in which the

                         contractor last performed labor or furnished material on the job.

                         Frequently, the question arises whether the performance of punch

                         list work or warranty work constitutes the last performance of labor


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                         or furnishing of material required by the mechanic's lien laws to

                         trigger the 90-day filing period. What often happens is that a

                         contractor will have failed to file his lien within 90 days from the last

                         day of the month in which he substantially completed his work and,

                         in order to claim a valid lien, must consider the performance of

                         punch list or warranty work as extending the time he has in which to

                         file a lien.

                                  This is a somewhat murky area of Virginia law. While the

                         Supreme Court of Virginia has recognized that a contract may

                         stipulate when the work is completed (for example, by the issuance

                         of a Certificate of Substantial Completion), whether a contractor

                         can use completion of the punch list and warranty work may

                         depend on a number of factors. These factors include: (1) whether

                         the work was delayed in bad faith, and/or (2) the terminology used

                         to describe the remaining work (i.e., whether the work is mere

                         completion of contractual work, correction of previous work, or

                         warranty repairs).

                                  In the absence of further direction from the court, the most

                         that can be said at this time is that if the completion of work (which

                         is not correction of previous work or warranty repairs) is undertaken

                         in good faith, the 90-day period for purposes of filing a mechanic's

                         lien starts upon actual (not ‘substantial’) project completion. See




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                         Dominion Trust Company v. Kenbridge Construction Company, 248

                         Va. 393, 448 S.E.2d 659 (1994).

                                  In Dominion Trust, although the Supreme Court of Virginia

                         dismissed the mechanic’s lien suit on other grounds, it rejected

                         defendant’s argument that the contractor was required to file its

                         memorandum of mechanic's lien within 90 days of the architect’s

                         certification that the project was “substantially complete.”     The

                         court stated that at the time of the certification the contractor was

                         still completing necessary “work to fulfill its obligations under the

                         contract” and noted that “[t]his work was not correction of previous

                         work or warranty repairs.” Id. at 395.

                                  The court reasoned that § 43-4 is “clear and unambiguous”

                         and refused to “rewrite and change the plain meaning of § 43-4 by

                         adding the word ‘substantially’ as a modifier to ‘completed.’” Id. at

                         396. The court thus held that “in the absence of evidence that a

                         contractor acted in bad faith to delay completion of work on a

                         project, the contractor is required to file his memorandum for

                         mechanic’s lien 90 days from the date of completion.” Id. at 396

                         (emphasis added).

        E.       Contents of the Memorandum

                         The Code of Virginia has set out exactly the type of form to be

                 followed by the general contractor, subcontractor, or sub-subcontractor in




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                 preparing a memorandum of mechanic’s lien. These forms are contained

                 in §§ 43-5, 43-8 and 43-10.

                 1.      Property Description. While care should be taken in completing the

                         memorandum to be filed, in contrast to the other sections of the

                         mechanic’s lien statute, § 43-15 permits some relief should the

                         memorandum contain certain errors. According to this section:

                                  No inaccuracy in the memorandum filed, or in the
                                  description of the property to be covered by the lien,
                                  shall invalidate the lien, if the property can be
                                  reasonably identified by the description given and the
                                  memorandum conforms substantially to the
                                  requirements of §§ 43-5, 43-8, and 43-10,
                                  respectively, and is not willfully false.

                         VA. CODE ANN. § 43-15. (emphasis added).

                                  The above-italicized reference suggests that errors in the

                         legal description of the property will not be fatal provided that the

                         correct property is identified. The Virginia Supreme Court has held

                         that a property description in the memorandum giving the street

                         address and deed book reference is sufficient to identify the

                         property. Penrod & Stauffer Building Systems, Inc. v. Metro

                         Printing & Mailing Services, Inc., 229 Va. 150, 326 S.E.2d 662

                         (1985).

                 2.      Requirement of an Affidavit in the Memorandum of Lien.            As

                         opposed to errors in the memorandum of lien, which may be

                         excused, other errors often prove fatal to the lien. For example, in

                         Clement v. Adams Bros.-Paynes Co., Inc., 113 Va. 547, 75 S.E.

“The Mechanic’s Lien in Virginia”                                                Page 21
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                         294 (1912), a corporation filed a lien and, as required by §§ 43-5,

                         43-8, 43-10 of the Virginia Code, submitted a verified account

                         consisting of an affidavit made by the corporation's president.

                         However, the Virginia Supreme Court sustained a demurrer to the

                         bill of complaint to enforce the lien on the grounds that the affidavit

                         made by the president of the corporation was insufficient to comply

                         with the requirement that the account be verified by the oath of the

                         claimant or his agent.

                                  Subsequent to the Clement case, the General Assembly

                         amended Title 49 of the Code of Virginia by adding § 49-7. This

                         section reads as follows:

                                  An affidavit by or for a corporation may be made by its
                                  president, vice-president, general manager, cashier,
                                  treasurer, or a director, without any special
                                  authorization therefor, or by any person authorized by
                                  a majority of its stockholders or directors to make the
                                  same; and when an affidavit is made by any person
                                  other than the principal authorized by law to make it,
                                  such person shall be deemed to have been the agent
                                  of the person so authorized until the contrary is made
                                  to appear.

                         Thus, in signing an affidavit in support of a mechanic's lien, the

                         party submitting the affidavit should be certain to sign it as

                         “President,” “Vice-President” or “Agent.” In addition, it appears that

                         persons not named in § 49-7 (e.g., "credit managers") should not

                         sign liens unless specifically authorized to do so by the

                         corporation's board of directors.


“The Mechanic’s Lien in Virginia”                                                 Page 22
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                                  See also Almond v. Williams, 45 Va. Cir. 52 (1997) (citing

                         Clement and holding that “[a] failure to expressly indicate the

                         capacity in which the affiant signs will render the lien unperfected”).

                 3.      Party and Property Identification. Errors as to the proper owner

                         identified in the memorandum or errors which result in the

                         identification of the wrong property are necessarily fatal if the error

                         is not corrected and a revised memorandum filed prior to expiration

                         of the requisite time period.

                         a.       The Owner. In order to properly perfect a mechanic's lien,

                                  there must be filed a memorandum showing the name of the

                                  owner of the property at the time of the recordation of the

                                  mechanic's lien.     Wallace v. Brumback, 177 Va. 36, 12

                                  S.E.2d 801 (1941).

                                         In Wallace, the court reasoned that since the

                                  memorandum of lien is recorded and indexed in the general

                                  Index of Deeds, the owner of the property at the time the lien

                                  is filed must be named to protect the interests of all parties.

                                  After all, prospective purchasers, checking title to the

                                  property, will naturally examine the condition of the title

                                  based upon the record owner rather than an earlier owner

                                  (who may be the owner listed in a memorandum of lien).

                                         As a practical matter, the Wallace case suggests that

                                  contractors should take care to name in their memorandum


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                                  of lien the owner of record at the time the lien is filed. While

                                  this may require a title search or examination of land records

                                  on the day the lien is filed, the cost of any such examination

                                  is far preferable to running the risk of losing the lien at a later

                                  date.

                         b.       Partial Owners. Under § 43-20, if a person owning less

                                  than fee simple interest in land (e.g., a lessee) causes a

                                  building or structure to be erected, then only his interest shall

                                  be subject to mechanic's liens (e.g., the lien would attach to

                                  the leasehold).

                                          In order to ensure that an owner’s interest in real

                                  estate will be subject to mechanic’s liens when he is aware

                                  that improvements are being made upon her property, § 43-

                                  20 provides that:

                                          When the vendee under a contract for the sale
                                          of real estate causes a building or structure to
                                          be erected or repaired on the land which is the
                                          subject of the contract and the owner has
                                          actual knowledge of such erection or repairs,
                                          the interest of the owner and the land shall be
                                          subject to liens created under this chapter.

                                  VA. CODE ANN. § 43-20 (emphasis added).

                         c.       The Claimant. At least one circuit court has found that

                                  where the attached affidavit misidentifies the claimant but

                                  the memorandum properly names the claimant, the mistake

                                  is not fatal to the mechanic's lien. See Griffith v. Great Falls

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                                  West Assoc., 26 Va. Cir. 22 (1991). In Griffith, the court held

                                  that such a misidentification was an obvious technical error

                                  and that, when the memorandum and affidavit were taken as

                                  a whole, it was clear who the proper claimant was.

                 4.      Amount Claimed in a Lien.

                         a.       Allowable Costs.

                                         The amount claimed should be the amount due on

                                  account as a result of work performed at the time that the

                                  lien is filed, subject to the 150-day “roll-back” rule. The

                                  amount claimed by the lien may include extras, changes and

                                  other costs incurred by the contractor that are beyond the

                                  scope of the base contract work.          These amounts are

                                  properly included in the mechanic's lien on the theory that

                                  the contractor was entitled, pursuant to the “Changes”

                                  clause in his contract, to compensation for extras, changes,

                                  etc. and, had change orders properly been issued pursuant

                                  to the contract, these amounts would have been added to

                                  the base contract.

                         b.       Unallowable Costs.

                                  1.     Lien Forfeiture. Great care must be taken in claiming

                                         an amount because, if you claim more than you are

                                         entitled (called filing an “over-inclusive” lien), you will

                                         in all likelihood lose your entire lien. This is because


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                                         § 43-23.1 provides that a lien will be forfeited if it

                                         includes work not performed (or materials not

                                         furnished) with the “intent to mislead.”

                                  2.     Non-Fatal Over-Inclusiveness. In Dominion Trust Co.

                                         v. Kenbridge Constr. Co., 248 Va. 393, 448 S.E.2d

                                         659 (1994), the Virginia Supreme Court recited

                                         several prior cases and admitted that “[i]t is true that ..

                                         we have held that a trial court, in certain limited

                                         circumstances, may reduce the amount of a

                                         mechanic’s lien rather than invalidate the lien.” The

                                         court refused, however, to grant such relief because

                                         the claimant: “had the opportunity to request that the

                                         trial court reduce the lien to reflect only the value of

                                         labor and materials performed on the property, but . . .

                                         failed to do so . . . [and because the claimant’s] vice-

                                         president was ‘not sure’ if the amount of [its]

                                         mechanic’s lien included work performed ‘off-site.”

                                         248 Va. at 399, 448 S.E.2d at 662.

                                                In P.C. Goodloe & Son, Inc. v. Charter

                                         Communities, Inc., 44 Va. Cir. 193 (1997), the Circuit

                                         Court of Stafford County examined the Kenbridge

                                         decision, supra at 29, and concluded that:

                                                [T]he ‘certain limited circumstances’
                                                referred to . . . which permit excision
“The Mechanic’s Lien in Virginia”                                                    Page 26
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                                               and validation of the remainder of the
                                               mechanic’s lien are: (1) delimitation by
                                               both amount and location; (2) a request
                                               at the trial level for such excision; (3) a
                                               lack of any evidence . . . that the over-
                                               inclusiveness of the lien was the result
                                               of bad faith rather than mistake; and (4)
                                               a demonstration that the amount of the
                                               delimitation is reasonably insignificant
                                               as related to the amount of the original
                                               lien, thus showing that the invalidation of
                                               the entire lien would be inequitable.

                                         Id. at 193 (emphasis added).

                                               While     the   above     circumstances       are

                                         conjunctive, not disjunctive (i.e., all four conditions

                                         must be met or the lien fails), and Goodloe is not a

                                         Supreme Court decision, it appears that some hope

                                         may exist for a claimant who inadvertently includes

                                         improper amounts in her lien. The narrow nature of

                                         the exception, however, emphasizes the importance

                                         that costs claimed in the lien clearly relate to labor

                                         performed or materials furnished the liened property.

                                  3.     Delay Damages and Overhead. The issue of whether

                                         delay damages and an overhead mark-up may be

                                         included in the amount claimed has never been

                                         addressed by the Virginia Supreme Court. Given the

                                         above discussion, however, it would appear that any

                                         actual costs directly incurred during the delay may be

                                         claimed (i.e., extended equipment rental costs;

“The Mechanic’s Lien in Virginia”                                                 Page 27
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                                         material escalation costs; increased labor and

                                         supervision costs; etc.).

                                                A much larger problem, however, arises if the

                                         “delay damages” sought include claims for home

                                         office overhead, acceleration, and the like. While

                                         these costs may very well have been incurred by the

                                         claimant, they are not “labor or materials”

                                         incorporated into the property and thus did not add

                                         value to the property. As such, they should not be

                                         included in the amount claimed in the mechanic’s lien

                                         and the claimant who insists on including such costs

                                         runs the risk of losing his entire lien.

                                  4.     Other Necessary Components.

                                         a.     Brief Description and Location of Real

                                                Property.       A brief, yet accurate legal

                                                description should be given as well as the

                                                street address. See Penrod & Stauffer, supra

                                                at 24.

                                         b.     Type of Materials or Services Furnished. The

                                                lien claimant should supply a detailed

                                                description of the type of materials or services

                                                furnished so as to distinguish his work from

                                                that of a similar claimant.         For example, a


“The Mechanic’s Lien in Virginia”                                                     Page 28
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                                         statement that the claimant furnished “electrical

                                         installation” is insufficient.

                                                In Shackleford v. Beck, 80 Va. 573

                                         (1885), the Virginia Supreme Court invalidated

                                         a memorandum of mechanic's lien which

                                         stated that the type of materials and services

                                         furnished was “to balance of account rendered

                                         for work and labor done and material furnished

                                         for your house.” The court determined that

                                         “the difficulty in this case is not alone that [the

                                         account] is not an itemized account, but that it

                                         is not an account of the things required by the

                                         statute - of work done and material furnished.”

                                         Id. at 577

                                                Thus, it is advisable that contractors

                                         describe with particularity the type of materials

                                         or services furnished, including references to

                                         relevant portions of the specifications, the type

                                         of components installed, etc.

                                                Referring to Shackleford v. Beck, the

                                         court in Shenandoah Valley Railroad v. Miller,

                                         80 Va. 821 (1885) stated "the contractor must

                                         give a bill of particulars, whereby all who may


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                                              be interested can ascertain not only the

                                              amount demanded, but the correctness or

                                              reasonableness of the demand.” Id. at 826.

        F.       Where to File

                         The memorandum should be filed in the County or City in which the

                 building or structure or any part thereof is located. In addition, there are

                 some specific provisions with regard to the City of Richmond which are set

                 out in § 43-4.

        G.       Notice Requirements

                 1.      The General Contractor.      The general contractor must file the

                         memorandum within the time required by § 43-4. It should be

                         noted that the general contractor is not required to give notice of its

                         liens to any party that it has filed a lien. See Coleman v. Pearman,

                         159 Va. 72, 77-78, 165 S.E. 371, 372 (1932) (holding that general

                         contractors need not give notice to the owner since “the filing of the

                         required memorandum for recordation in the clerk’s office [is]

                         sufficient”). As a practical matter, however, it is advisable that the

                         general contractor give notice of the lien to the owner and other

                         parties in order to obtain the benefit of the leverage that the lien

                         affords in a payment dispute.

                 2.      The Subcontractor. The subcontractor, in addition to filing the

                         memorandum, must give notice in writing to the owner of the

                         property (or his agent) of the amount and character of the claim. A


“The Mechanic’s Lien in Virginia”                                                Page 30
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                         copy of the form of this notice may be seen in the Appendix, § 43-

                         8. Notice may be served by any sheriff, constable, or by certified or

                         registered mail with a return receipt. VA . CODE ANN. § 43-14.1.

                         While it is best to serve the notice within the filing period, courts will

                         probably allow notice to be served outside of the filing period.

                                  In Mills v. Moore's Super Stores, 217 Va. 276, 227 S.E.2d

                         719 (1976), various subcontractors filed liens after work on the

                         construction of a residence ceased due to lack of financing. The

                         owner defended against the liens on the basis that the notice given

                         by the subcontractors was not given within the time period required

                         by § 43-4. The Supreme Court of Virginia, however, noted that

                         §43-7 does not require that the subcontractor's written notice to the

                         owner be given within any specified time. The purpose of the

                         notice was described as follows:

                                  The notice affords protection to the owner, who is not
                                  in privity of contract with the subcontractor, so that he
                                  may not be required to pay twice for the same work
                                  and materials. Since the statute speaks only of
                                  amounts payable by the owner to the general
                                  contractor at and after the time the subcontractor's
                                  notice has been given, the risk of losing his lien is
                                  properly imposed on the dilatory subcontractor. Only
                                  when the owner receives the notice to which he is
                                  entitled does he incur a legal obligation to the
                                  subcontractor.

                         217 Va. at 280, 227 S.E.2d at 722-23.

                                  The court thus found that notice given beyond the filing

                         period, but before suit was instituted, was timely, particularly in view

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                         of the fact that there had been no change of position by the owners

                         due to the purported failure of the subcontractors to give notice

                         earlier. 217 Va. at 280-81, 227 S.E.2d at 723. This suggests,

                         however, that if the owner is able to demonstrate that the failure to

                         give notice in a timely manner resulted in prejudice to his position,

                         the court may void the lien on the basis of improper notice.

                 3.      The Sub-subcontractor and Supplier. The sub-subcontractor is a

                         person performing labor or furnishing materials for a subcontractor.

                         The procedure for the filing of his lien under § 43-9 is very similar

                         to that of the subcontractor. The form for the sub-subcontractor's

                         lien is contained in § 43-10 in the Appendix. The sub-subcontractor

                         must also send notice to the owner of the property, or his agent,

                         and to the general contractor (or his agent) of the amount and

                         character of his claim. VA. CODE ANN. § 43-9.

        H.       Special Notice Requirements for Residential Dwelling Units in Va.
                 Code Ann. § 43-4.01

                         These notice requirements pertain to one- and two-family

                 residential dwelling units. Commercial properties and multi-family or multi-

                 unit residential properties appear to be unaffected by the amendments.

                 When a permit designates a mechanic’s lien agent, those persons desiring

                 to perfect a mechanic's lien, except those utility/site work contractors

                 claiming a lien under § 43-3(b), must follow the additional procedures

                 provided for in § 43-4.01. The additional procedures require that the lien


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                 claimant give notice to the mechanic’s lien agent within thirty (30) days of

                 first performing labor or providing materials to the project.

                 1.      Mechanic’s Lien Agent.      At the applicant’s request, a building

                         permit for any one- or two-family residential dwelling unit shall

                         designate a mechanic's lien agent. When the permit designates an

                         agent, the permit must contain the name, mailing address and

                         telephone number of the agent.         An applicant for a one- or

                         two-family residential dwelling unit, however, is not required to

                         designate an agent. In this case, the permit would provide that no

                         agent has been designated.

                                              The term “mechanic’s lien agent” means a

                         person designated in writing by the real estate owner who consents

                         in writing to act as the owner’s designee for purposes of receiving

                         notice. VA . CODE ANN. § 43-1. A mechanic’s lien agent must be

                         either a Virginia attorney, a Virginia title insurance company (or one

                         of its subsidiaries or licensed title insurance agents), or a Virginia

                         banking or savings institution.


                 2.      Posting of the Building Permit. The building permit for any one- or

                         two-family residential dwelling unit must be conspicuously and

                         continuously posted on the property for which the permit is issued

                         until all work is completed. The permit must be posted before any




“The Mechanic’s Lien in Virginia”                                                Page 33
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                         labor is performed or any material furnished on the property for

                         which the building permit is issued. VA. CODE ANN. § 43-4.01(A).

                 3.      Notice to Mechanic’s Lien Agent.             All persons claiming a

                         mechanic's lien with respect to a one- or two-family residential

                         dwelling unit, except those claiming a lien under § 43-3(b), must

                         notify the agent designated on the permit. The notice must be

                         furnished:(a) within thirty (30) days of the first date that the

                         mechanic performs labor or furnishes material to or for the building

                         or structure, or (b) within thirty (30) days from the date the permit is

                         issued, if such labor or materials are first performed or furnished

                         prior to the issuance of the permit. VA. CODE ANN. § 43-4.01(C).

                                  Failure to give notice within the appropriate thirty-day period

                         is not a complete bar to perfecting a mechanic’s lien. One who fails

                         to give notice within the appropriate thirty-day period may

                         nonetheless perfect a mechanic's lien provided that the lien is

                         limited to labor performed or materials furnished on or after the date

                         notice is given to the mechanic's lien agent.

                 4.      Contents of Notice. The notice must be furnished by registered or

                         certified mail or by physical delivery. VA. CODE ANN. § 43-4.01(B).

                         The notice must contain the following information:

                                  (a)    The name, mailing address and telephone number of
                                         the person furnishing the notice;

                                  (b)    The building permit number designated on the
                                         building permit;

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                                  (c)    A description of the property as shown on the building
                                         permit (an inaccuracy in the description of the
                                         property will not bar a person from perfecting or
                                         enforcing a mechanic's lien if the property can
                                         otherwise be reasonably identified from the
                                         description); and

                                  (d)    A statement that the person filing the notice seeks
                                         payment for labor performed or materials furnished.

                                  Prima facie evidence of receipt of the notice is established

                         by a return receipt or other receipt showing delivery of the notice to

                         the addressee or written evidence that the notice was delivered by

                         the postal service or other carrier to, but not accepted by, the

                         addressee.

                                  A sample Notice to Mechanic’s Lien Agent appears on the

                         following page.




“The Mechanic’s Lien in Virginia”                                                Page 35
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                                                       [Sub]Contractor Name]
                                                       [Sub]Contractor's Address]
                                                       _______________________
                                                       _______________________

                                                       [Date]


    CERTIFIED MAIL
    RETURN-RECEIPT REQUESTED

    [Mechanic's Lien Agent Name]
    Mechanic's Lien Agent for
    [Name of Owner]
    [Address of Mechanic's Lien Agent]
    __________________________________
    __________________________________


                                  NOTICE TO MECHANIC'S LIEN AGENT
                              PURSUANT TO VIRGINIA CODE SECTION 43-04.01

    Pursuant to the provisions of Virginia Code Section 43.04-01, this is to notify you in your capacity as
    Mechanic's           Lien     Agent    for   _______________________,                 Owner,       that
    _____________________, [Sub]Contractor, seeks payment for labor performed or material furnished on
    the project identified below.

             (i)     [Sub]Contractor's Name:
                     _______________________________

                     [Sub]Contractor's Mailing Address:
                     _________________________________

                     [Sub]Contractor's Telephone Number:
                     _______________________________

             (ii)    Building Permit Number:
                     _______________________________

             (iii)   Description of Property As Shown on Building Permit:
                     __________________________________________________
                     __________________________________________________

             (iv)     By filing this Notice, _________________________ [Sub]Contractor, seeks payment for
    labor performed or materials furnished.

                                                 _____________________________
                                    [Individual] on behalf of ______________
                                                  [Sub]Contractor




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                 5.      The Lien Claimant's Responsibilities.          The lien claimant is

                         responsible for determining the existence of the mechanic’s lien

                         agent. A mechanic's lien claimant is not free to disregard the

                         notification requirements with regard to the agent simply because a

                         building permit was not posted on a one- or two-family residential

                         dwelling unit at the time he first performed labor or furnished

                         material. In this situation it is the mechanic's responsibility to

                         determine, from appropriate authorities, whether a permit which

                         designates a mechanic's lien agent has, in fact, been issued and

                         the date on which it was issued.

                 6.      Exceptions to Notification Requirement. No person is required to

                         notify the agent where either: (a) a memorandum of mechanic's lien

                         is recorded prior to the issuance of the building permit; (b) the

                         building permit does not designate a mechanic's lien agent; or (c) a

                         mechanic's lien claimant is claiming a lien under § 43-3(b). VA .

                         CODE ANN. § 43-4.01(C).

                 7.      Duties of Agent. The mechanic's lien agent, unless otherwise

                         agreed in writing, shall have only the following two duties:

                         a.       to receive notices from persons claiming mechanic's liens
                                  against one- or two-family residential dwelling units; and

                         b.       to provide notice upon request to a settlement agent
                                  involved in a transaction relating to the residential dwelling
                                  unit.




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                 8.      Authority of Agent. A mechanic's lien agent is authorized to enter

                         into written agreements with third-parties regarding funds that may

                         be advanced to him for disbursement. VA. CODE ANN. § 43-4.01(E).

                 9.      Agent's Fee. A mechanic's lien agent may charge a reasonable fee

                         for services rendered. VA. CODE ANN. § 43-4.01(F).

                 10.     Requirement of Owner's Affidavit. At the time of settlement on the

                         sale of a one- or two- family residential dwelling unit, a person who

                         is both the owner of the unit and either: (i) a developer of such

                         property; (ii) a contractor in connection with the development or

                         improvement of the property; or (iii) a contractor or subcontractor

                         furnishing labor or material in connection with the development or

                         improvement of the property, must provide an affidavit to the

                         purchaser.

                                  The affidavit must state either: (i) that all persons performing

                         labor or furnishing materials in connection with the improvements

                         on the property and with whom such owner is in privity of contract

                         have been paid in full; or (ii) the name, address and amount

                         payable to or claimed to be payable to any person performing labor

                         or furnishing materials and with whom the owner is in privity of

                         contract. Willful failure to provide this statement or any willful

                         material misrepresentation with respect to the statement which

                         causes a monetary loss to or any person or institution is punishable

                         as a Class 5 felony.


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                 11.     Section 11-2.4 - Notice of Possible Filing of Mechanic's Lien.

                         Section 11-2.4 provides that all contracts for the purchase of

                         residential real property must contain a notice provision which

                         informs the parties to the contract of the possibility that persons

                         may file mechanic's liens against the property after settlement.

                         Failure to include this provision, however, does not void the

                         contract. The notice provision required by § 11-2.4 is set forth

                         below:


                                                                 NOTICE

                                    Virginia law (§ 43-1 et seq.) permits persons who have performed labor or
                          furnished materials for the construction, removal, repair or improvement of any
                          building or structure to file a lien against the property. This lien may be filed at any
                          time after the work is commenced or the material is furnished, but not later than the
                          earlier of (i) 90 days from the last day of the month in which the lienor last performed
                          work or furnished materials or (ii) 90 days from the time the construction, removal,
                          repair or improvement is terminated. AN EFFECTIVE LIEN FOR WORK
                          PERFORMED PRIOR TO THE DATE OF SETTLEMENT MAY BE FILED AFTER
                          SETTLEMENT. LEGAL COUNSEL SHOULD BE CONSULTED.




                 12.     Section 43-3(b) - Development Lots and Condominium Units.

                         Section 43-3(b) of the Code, which provides for a lien upon the

                         individual lots of a development and the individual units of a

                         condominium provides that a contractor claiming a lien under § 43-

                         3(b) (as opposed to all other contractors who provide labor or

                         materials to one- or two-family residential dwelling units where the

                         building permit designates an agent) is not required to notify the

                         agent.

“The Mechanic’s Lien in Virginia”                                                                 Page 39
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                                  This provision extends lien coverage to persons providing

                         labor or materials for “site development improvements”2 and “storm

                         water facilities,” as well as persons providing labor or materials for

                         streets, sanitary sewers, or water lines for the purpose of providing

                         access or service to the individual lots in the development or

                         condominium units.

        I.       Alternatives to Filing for a Subcontractor

                 1.      VA. CODE ANN. § 43-18. In Virginia, the perfected lien of a general

                         contractor will inure to the benefit of any subcontractor or sub-

                         subcontractor who has not perfected a lien on the building or

                         structure.      In order to have the advantage of the general

                         contractor's lien, the subcontractor or the sub-subcontractor must

                         give written notice of his claim against the contractor or

                         subcontractor, as the case may be, to the owner or his agent before

                         the amount of the lien is actually paid off or discharged. VA. CODE

                         ANN. § 43-18.

                 2.      Personal Liability of the Owner or General Contractor. In addition

                         to the lien remedies available to a subcontractor or sub-

                         subcontractor, the Virginia lien law may impose personal liability

                         upon an owner or general contractor in the absence of a written

                         contract. A subcontractor does not normally have a contract with

                         the owner and, therefore, his only remedy is his mechanic's lien

        2
           Site development improvements are improvements which are provided for the development as a whole,
        such as project site grading, rather than for an individual lot.

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                         right.     However, § 43-11 provides a method by which a

                         subcontractor may hold the owner personally liable to him (this also

                         applies to the sub-subcontractor vs. the general contractor).

                         Section 43-11 gives the subcontractor or the sub-subcontractor

                         added security that he will be paid for the work he has performed

                         on the job.

                         a.       First Notice Required. Before the work begins, notice must

                                  be given by the subcontractor to the owner or his agent

                                  stating the nature and character of his contract and the

                                  probable amount of his claim. VA. CODE ANN. § 43-11.

                         b.       Second Notice Required. At any time after the subcontractor

                                  has completed his work, but before the expiration of thirty

                                  (30) days from the time such building is completed or work

                                  thereon is otherwise terminated, he must furnish the owner

                                  or his agent and the general contractor with a correct

                                  account verified by affidavit of his claim against the general

                                  contractor.

                         c.       Sub-subcontractor. A sub-subcontractor follows basically

                                  the same procedure, but gives notice to the contractor

                                  and/or the owner.

                         d.       Extent of Liability. The owner is personally liable, provided

                                  the sum claimed does not exceed the sum in which the

                                  owner is indebted to the general contractor at the time the


“The Mechanic’s Lien in Virginia”                                                 Page 41
KATZ & STONE, L.L.P., Vienna, Virginia
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                                  notice is given or may thereafter become indebted by virtue

                                  of his contract with the general contractor.

                         e.       The Sub-subcontractor - Extent of Liability.      The same

                                  applies to a sub-subcontractor in that the liability of the

                                  contractor shall not exceed the sum due his subcontractor.

                         f.       Method of Service. The notices required under this section

                                  may be served pursuant to Title 8.01 of the Virginia Code,

                                  and may be recorded in the appropriate clerk’s office in

                                  accordance with § 43-4.1. Alternatively, the notices may be

                                  mailed (by registered or certified mail) to the owner or

                                  general contractor upon whom personal liability is sought to

                                  be imposed.     A return receipt showing delivery to the

                                  addressee is sufficient evidence that the notice was

                                  received.

                                         In Arthur's Industrial Maintenance, Inc. v. Eichleay

                                  Constructors, Inc., Adversary Proceeding No. 90-00016A,

                                  (Bankr., W.D. Va. Lynchburg Div. 1990), aff'd. Arthur's

                                  Industrial Maintenance, Inc. v. Eichleay Constructors, Inc.,

                                  Adversary Proceeding No. 90-00016A, (W.D. Va., April 16,

                                  1991), the court addressed the personal liability of the owner

                                  and general contractor. Here, the supplier of air conditioning

                                  units failed to provide the proper notice under § 43-11, and

                                  the court found that because the supplier failed to provide


“The Mechanic’s Lien in Virginia”                                                 Page 42
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                                  both notices (one prior to the commencement of work and

                                  one within 30 days of completion), it did not have a claim

                                  under this section of the Code. See Loyola Federal Savings

                                  & Loan Ass's v. Herndon Lumber & Millwork, Inc., 218 Va.

                                  803, 241 S.E.2d 752 (1978); see also Staples v. Adams,

                                  Payne & Gleaves, Inc., 215 F. 322 (4th Cir. 1914), N.J.

                                  Steigleder & Son v. Allen, 113 Va. 686, 75 S.E. 191 (1912).

        J.       Multiple Unit or Multiple Lot Problems

                 1.      Separate Lien for Each Parcel. There are many instances where a

                         lien claimant will have provided labor and materials on a job

                         containing multiple lots and multiple units. In such a case, the lien

                         claimant must be very careful to properly perfect his mechanic's lien

                         on the property on which he performs.

                                  According to an old Virginia case, Gilman v. Ryan, 95 Va.

                         494, 28 S.E. 875 (1898), a separate lien memorandum must be

                         filed for each parcel of land where the work is performed on two or

                         more properties under separate contracts with the same owner.

                         The memorandum should contain only a claim for labor and

                         materials furnished on the individual parcel described in the

                         memorandum. Id.

                 2.      Over-Inclusive Liens.      In Woodington Electric, Inc. v. Lincoln

                         Savings & Loan Assoc., 238 Va. 623, 385 S.E.2d 872 (1989), the

                         court considered the question of whether a lien filed partially on


“The Mechanic’s Lien in Virginia”                                                Page 43
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                         property on which the contractor did not work fails completely, or

                         whether the court may excise from the lien the property on which

                         the contractor did not work. The court held that a mechanic's lien

                         filed on a parcel where the mechanic has not worked is invalid in its

                         entirety. The court explained that "[m]echanic's lien law in Virginia

                         will not permit a claimant to file an over-inclusive lien and then

                         leave it to the trial court to excise any excess property." Id. at 634,

                         385 S.E.2d at 880.

                                  However, in the rare situation where an owner has not

                         recorded the subdivision plat, a contractor may file a lien on the

                         entire property. The mechanic's lien claimant is entitled to rely

                         upon the land records when filing a lien.          See Blue Ridge

                         Construction Corp. v. Stafford Development Group, 244 Va. 361,

                         421 S.E.2d 199 (1992).

                 3.      Single Memorandum (Blanket Lien).             Sometimes a single

                         memorandum is permitted, but only in certain situations and not

                         where there are separate contracts for each parcel.

                         a.       Blanket Liens Generally. The “blanket lien” was recognized

                                  by the Virginia Supreme Court in Sergeant v. Denby, 87 Va.

                                  206, 12 S.E. 402 (1890). There, a single contract had been

                                  executed for the construction of two neighboring buildings.

                                  One lump sum payment was to be made. There was no

                                  provision for the contractor to maintain separate accounts of


“The Mechanic’s Lien in Virginia”                                                Page 44
KATZ & STONE, L.L.P., Vienna, Virginia
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                                  labor or materials furnished for each house. Under these

                                  circumstances, the Supreme Court of Virginia held that the

                                  two buildings were, in effect, one piece of work and any lien

                                  must be joint since allocation to each house was impossible.

                                         However, in Addington-Beaman Lumber Co., Inc. v.

                                  Lincoln Savings & Loan Assoc., 241 Va. 436, 403 S.E.2d

                                  688 (1991), the court invalidated a blanket mechanic's lien

                                  because the supplier failed to apportion the amount of its

                                  claims for material furnished to each of the ten separate

                                  townhouse units in a single building. The court reasoned

                                  that, although the terms of the contract were on an open

                                  account, the materials furnished added disproportionate

                                  values to the individual units.     Moreover, given that the

                                  supplier's documents identified the specific units on which

                                  the materials were used, the supplier could have filed a lien

                                  for a specified amount on each unit.

                         b.       Third-Party Issues. The blanket lien can create problems

                                  where third-parties (lenders and title insurance companies,

                                  etc.) who are adversely affected by the lien object to the lien.

                                         In Weaver v. Harland Corp., 176 Va. 224, 10 S.E.2d

                                  547 (1940), a blanket lien was filed against 20 lots. The

                                  lienors released several lots from the lien and then

                                  attempted to enforce their entire claim against the remaining


“The Mechanic’s Lien in Virginia”                                                  Page 45
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                                  lots. The court denied a blanket lien and held that to allow

                                  lienors to shift the entire claim to less than all of the lots

                                  would unfairly burden the remaining lots.          Practically

                                  speaking, a third-party (such as an owner) would, in order to

                                  secure the release of his own property from the lien, be

                                  forced to pay for work done on other properties.

                                         Virginia courts have established two controlling

                                  requirements which govern the validity of a blanket lien.

                                  First, release of less than all of the units is allowed only

                                  where the interested third-parties (such as mortgagees and

                                  other creditors) are not adversely affected. See Weaver,

                                  supra at 49. Second, blanket liens may only be used where

                                  the property units to be attached were those which were

                                  benefitted as part of a single transaction and there has been

                                  no provision for a separate accounting of labor or materials

                                  furnished for individual units. See Sergeant, supra at 48.

                                         It should be noted that problems with a blanket lien

                                  most frequently arise when a contractor attempts to release

                                  less than all of the lots encumbered by the lien but fails to

                                  reduce the amount of the lien claimed as to other lots.

                                  Section 43-4 requires that the memorandum of lien allocate

                                  charges to the property sought to be encumbered. A strict

                                  interpretation of this section would exclude the use of a


“The Mechanic’s Lien in Virginia”                                                 Page 46
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                                  blanket lien where individual liens can be achieved on the

                                  basis of apportionment.

                         c.       Condominiums.

                                  1. Lien Claimants Generally. According to § 43-3, if the

                                         building being constructed is part of a condominium as

                                         defined in § 55-79.41(d) or under the Horizontal Property

                                         Act (§§ 55-79.1 through 55-79.38), a lien claimant

                                         providing labor or material to one or more units (or to

                                         limited common elements within the condominium) under

                                         a single contract may perfect a single lien provided that it

                                         only encumbers those units: (1) which are the subject of

                                         the contract (or to which those limited common elements

                                         pertain), and (2) for which payment has not been made.

                                         In addition, persons providing labor or furnishing

                                         materials for the “common elements” pertaining to all the

                                         units may perfect a single lien encumbering all such

                                         condominium units. Id. Section 43-3 also describes the

                                         procedures by which individual units may be released

                                         from a single lien.

                                  2. Section 43-3 Caselaw.            In United Masonry, Inc. v.

                                         Jefferson Mews, Inc., 218 Va. 360, 237 S.E.2d 171

                                         (1977), a mechanic's lien was filed against a

                                         condominium project.


“The Mechanic’s Lien in Virginia”                                                     Page 47
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                                         The trial court refused to allow the lien on the grounds

                                         that the subcontractor's memorandum of lien claimed a

                                         lien upon the entire project and had not apportioned the

                                         total amount claimed under two separate contracts: one

                                         for the construction of individual condominium units and

                                         the other for work performed on a bath house (one of the

                                         common facilities on the project).

                                            The court specifically noted that the plaintiff did not

                                         dispute that it sought to encumber the entire property in

                                         one lien for all the work done and materials furnished.

                                            A second question was what property could be

                                         encumbered, since on the day the memorandum of lien

                                         was recorded, only 132 of 264 units had been completed.

                                         The defendants argued that, on the day the

                                         memorandum of lien was recorded, all 264 units were in

                                         existence (even if not yet built) due to the earlier

                                         recordation of the Master Deed.

                                              The court, however, found that defendants could not

                                         encumber the units not yet built when the lien

                                         memorandum was recorded. The court reasoned that

                                         the unbuilt units had received no benefit from the

                                         contractor's performance and thus the memorandum did

                                         not seek to secure the claim to the extent that the plaintiff


“The Mechanic’s Lien in Virginia”                                                      Page 48
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                         added value to the individual units, but instead attempted

                                         to   lien   property   not   benefitted       by     the     work.

                                         Consequently, the memorandum did not comply with §

                                         43-3.

                                              United Masonry, if nothing else, should be read by

                                         contractors as a warning not to infringe on the property

                                         rights of unbuilt condominium units or other unbuilt

                                         properties. Contractors who file liens on condominium

                                         projects or other multi-unit projects should be careful that

                                         their liens describe and encumber only the properties that

                                         are benefitted by their labor or materials.

                                              Note that since United      Masonry, the General

                                         Assembly has amended the Code so a contractor

                                         working on a condominium or common elements of a

                                         condominium unit may either: (1) perfect a single lien

                                         encumbering one or more units, or (2) perfect a single

                                         lien encumbering all units where work is performed on

                                         the common elements pertaining to all units. Section 43-

                                         3(a) also prescribes the method by which individual units

                                         may be released from such a lien.

                         d.       Road Building, Street, and Sewer Work. In situations, such

                                  as road clearing, building, and excavation, where the

                                  contractor has performed work which benefits a number of


“The Mechanic’s Lien in Virginia”                                                           Page 49
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                                  lots but does not directly work on the lots, the contractor may

                                  maintain a mechanic's lien on all of the benefited lots if the

                                  requirements of § 43-3(b) are met. Section 43-3(b) requires

                                  that in order to file a lien, contractors providing utility

                                  services (streets, sanitary sewers, etc.) must, prior to the

                                  sale of an individual condominium unit, file with the clerk a

                                  document which sets forth: (1) a full disclosure of the nature

                                  of the lien to be claimed; (2) the amount claimed against

                                  each lot or unit; and (3) a description of the condominium.

                                  This filing is in addition to the memorandum of lien. VA. CODE

                                  ANN. § 43-3(b).

                                         In Rosser v. Cole, 237 Va. 572, 379 S.E.2d 323 (1989),

                                  the Virginia Supreme Court found that a contractor who

                                  performed road clearing and grading on a large tract of land

                                  and who filed a blanket mechanic's lien on the whole tract

                                  failed to meet the requirements of § 43-3(b) and, as a

                                  consequence, his lien rights were governed by § 43-3(a).

                                  Under § 43-3(a), the court strictly construed the statute,

                                  finding that the contractor's blanket mechanic's lien was

                                  invalid because it failed to correspond to the contract, failed

                                  to describe the land and improvements upon which the lien

                                  rights may exist, and purported to cover property to which




“The Mechanic’s Lien in Virginia”                                                  Page 50
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www.katzandstone.com
                                  lien rights did not extend because the contractor did not work

                                  on that property.

                                         The court noted that had the contractor strictly complied

                                  with the notice requirement of § 43-3(b), he could have

                                  perfected a lien on the lots, but that since he failed to meet

                                  the precise requirement of § 43-3(b), he could only lien the

                                  streets upon which he actually worked pursuant to § 43-3(a).

                                         Similarly, in Valley Blox, Inc. v. Linpro Chantilly Land

                                  Limited Partnership, 24 Va. Cir. 154 (1991), the Fairfax

                                  Circuit Court found that a mechanic's lien filed on the units of

                                  a shopping center by a contractor who worked on the

                                  sewers, streets, and water lines was invalid because the

                                  mechanic's lienor failed to provide the request notice

                                  pursuant to § 43-3(b). Thus, site improvement contractors

                                  who want to lien land upon which they have not worked

                                  should be especially careful to precisely meet all the notice

                                  requirements of § 43-3(b).




“The Mechanic’s Lien in Virginia”                                                   Page 51
KATZ & STONE, L.L.P., Vienna, Virginia
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III.    ENFORCEMENT OF THE MECHANIC'S LIEN.
        A.       Method of Enforcement

                         Under § 43-22, the only method for enforcing a mechanic's lien is a

                 lawsuit commencing in equity with a bill of complaint. The lienor must file

                 with the complaint an itemized statement of his account, showing the

                 amount and character of work done or materials furnished, the prices

                 charged for them, the payments made (if any), the balance due and the

                 time from which interest is claimed. The accuracy of this account must be

                 verified by an affidavit of the lienor himself or his agent.

                         Section 43-22 indicates that the itemized statement of account is

                 jurisdictional. A bill to enforce a mechanic's lien that does not contain an

                 itemized statement of account, verified by affidavit, is ineffective and does

                 not constitute proper filing of suit so as to toll the statute of limitations.

                         Despite the above, a decision of the Supreme Court of Virginia

                 suggests that the failure to file a verified statement of the account is, at

                 best, a technical defect which can be raised by the defendant within seven

                 (7) days as required by Rule of Court 1:10 or it is waived. Further, the

                 statement may be filed anytime before the court acts upon a demurrer to

                 the bill of complaint. Va. S.Ct. Rules 1:10.

                         In Herbert Bros., Inc. v. McCarthy Co. of Virginia-Maryland, 220 Va.

                 907, 265 S.E.2d 685 (1980), a contractor filed a mechanic's lien against

                 certain property located in Fairfax County and subsequently acquired by

                 Gulf Reston, Inc. The contractor then filed a bill to enforce its mechanic's


“The Mechanic’s Lien in Virginia”                                                    Page 52
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                 lien and attached to its bill an itemized statement of account.           The

                 contractor, however, failed to verify the correctness of the account as

                 required by § 43-22.

                         Thereafter, the defendant, within the time period permitted by the

                 Rules of Court for a response, but more than seven days after service,

                 filed a demurrer asserting that the bill was insufficient because of the

                 absence of the verified statement of account required by § 43-22. The

                 contractor then filed an affidavit verifying the correctness of the account.

                         More than a year later, the trial court sustained the demurrer and

                 dismissed the bill. The complainant contended that Rule 1:10 "supplies a

                 remedy where an affidavit required by statute to be filed with a pleading is

                 not so filed." Id. at 908, 265 S.E.2d at 686. Since Gulf Reston failed to

                 complain as to the absence of the verified statement of account within the

                 time permitted by Rule 1:10, it waived any objection it might have had due

                 to the lack of the affidavit.

                         The court agreed and concluded that the Rule 1:10 “cure” provision

                 applies to the § 43-22 affidavit. It appears, therefore, that the court

                 considered the verification of the itemized statement of account to be

                 merely a technical defect which must be raised within the time permitted

                 by Rule 1:10; otherwise, the defect is waived and/or is curable in any

                 event before a demurrer raising the defect is adjudicated. Herbert Bros.,

                 Inc., 220 Va. 227, 265 S.E. 2d 685 (1980).




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                         Similarly, where the mechanic has filed an itemized account, the

                 "meagerness" of the statement of account is not a ground for defeating the

                 mechanic's lien. Knight v. Ferrante, 202 Va. 243, 117 S.E.2d 283 (1960).

                 In Knight, the court found that the claimant's account was adequate

                 where, when read in connection with the bill of complaint, it sufficiently

                 established the requirements of § 43-22. The court suggested that if the

                 owners wanted a more detailed accounting, they could have sought

                 further particulars on the claim.

                         Additionally, if the affidavit contains a mathematical error, courts will

                 permit leave to amend because the itemized account is not jurisdictional

                 and because the amendment neither creates a new cause of action nor

                 makes a new demand. See Becker v. Capital Sun Land Ltd., 23 Va. Cir.

                 495 (1991).

        B.       Inclusion of Other Claims

                         In addition to alleging all facts necessary to enforce the mechanic's

                 lien previously filed on the property, the bill of complaint may also state

                 other causes of action against the same defendant, for example, recovery

                 in quantum meruit, breach of contract, etc. Once the matter is submitted

                 to the court, the court has jurisdiction to hear all such claims.

        C.       Where Must the Suit be Filed?

                         The suit must be filed in a court of equity (circuit court) in the county

                 or city where the building structure, railroad or some part thereof is




“The Mechanic’s Lien in Virginia”                                                    Page 54
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                 situated, or where any owner of the property resides. VA. CODE ANN. § 43-

                 22.

        D.       When Must the Suit be Filed?

                         Section § 43-17 provides that any suit to enforce a mechanic's lien

                 must be brought within 6 months from the date the memorandum of lien

                 was recorded or within 60 days from the time the building, structure or

                 railroad was completed or the work otherwise terminated, whichever such

                 time shall last occur. The bill of complaint should state that the suit is

                 timely filed and should refer to the date the lien was recorded to confirm

                 this.

                         It should be noted that the statute further provides that "nothing

                 herein shall extend the time within which such lien may be perfected." VA.

                 CODE ANN. § 43-17. Therefore, since failing to file suit to enforce the lien

                 within the proper time is a bar to enforcement, it is vital that the

                 mechanic's lienor comply with this time requirement.

                         It also is important to ensure that all necessary parties to a

                 mechanic's lien suit are named before the statute of limitations has run

                 because if a necessary party is added after the statute of limitations has

                 run, the mechanic's lien suit is subject to dismissal as being time-barred.

                 See Mendenhall v. Douglas L. Cooper, Inc., 239 Va. 71, 387 S.E.2d 468

                 (1990) (holding that the “date of filing” for purposes of the statute of

                 limitations is the date that the amended complaint is filed, not the date the

                 original suit is filed).


“The Mechanic’s Lien in Virginia”                                              Page 55
KATZ & STONE, L.L.P., Vienna, Virginia
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                         In Commonwealth Mechanical Contractors, Inc., 222 Va. 330, 281

                 S.E.2d 811 (1981), the Court noted that § 43-22 permits a mechanic's lien

                 claimant to seek enforcement of his lien in another lien claimant's suit

                 against the same property. Referring to the section of the Virginia Code

                 setting forth the statute of limitations, the court noted that both sections of

                 the Virginia Code had been virtually unchanged since they were

                 simultaneously enacted by the General Assembly in 1893.

                         This common history dictates that each provision be
                         interpreted in light of the other. When read together, it is
                         clear that these code sections require that a lienor's
                         intervening petition in a suit to enforce a mechanic's lien be
                         filed within the limitation period provided in § 43-17 of the
                         Va. Code. Although the filing of an intervening petition in a
                         suit filed by another lienor is the equivalent of instituting a
                         suit under § 43-17 of the Va. Code, being named as party
                         defendant in a suit by a lienor is not . . . . Merely naming a
                         lienor in a suit is not enough to provide this information
                         [needed by the owner, the builder, and the lender] because it
                         does not establish the validity of the lien or the amount due
                         thereunder.

                 Id. Hence, the court ruled that Commonwealth was not entitled to enforce

                 a lien against the property.

                         In Isle of Wight Materials Company, Inc. v. Cowling Brothers, Inc.,

                 246 Va. 103, 431 S.E.2d 42 (1993), the court, citing Commonwealth

                 Mechanical,, considered the contention of a mechanic's lien claimant that

                 his being named a party defendant in another lien claimant's suit tolled the

                 § 43-17 statute of limitations and thus abated the necessity of filing a

                 petition to enforce his lien within the six-month statute of limitations.

                 Concluding that "[m]erely being named as a defendant in an enforcement

“The Mechanic’s Lien in Virginia”                                                Page 56
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                 action of another lienor is not the equivalent of either filing an independent

                 suit or intervening in the suit of another," the court found that the

                 materialman had not timely filed a suit to enforce its mechanic's lien and

                 dismissed the lien suit. 246 Va. at 107.



IV.     LIEN ISSUES
        A.       Other Mechanic’s Lien Issues

                 1.      Waiver of Defenses. Can an owner agree in writing not to assert

                         the defense of the statute of limitations if the contractor agrees not

                         to file a mechanic's lien or to file suit to enforce a lien?

                         Occasionally, an owner in financial difficulty learns or anticipates

                         that liens will be filed on his project. In order to avoid having the

                         project liened or to avoid being sued, the owner will ask contractors

                         to forebear in filing liens and will promise not to enforce the statute

                         of limitations if the contractors agree not to file liens.

                                  There are no reported cases in Virginia directly on this point.

                         Generally, where a debt has already matured, a promise not to

                         plead the statute of limitations may properly be interpreted as a

                         new promise to pay the debt which will extend the statutory period

                         from the time the promise is made. See Williston on Contracts,

                         §2070 (3d Ed. 1978).

                                  Thus, while an owner could not agree in his original contract

                         with the contractor not to plead the statute of limitations as a


“The Mechanic’s Lien in Virginia”                                                     Page 57
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                         defense, once the debt matures and the owner faces the possibility

                         of a lien, it appears the contractor may rely on that promise.

                         However, the contractor should insist that this promise be

                         committed to writing. Moreover, third-parties with interests in the

                         property (e.g., lenders or title companies) may not be bound by the

                         owner's promise not to plead the statute of limitations as a defense.

                 2.      Necessary Parties.

                         a.       General Overview. In a suit to enforce a mechanic’s lien,

                                  care must be taken to name all “necessary” parties as

                                  defendants since failing to include one necessary party

                                  results in defeat of the entire mechanic's lien. Id. A party is

                                  necessary if the "individual is in actual enjoyment of the

                                  subject matter, or has an interest in it, either in possession or

                                  expectancy, which is likely either to be defeated or

                                  diminished by the plaintiff's claim. In such case he has an

                                  immediate interest in resisting the demand, and all persons

                                  who have such immediate interests are necessary parties to

                                  the suit." Mendenhall v. Douglas Cooper, Inc., 239 Va. 71,

                                  75, 387 S.E.2d 468, 470 (1990).

                                         Thus, the parties named as defendants should

                                  include (i) the owner, (ii) the general contractor, (iii) other

                                  mechanic's lienors, (iv) all judgment or lien creditors (e.g.,




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                                  lenders), and (v) trustees under all deeds of trust or other

                                  security agreements.

                         b.       Payment and Performance Bond Sureties. Section 43-71

                                  provides that sureties on any bond filed to secure the

                                  release of a mechanic’s lien are necessary parties which

                                  must be made parties to such suit.

                         c.       Deed Trustees. Furthermore, the trustees of any deeds of

                                  trust on the property should be named as party defendants

                                  because their interests will be affected by the results of the

                                  suit. In James T. Bush Construction Company v. Patel, 243

                                  Va. 84; 412 S.E.2d 703 (1992), the court rejected any

                                  distinction between an antecedent and subsequent deed of

                                  trust and explicitly required that any trustee be named as a

                                  party.

                                           When a lien has been "bonded off,” the property

                                  owner, beneficiaries of the deed of trust, and trustee are not

                                  necessary parties to the suit to enforce the mechanic's lien.

                                  This is because, as the court found in George Kane, Inc. v.

                                  NuScope, Inc., 243 Va. 503, 416 S.E.2d 701 (1992), once a

                                  lien release bond has been posted, the claimant’s security

                                  for the claim becomes the bond and not the real estate.

                                  Thus, owners, trust beneficiaries, and trustees are no longer

                                  necessary parties since they no longer have an interest in


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                                  the property "likely either to be defeated or diminished" by a

                                  suit on the bond. Id. at 510.

                         d.       General Contractor. If the mechanic's lien claimant is a

                                  subcontractor, the general contractor is a necessary party

                                  and must be named in the bill of complaint.                 In Re

                                  Richardson Builders, Inc. v. Middleton & Dugger Plumbing &

                                  Heating, Inc., 123 Bankr. 736 (W.D. Va. 1990).

                                         However, there appears to be a conflict between the

                                  Virginia circuit courts as to whether failing to name the

                                  general contractor as a party before the six-month statute of

                                  limitations has run will defeat the mechanic's lien.           In

                                  Addington-Beaman Lumber Co., Inc. v. Old Dominion

                                  Drywall & Plaster, Inc., Chancery No. CH91-169 (Norfolk Cir.

                                  Ct., May 24, 1991), the court found that such a failure

                                  defeated the mechanic's lien.

                                         The Prince William County Circuit Court came to the

                                  opposite conclusion and held that because (1) the land

                                  subject to the proceeding remains the same, (2) the priorities

                                  of all parties to the litigation remain unaffected, and (3) the

                                  owner's position is as before, the filing of the original bill of

                                  complaint tolls the statute against a general contractor.

                                  Thus, the Prince William Court allowed the claimant to add

                                  the general contractor to the suit. Ferguson Enterprises, Inc.


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                                  v. Equity Resources, Inc., Chancery Nos. 30347, 30348

                                  (Prince William Cir. Ct., March 25, 1991).

                 3.      Suit Consolidation: Numerous Lien Creditors.

                                  All lien creditors are proper parties, but not per se necessary

                         parties. Lien creditors other than the complainant are named as

                         nominal defendants in order to ensure that all parties are before the

                         court so that the court’s decision reaches all claims. What often

                         occurs is that a number of lien suits will be filed on a single project.

                         Various lien claimants will be defendants in suits filed by other lien

                         claimants.

                                  For purposes of economy and where possible without

                         conflicts, the separate lien claimants may wish to consolidate their

                         cases (by way of an Order of Consolidation) to minimize hearing

                         costs (e.g., using one appraiser to determine the value of the

                         property, etc). In effect, this consolidation merges the different

                         claims into a single suit. Evidence in one becomes evidence in the

                         other, the parties to one become parties to the other, and the case

                         proceeds for all purposes as if the several causes had been

                         originally asserted in a single bill. See, e.g., Liles's Equity Pleading

                         and Practice, Chapter XXV, "Consolidation of Causes" (3d ed.

                         1952).

                                  Another reason why a mechanic's lien claimant may wish to

                         consolidate his suit with other lien suits is to ensure that he


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                         recovers at least a portion of his claim. A mechanic's lien claimant

                         whose suit is scheduled to be heard months after other lien suits

                         may find that, by the time his suit is heard, there are no proceeds

                         left to satisfy his claim. By consolidating his case with other cases,

                         the claimant ensures that his claim is before the court early enough

                         to share in the proceeds.

                 4.      Trial.

                         a.       Equity Proceeding. Since the enforcement of a mechanic's

                                  lien in Virginia is an equity proceeding, when the case is

                                  mature, a decree of reference will be entered by one of the

                                  parties referring the matter to a Commissioner in Chancery.

                                  (In some jurisdictions, judges of the circuit court hear such

                                  matters.)

                         b.       The Commissioner's Hearing.               At the hearing, the

                                  mechanic's lienor will present proof of every material

                                  allegation in his memorandum of mechanic's lien and bill in

                                  equity, including: (i) the type of materials or services

                                  furnished for the property; (ii) the amount claimed for such

                                  materials and/or services; (iii) the date from which interest on

                                  this amount is claimed; (iv) the timely filing of the

                                  memorandum and notice to the owner; (v) the timely filing of

                                  the bill in equity instituting suit; and (vi) the fact that all work

                                  performed or materials furnished, as noted in the


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                                  memorandum of lien, were furnished for the property

                                  described in the memorandum. Note that § 43-23.1 provides

                                  that any person who shall, with intent to mislead, include in

                                  his memorandum of lien work not performed upon or

                                  materials not furnished to the property shall thereby forfeit

                                  any right to a lien.

                 5.      Sale of Property. The Commissioner will return a report of his

                         findings to the court.          If the Commissioner holds that a valid

                         mechanic's lien exists on the subject property (and the

                         Commissioner's findings are upheld by the court), a decree of sale

                         will be entered, even if rent from the property over the next several

                         years would pay the lien(s). The court will appoint one or more

                         Special Commissioners to make the lien sale. Frequently, the

                         mechanic's lienor's attorney will serve as a Special Commissioner.

                         A bond must be posted by the Special Commissioner prior to the

                         sale. VA. CODE ANN. § 8.01-96.

                 6.      Lien Priority.

                         a.       Liens of Equal Status. Section 43-23 provides that there will

                                  be no priority among lienors of equal status. For example, if

                                  three subcontractors file mechanic's liens on the same piece

                                  of property, the mechanic's lienor filing first has no priority to

                                  payment over the other two mechanic's lienors.




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                         b.       Between Contractor and Subcontractor. However, § 43-23

                                  does provide that the lien of a subcontractor is preferred to

                                  that of his general contractor; the lien of a sub-subcontractor

                                  is preferred to a subcontractor; and liens filed by persons

                                  performing manual labor will have priority over materialmen

                                  to the extent of the labor performed during the thirty days

                                  immediately preceding the date of the last labor

                                  performance. Id.

                         c.       Priority Over Deed of Trust. A mechanic's lien has priority

                                  over a prior deed of trust on the property as to any

                                  improvements on the property. However, the mechanic's

                                  lien is inferior to the deed of trust as to the extent of the

                                  value of the surplus land, if any, as of the date of the judicial

                                  sale.

                         d.       Priority Over Bank's Perfected Security Interest in Accounts

                                  Receivable. The Supreme Court of Virginia, in Kayhoe

                                  Construction Corporation v. United Virginia Bank, 220 Va.

                                  285, 257 S.E.2d 837 (1979), considered the priority of

                                  mechanic's lien claimants as against the claims of a bank

                                  holding a perfected security interest in a subcontractor's

                                  accounts receivable. Kayhoe, the general contractor, and

                                  C&T, its mechanical subcontractor, entered into two written




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                                  contracts where C&T was to install the plumbing and HVAC

                                  systems on each project.

                                         However, prior to completing its work for Kayhoe,

                                  C&T filed for bankruptcy.      At the time it abandoned its

                                  contract with Kayhoe, C&T was indebted to 13 suppliers and

                                  subcontractors for materials furnished for services performed

                                  on the Kayhoe projects.         The unpaid suppliers and

                                  subcontractors notified Kayhoe and the property owners of

                                  their respective claims but had not perfected their liens.

                                         For a number of years prior to its entering into

                                  contracts with Kayhoe, C&T had an arrangement with United

                                  Virginia Bank whereby the bank made loans to C&T which

                                  were secured by a security interest in C&T's accounts

                                  receivable, contract rights, and the proceeds therefrom.

                                  Upon receipt of money subject to the security interest, C&T

                                  deposited the funds in a special bank account designated

                                  "collateral account." These funds were then applied by the

                                  bank to the repayment of C&T’s loans.

                                         Kayhoe subsequently filed suit in an attempt to

                                  recover the payments received by the bank from C&T as the

                                  result of progress payments made by Kayhoe to C&T.

                                         The court, though, rejected the suit, stating that

                                  nothing in Virginia's mechanic's lien law established a legal


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                                  trust in funds paid to a contractor for the benefit of a

                                  contractor’s materialmen and laborers. The court further

                                  noted that, in order to perfect their liens, those who sought to

                                  benefit from Kayhoe's suit (C&T's subcontractors and

                                  suppliers) were required by § 43-7 to give notice to the

                                  owner and general contractor. Thus, while § 43-19 gives

                                  priority to the lien of a supplier over a bank's security interest

                                  in receivables, that priority is available only as of the time the

                                  subcontractor or supplier gives notice as required by § 43-7.

                 7.      Waiving Lien in Favor of Second Deed of Trust.                  Potential

                         mechanic's lienors should never make the mistake of waiving their

                         mechanic's lien in favor of obtaining a second deed of trust on the

                         property. Obviously, should a mechanic's lienor fall into this trap,

                         he would be removing himself from a position of first priority on the

                         improvements to a position of third priority and putting himself

                         behind other mechanic's lienors and the existing deed of trust on

                         the property.

                 8.      Defending the Owner Against a Lien. An owner may possibly

                         defeat a mechanic's lien through the application of two provisions of

                         the Virginia lien law, §§ 43-7 and 43-16.

                         a.       Owner’s Payment Defense. Section 43-7 provides that the

                                  amount for which a subcontractor may perfect a lien cannot

                                  exceed the amount for which the owner is indebted to the


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                                  general contractor at the time the notice is given or the

                                  amount for which the owner will thereafter, pursuant to the

                                  contract, become indebted to the general contractor.

                                         Thus, under this statute, the maximum amount a

                                  subcontractor can obtain from his mechanic's lien is limited

                                  by the amount remaining due from the owner to the general

                                  contractor at or subsequent to the date of the notice. If, as

                                  of the date of notice to the owner, the owner is not indebted

                                  in any amount to the general contractor, the owner will have

                                  no liability to the subcontractors. Maddux v. Buchanan, 121

                                  Va. 102, 92 S.E. 830 (1917).

                 Example:         Owner contracts with general contractor to have a house
                                  built for a contract price of $60,000. Owner pays general
                                  contractor $55,000 at which time general contractor defaults.
                                  Subcontractor is owed $15,000 and files a mechanic's lien.

                 Question:        What is the maximum amount for which the subcontractor
                                  may perfect his lien?

                 Answer:          $5,000 (the amount in which owner was indebted to general
                                  contractor at the time notice was given).


                         b.       Owner's Credit for Completion. Section 43-16 provides that

                                  if an owner is compelled to complete his building, or any part

                                  thereof, as a consequence of the failure or refusal of the

                                  general contractor to do so, the amount expended by the

                                  owner for such completion will have priority over all



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                                  mechanic's liens which have been or may be placed on the

                                  building.

                                         To be protected under this section, an owner must

                                  ensure that he or she is the record owner of the property at

                                  the time the mechanic's lien is filed; otherwise, the

                                  unrecorded owner loses her priority over the mechanic's

                                  lienor. See E.E. Stump Well Drilling, Inc. v. Willis, 230 Va.

                                  445, 450; 338 S.E.2d 841, 843 (1986) (holding that "an

                                  owner of land or an interest therein should not be entitled to

                                  protection from a mechanic's lien if he fails to record the

                                  contract or other instrument evidencing his interest.")

                                         The intent of the provision is to permit an owner

                                  whose general contractor has abandoned an uncompleted

                                  building project to “set off” the cost of completion against the

                                  balance due to the general contractor. See Henderson &

                                  Russell Assocs., Inc. v. Warwick Shopping Center, Inc., 217

                                  Va. 486; 229 S.E.2d 878 (1976). Note that in order to take

                                  advantage of this section, the owner must produce evidence

                                  of the cost of completion. Id.

                                         In Northern Development Ltd. v. Leake, No. 90-0021-

                                  H (W.D. Va., June 7, 1991), the court found that the work

                                  done on foundation walls was not completion work but repair

                                  work. Consequently, the entire amount was not subject to


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                                  set-off under § 43-16. The court’s determination that the

                                  work was repair and not completion was based on the fact

                                  that the structures at issue were complete but defective

                                  when the work was done. The court refused to allow the

                                  developer to both set-off the amount, reasoning that to do so

                                  would permit the developer to disguise a breach of warranty

                                  against the general contractor as a “completion cost” and an

                                  unwarranted gain priority over the other lien holders.

                 Example:         Owner in the above example produces evidence that his
                                  cost to complete his house, pursuant to the terms of his
                                  contract, was $6,000.

                 Question:        How much can the subcontractor recover as a result of its
                                  lien?

                 Answer:          Nothing. The owner's contract with the general contractor
                                  was for $60,000. Owner had already paid $55,000 to the
                                  general contractor and produced evidence that his cost of
                                  completion would be $6,000 more. Accordingly, his total
                                  cost exceeded the original contract price and, therefore, the
                                  mechanic's lienor can recover nothing.


                         c.       The Speculative Builder Situation. Where the owner of the

                                  real property acts as his own general contractor with the

                                  intent to sell the improved property upon the completion of

                                  the improvement, a different situation exists from the ones

                                  discussed above.

                 Example:         "Spec" buys a lot and, acting as his own general contractor,
                                  constructs a house on the lot. "Sub" contracts with Spec
                                  and installs the plumbing in the house. When house is
                                  completed, Spec sells the house and lot to Homeowner.
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                                  Sub has not been paid and files a mechanic's lien against
                                  the property.

                 Question:        Since Homeowner paid the full contract price to Spec, does
                                  he come under the protection of § 43-7 (payment to general
                                  contractor) and cut off the mechanic's lien of Sub?

                 Answer:          No. Recall that under § 43-1, a "general contractor" is
                                  defined as a laborer or materialman who contracts directly
                                  with the owner. The owner in this case was Spec and since
                                  Sub contracted with Spec, Sub is the general contractor.
                                  Homeowner purchased the lot and home from Spec, the
                                  owner, not Sub, the general contractor. Thus, Homeowner
                                  cannot claim the benefit of § 43-7 and may have to pay
                                  Sub's claim, regardless of the fact that he has paid the full
                                  contract price to Spec.

                 9.      Challenging the Validity of a Lien under § 43-17.1. In addition to

                         the above, an owner may utilize § 43-17.1 to require that a hearing

                         be held as to the validity of any lien filed on the property. According

                         to this section: “Any party, having an interest in real property

                         against which a lien has been filed, may, upon a showing of good

                         cause, petition a court of equity having jurisdiction wherein the . . .

                         property . . . is located to hold a hearing to determine the validity of

                         any perfected lien on the property . . . . If the court finds that the lien

                         is invalid, it shall forthwith order that the memorandum or notice of

                         lien be removed from record.“

                                  An owner who receives notice of a lien and is confident that

                         the lien is not timely filed or is otherwise defective may wish to

                         utilize § 43-17.1 to obtain a speedy determination by the court that

                         the lien is invalid.

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                 10.     Bankruptcy. A lien claimant is affected both by the bankruptcy of

                         the owner and the contractor if the claimant happens to be a

                         subcontractor. Generally, when a person claims bankruptcy, the

                         bankruptcy court has full control over all claims against him and his

                         property. The lien claimant needs to take into account the rules

                         that must be followed in accordance with the Bankruptcy Act, as

                         well as the mechanic's lien statutes.

                         a.       The Stay. When a person files bankruptcy, all other persons

                                  who may have an interest in or claims against the bankrupt's

                                  estate (real and personal property) are automatically under

                                  the jurisdiction of the stay provision of 11 U.S.C. § 362. This

                                  means that no one may proceed against the bankrupt after

                                  bankruptcy is filed, unless the court permits it by granting

                                  leave (permission) from the stay.

                         b.       Perfection in Spite of Stay.     The stay does not prevent

                                  perfection of a mechanic’s lien.       A mechanic’s lien is

                                  perfected by filing a memorandum of mechanic’s lien. This

                                  is not the type of event which would be subject to the stay.

                                  See 11 U.S.C. § 362(b)(3). Therefore, the time limitation for

                                  filing a memorandum of lien must be adhered to regardless

                                  of the bankruptcy stay.




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                         c.       Enforcing the Lien. The stay does prevent the filing of a suit

                                  to enforce a perfected mechanic's lien in circuit court. After

                                  the mechanic's lien is timely filed, suit to enforce the lien

                                  must be filed within six months from the date the

                                  memorandum of lien was recorded or within 60 days from

                                  the time the building or structure was completed or the work

                                  thereon otherwise terminated, whichever occurs last.

                                         In order to comply with the above requirement, the

                                  lien claimant should either: (a) file his suit in the bankruptcy

                                  court to enforce his perfected lien; or (b) ask the bankruptcy

                                  court to give him relief from the stay so he may file his suit in

                                  circuit court (as he normally would). The latter option is the

                                  preferred method and it is customary for lien claimants to

                                  seek relief from the stay and file suit in state court. McCoy v.

                                  Chrysler Condo Developer Limited Partnership, 239 Va. 321,

                                  389 S.E.2d 905 (1990).

                         d.       The Contractor's Bankruptcy.         When the contractor is

                                  declared bankrupt, the lien claimant may have more than a

                                  lien claim against the real estate. In some instances, the

                                  owner or some other person has a personal obligation to him

                                  to pay the money. This could exist by virtue of a contractual

                                  relationship or by virtue of § 43-11, which allows a


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                                  subcontractor, laborer or materialman to hold an owner or

                                  general contractor personally liable for the amount owed. In

                                  order to obtain this personal liability, the lien claimant must

                                  strictly follow the provisions of § 43-11.

                         e.       Personal Obligation Extinguished. The bankruptcy of an

                                  owner, contractor or anyone else will, under normal

                                  circumstances, extinguish the personal (contract) obligation

                                  owed to the lien claimant under § 43-11. The claimant,

                                  however, can always share in whatever assets are part of

                                  the bankrupt's estate.

                         f.       Share in Assets of the Bankruptcy. The lien claimant, like

                                  any other creditor, may file a proof of his claim with the

                                  bankruptcy court. This filing will enable the claimant to

                                  potentially have a share in whatever assets are liquidated

                                  from the bankrupt's estate.

                         g.       Lien is Not Discharged. The perfected mechanic's lien,

                                  because it is probably considered to be statutory in nature,

                                  will be valid against the property of a bankrupt. 11 U.S.C.

                                  §§545 and 547(c)(6).

                         h.       The Statute of Limitations. The Bankruptcy Act probably

                                  provides an extension of time for the lien claimant to file suit

                                  if the six months have not yet passed at the time the


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                                  bankruptcy is filed. 11 U.S.C. § 108. This means that the six

                                  month time is suspended while the stay is in force. Rather

                                  than risk running afoul of the statute of limitations for the

                                  filing of suit by the lien claimant, it would always be prudent

                                  to immediately institute an action in the bankruptcy court or

                                  seek relief from the stay, as discussed above.

                                         To illustrate, the court in Washington Federal Savings

                                  Bank v. William H. Metcalfe & Sons, 33 Va. Cir. 161 (1994),

                                  held that once the real property is out of the estate by way of

                                  foreclosure sale (pursuant to 11 U.S.C. § 362), the stay

                                  against the enforcement of the liens will be lifted and the

                                  mechanic's lien statute of limitations will begin running again.


V.      MECHANIC’S LIEN WAIVERS
                 Section 43-3(c) provides that any right to file or enforce any mechanic's

        lien may be waived in whole or in part at any time by any person entitled to such

        a lien. Often, on commercial projects, general contractors who contract with the

        owner will agree to a waiver of mechanic's liens.                Thereafter, individual

        subcontracts will incorporate by reference the provisions of the prime contract.

        This enables the general contractor, owner, or lender to contend that, by

        incorporating the prime contract's lien waiver provision, the subcontractor also

        agreed to waive his lien rights.




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                 This issue was before the Supreme Court of Virginia in VNB Mortgage

        Corp. v. Lone Star Industries, Inc., 215 Va. 366, 209 S.E.2d 909 (1974). There,

        the prime contract included a lien waiver. The contracts between the general

        contractor and its subcontractors contained a paragraph which stated, in relevant

        part:
                 Subcontractor . . . agrees further to be bound to the Contractor by
                 the terms of the Agreement, general condition, drawings and
                 specifications, and to assume toward Contractor all the obligations
                 and responsibilities the Contractor, by those documents, assumes
                 to the Owner.

        215 Va. at 369, 209 S.E.2d at 912. When the lender used the above provision to

        argue that the subcontractors had agreed to accept the waiver of liens set forth in

        the prime contract, the Supreme Court of Virginia noted:

                 In a contract where particular provisions are inserted for the benefit
                 of one of the parties, and those provisions are ambiguous, they are
                 to be construed most strongly against the favored party. This rule
                 is particularly applicable where the ambiguous provision is alleged
                 to constitute a waiver of the right to file a lien, as it is presumed, in
                 the absence of clear evidence to the contrary, that one has not
                 precluded himself from exercising a right granted by statute.
                 Moreover, resolution of doubts against waiver 'applies with
                 additional and far greater force when the general contractor's
                 agreement is invoked to cut off the lien rights of subcontractors . . .
                 who are not parties to it.'

        215 Va. at 371, 209 S.E.2d at 913-14 (internal citations omitted).

                 Thus, subcontractors will not be deprived of their independent lien rights

        unless they expressly waive such rights or expressly accept the general

        contractor's waiver of his mechanic's lien rights. 215 Va. at 370, 209 S.E.2d at

        913.




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VI.     RELEASE OF LIEN
        A.       Margin Release or Certificate of Satisfaction

                         Sections 43-67 and 43-71 provide that, when payment or

                 satisfaction of a lien has been made, or suit has been concluded for the

                 debt secured by a mechanic's lien, the lien shall be released by either a

                 full margin release or certificate of satisfaction, or partial margin release or

                 certificate of partial satisfaction.

        B.       Releases Made by Court

                         Section 43-68 provides that any person who has any interest in real

                 estate on which a mechanic's lien exists may, after 20 days' notice to the

                 lienor, apply to the circuit court in which such lien is recorded to have the

                 lien released.          Upon proof that either (1) the lien has been paid or

                 discharged, (2) twenty years have elapsed since the maturity of the lien, or

                 (3) no suit has been filed within the prescribed time period, the court will

                 order the release of the lien to be entered in the margin of the page of the

                 book in which the lien is recorded. Id.

        C.       Release of Lien Upon Payment into Court or Filing of Bond

                         Sections 43-70 and 43-71 provide that, after any mechanic's lien

                 has been perfected and prior to enforcement, the owner, general

                 contractor, or other party in interest may, after five days’ notice to the

                 lienor(s), apply to the court in which the suit is pending for permission to

                 pay into the court an amount of money sufficient to discharge the lien and

                 the costs of the suit. Alternatively, the party may request the court’s


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KATZ & STONE, L.L.P., Vienna, Virginia
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                 permission to file a bond with a surety approved by the court in double the

                 amount of such lien and costs. If the court grants permission for either

                 option and the money is paid into the court or a bond is filed, the property

                 affected will be released from the lien(s). This release will be noted in the

                 margin of the page of the book where the lien is recorded. Id. This

                 practice is discussed in greater detail in “Section VII: Bonding-Off Liens.”

        D.       Release of Condominium Unit

                          Section 43-3(a) provides that, if a mechanic's lien encumbering two

                 or more units in a condominium project has been perfected, the lien

                 claimant must, at the request of a unit owner, release the unit after

                 receiving payment equal to that portion of the indebtedness evidenced by

                 the lien which is attributable to such unit (i.e., the ratio that the percentage

                 liability for common expenses appertaining to that unit bears to the total

                 percentage liabilities for all units which are or may be encumbered by the

                 lien).



VII.    BONDING OFF LIENS
        A.       Generally

                          Sections 43-70 and 43-71 permit the owner, general contractor, or

                 "other parties in interest" to apply to the court for permission to file a bond

                 to remove the lien. While the Code distinguishes between bonds filed

                 before suit is brought and those filed after suit, there is little practical

                 difference between the two situations.


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        B.       After Suit is Brought

                         When suit to enforce the lien is filed, pursuant to § 43-70 of the

                 Virginia Code, the owner, general contractor or other party in interest,

                 upon five days' notice to the lien claimant, has two options that can be

                 used to release the lien of record while the suit is pending: (a) apply to the

                 court for permission to pay into the court an amount of money to

                 sufficiently discharge the lien and the cost of the suit, or (b) apply for

                 permission to file a bond in the penalty of double the amount of the lien

                 and costs, with surety to be approved by the court.

                         Courts will generally grant permission to file the bond unless “good

                 cause” against granting permission is shown by a party in interest. After

                 the money is paid into court (or the bond is filed), the clerk will release the

                 lien by way of a marginal release. The bond is then retained until the case

                 is resolved on its merits. VA. CODE ANN. § 43-70.

                         Section 43-70 specifically refers to a bond in the penalty of double

                 the amount of the lien; Section 43-71, which deals with the pre-

                 enforcement situation, does not specifically state the necessary amount of

                 the bond, though it does state that permission must be requested to file a

                 bond "as prescribed in the proceeding section" (§ 43-70). Presumably,

                 this requires that the bond in such a case be double the amount of the

                 lien.




“The Mechanic’s Lien in Virginia”                                                Page 78
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www.katzandstone.com
        C.       Before Suit is Brought

                         Under § 43-71, at any time after a lien is perfected and before suit

                 is brought for the enforcement of the lien, the owner of the property, the

                 general contractor, and other parties in interest, have essentially the same

                 options as when the suit is brought. Such parties may, after five days'

                 notice to the lien claimant, apply to the court where the lien would be

                 enforced for permission to either (a) pay into the court the amount of the

                 lien, or (b) file a bond to release the lien of record. Permission will be

                 granted, unless a party in interest can show good cause against granting

                 the request.

                         The money or bond will be held by the court subject to the final

                 judgment adjudicating the lien’s validity. Note that sureties on any bond

                 filed pursuant to § 43-71 are necessary parties to any suit or action

                 involving the bond.

        D.       Impact of Bonding Off Lien

                         One of the practical advantages of filing a lien is to obtain leverage

                 over a party so that the party is forced to settle with the contractor-

                 claimant. As previously noted, where lenders require that the property be

                 kept lien-free, the filing of a lien or even a threat of filing a lien may force

                 the owner or other party holding the funds to release a sufficient amount to

                 satisfy the claimant.

                         Obviously, bonding-off the lien eliminates this leverage because it

                 substitutes a bond to be utilized at a later date for the funds presently held


“The Mechanic’s Lien in Virginia”                                                 Page 79
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                 by the owner. Though the statute allows good cause to be shown as to

                 why the lien should not be bonded-off, if the bond is that of a recognized

                 and approved surety there is little likelihood that the opposing party can

                 show good cause why the bond should not be granted.

        E.       Consideration for Lien Waivers

                         The question of whether a lien waiver may be held unenforceable

                 for lack of consideration will most often occur where the contractor has

                 signed a partial lien waiver with an executory promise (a promise to waive

                 future liens) rather than merely a present waiver (i.e. agreeing to “file no

                 mechanic’s lien . . . for or on account of any work done, labor performed or

                 materials furnished under the Contract” or agreeing to waive all lien rights

                 that “have accrued or may hereafter accrue”). If payment is not

                 forthcoming or, more likely, retention payments are still outstanding, will

                 such waivers operate to preclude a contractor’s lien rights notwithstanding

                 the non-payment (a presumed condition for the waiver)?

                         The answer may turn on whether the waiver is part of the contract

                 itself or merely the waiver required to receive payment. It is clear that a

                 contractual lien waiver will be enforced in Virginia. In VNB Mortgage Co.

                 v. Lone Star Indus., 215 Va. 366, 209 S.E.2d 909 (1974), the Supreme

                 Court of Virginia held that a construction contract which contained waiver

                 language could be enforced against the general contractor

                 notwithstanding the fact that the Owner had breached the contract by

                 failing to pay outstanding sums due and retention. The court indicated


“The Mechanic’s Lien in Virginia”                                              Page 80
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                 that the payment and waiver provisions were severable, and the

                 subsequent breach by the owner could not revive a right already waived in

                 a separate provision. The court, however, never addressed the issue of

                 whether there was consideration for the waiver in the general contract.

                         In United Masonry Inc. v. Riggs Nat’l Bank, 233 Va. 476, 357

                 S.E.2d 509, (1987), though, the court noted that, absent consideration a

                 lien release will be unenforceable. The court stated that:

                         Although a person entitled to a mechanic’s lien may waive
                         that right in whole or in part, the general rule is that an
                         agreement to waive or release a mechanic’s lien must be
                         supported by consideration to be valid and binding.
                         Sufficient consideration exists if the promisee is induced by
                         the waiver to [1] do something that he is not legally bound to
                         do or [2] refrains from doing anything he has a legal right to
                         do, or [3] if the promisee acts in reliance upon the waiver to
                         his detriment.

                 233 Va. at 483, 357 S.E.2d at 513-514 (emphasis added) (citations

                 omitted). The court found that, since the partial lien waivers operated to

                 induce the construction insurer to increase its policy liability and issue

                 insurance against all unfiled liens, thus assuring the financing bank that “it

                 could disburse the funds” to the owner, there was consideration for the

                 waivers and the waivers would be enforced.


VIII. ARBITRATION
        A.       General Overview

                         Construction contracts often contain arbitration provisions which

                 allow the parties to resolve their dispute by arbitration, rather than by

“The Mechanic’s Lien in Virginia”                                               Page 81
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www.katzandstone.com
                 litigation. Where a dispute arises, and the parties resort to arbitration, the

                 contractor may find that either prior to or in the midst of an arbitration

                 hearing, it must file suit to enforce its previously-perfected lien or the lien

                 will lapse. On other occasions, the contractor may find that after it has

                 commenced suit to enforce the lien, it now wishes to arbitrate its dispute.

                 The other side, anxious to avoid arbitration, will point to the lien suit as a

                 waiver of the right to arbitrate on the theory that the contractor, having

                 elected his forum (court) and remedy (lien suit to foreclose upon the

                 property) cannot also pursue his claim by way of arbitration.

        B.       Arbitration Waiver Issues

                         There is a wide body of law (though there are no cases reported in

                 Virginia) that the filing of suit to enforce a lien does not amount to a waiver

                 of the right to arbitration. The practical approach in such a situation is to

                 file suit to enforce the lien (to avoid the statute of limitations) but

                 simultaneously move for a stay of the suit pending arbitration. This

                 enables the contractor to avoid having to fight on two fronts, in arbitration

                 and the lien suit, while maintaining the right to exercise his lien rights in

                 court should that prove necessary.

                         Contractors whose agreements provide for arbitration and include a

                 reference to the Construction Industry Arbitration Rules of the American

                 Arbitration Association stand less chance of waiving the right to arbitrate

                 by virtue of a lien suit (or vice versa). Rule R-48(a) of the Construction

                 Industry Arbitration Rules states "No judicial proceedings by a party


“The Mechanic’s Lien in Virginia”                                                Page 82
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www.katzandstone.com
                 relating to the subject matter of the arbitration shall be deemed a waiver of

                 the party's right to arbitrate."

                         Section 43-23.2 also implies that the resort to arbitration will not

                 amount to the waiver of the right to file a lien. According to this section,

                 "[t]he remedies afforded by this chapter shall be deemed cumulative in

                 nature and not be construed to be in lieu of any other legal or equitable

                 remedies." Id.

                         While a party may safely arbitrate and pursue its lien rights by filing

                 suit to enforce a lien and staying the lien action, the party who pursues his

                 lien rights into litigation and then decides to arbitrate, is likely to have

                 waived the right to arbitrate. In general, the question of waiver of the right

                 to arbitration often is determined by the extent to which legal proceedings

                 have developed before the Demand for Arbitration is filed.



    IX.     RECENT DEVELOPMENTS AND LEGISLATION
            A. Recent Case Law

                 1.      Carolina Builders: In Carolina Builders Corp. v. Cenit Equity Co.,

                         supra at 18, the Supreme Court of Virginia decided two issues

                         pertaining to Virginia § 43-4: (1) what date is used in order to

                         calculate the 150-day limitation period in determining what sums

                         can properly be included in a memorandum of mechanic’s lien; and

                         (2) whether a lien which includes sums due for labor performed (or




“The Mechanic’s Lien in Virginia”                                                Page 83
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www.katzandstone.com
                         materials furnished) prior to the 150-day period is invalid or can be

                         cured by excising the excess sums.

                                  In     Carolina   Builders, a materials supplier filed a

                         memorandum of mechanic’s lien and, subsequently, a bill to

                         enforce the lien. Acting on a petition to declare the lien invalid

                         pursuant to § 43-17.1 (and a motion for summary judgment), the

                         court held the mechanic’s lien unenforceable. The court reasoned

                         that the lien, in direct violation of the 150-day time limitation set

                         forth in § 43-4, included sums for materials furnished more than

                         150 days prior to the last date on which material was furnished to

                         the job prior to the filing of the memorandum.

                                  Relying on the usual strict construction of the mechanic’s

                         lien statute, the court determined that the 150-day period runs

                         backwards from the “last day that material was furnished to the job

                         preceding the filing of the memorandum.” Id. at 410. The court

                         further held that a violation of the 150-day limitation renders the

                         entire mechanic’s lien unenforceable since a court did not have

                         authority to reduce the amount of the lien if the memorandum

                         contained “excess sums.” Id. at 409-10.

                 2.      York Federal: In York Federal Savings & Loan Ass’n v. William A.

                         Hazel, Inc., 256 Va. 598, 506 S.E.2d 315 (1998), the Supreme

                         Court of Virginia confronted the issue of whether the holder of a

                         mechanic’s lien that is “bonded off” pursuant to § 43-70 must still


“The Mechanic’s Lien in Virginia”                                               Page 84
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                         establish priority of the lien before being entitled to collect on the

                         bond. The court held that the bonding-off statute had no effect on

                         the substantive requirements of proving a lien claim, but merely

                         substituted the bond for the real estate. Thus, to recover on a lien

                         release bond, a claimant has the burden to prove that his lien is

                         enforceable and that he could collect on the lien if the lien was

                         against the real property and the real property was sold.

                 3.      BurgerBusters: In Kalen v. BurgerBusters III, L.C., 47 Va. Cir. 388

                         (1998), the Circuit Court of Greene County liberally construed the

                         provisions of § 8.01-6 (which governs amendments of pleadings

                         and relation back) to allow a mechanic’s lien claimant to amend his

                         complaint to include a necessary party (the beneficiary of an

                         antecedent deed of trust on the affected property) after the

                         expiration of the statutory (§ 43-17) six-month period for leave to

                         amend.

                                  The court read § 8.01-6 to allow amendment where the

                         added party has actual notice of the suit and knew, or should have

                         known, that, but for the complainant’s mistake, the enforcement

                         action would have been brought against the added party as well.

                         Thus, given that the defendant had more than two months actual

                         notice (and filed its motion to dismiss “the very day after the six-

                         month period elapsed”), the court weighed the equities, denied the

                         motion to dismiss, and granted leave to amend the complaint.


“The Mechanic’s Lien in Virginia”                                               Page 85
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
        B.       Legislation

                         On March 27, 1999 Governor Gilmore signed House Bill 1902,

                 which amended Virginia Code § 43-4 to specifically allow a claimant to

                 include in his lien memorandum amounts not yet due because of the

                 operation of a “pay-if-paid” clause in his contract. Thus, § 43-4 now reads,

                 in part, that: “[A]ny [lien] memorandum may include . . . sums which are

                 not yet due because the party with whom the lien claimant contracted has

                 not yet received such funds from the owner or another third party.”

                         While there are not yet any cases interpreting this amendment to

                 the lien law, the obvious effect of the amendment is to allow claimants,

                 such as subcontractors and sub-subcontractors, to assert a lien for

                 monies which otherwise might not be due because of the existence of a

                 “pay-if-paid” clause. With the proliferation of these types of clauses in

                 construction contracts, this amendment increases the importance and

                 effectiveness of the mechanic’s lien to subcontractors as a tool to collect

                 monies that are due and owing.




“The Mechanic’s Lien in Virginia”                                              Page 86
KATZ & STONE, L.L.P., Vienna, Virginia
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                                        Chapter 1
                            MECHANICS' AND MATERIALMEN'S LIENS

§ 43-1. Definitions.

                  As used in this chapter, the term "general contractor" includes contractors, laborers, mechanics,
         and persons furnishing materials, who contract directly with the owner, and the term "subcontractor"
         includes all such contractors, laborers, mechanics, and persons furnishing materials, who do not contract
         with the owner but with the general contractor. As used in this chapter, the term "owner" shall not be
         construed to mean any person holding bare legal title under an instrument to secure a debt or indemnify a
         surety. As used in this chapter, the term "mechanics' lien agent" means a person (i) designated in writing by
         the owner of real estate or a person authorized to act on behalf of the owner of such real estate and (ii) who
         consents in writing to act, as the owner's designee for purposes of receiving notice pursuant to § 43-4.01.
         Such person shall be an attorney at law licensed to practice in the Commonwealth, a title insurance
         company authorized to write title insurance in the Commonwealth or one of its subsidiaries or licensed title
         insurance agents, or a financial institution authorized to accept deposits and to hold itself out to the public
         as engaged in the banking or savings institution business in the Commonwealth or a service corporation,
         subsidiary or affiliate of such financial institution. Any such person may perform mechanics' lien agent
         services as any legal entity. Provided that nothing herein shall be construed to affect pending litigation.

§ 43-2. Structures, materials, etc., deemed permanently annexed to freehold.

                   For the purpose of this chapter, a well, excavation, sidewalk, driveway, pavement, parking lot,
         retaining wall, curb and/or gutter, breakwater (either salt or fresh water), water system, drainage structure,
         filtering system (including septic or waste disposal systems) or swimming pool shall be deemed a structure
         permanently annexed to the freehold, and all shrubbery, earth, sod, sand, gravel, brick, stone, tile, pipe or
         other materials, together with the reasonable rental or use value of equipment and any surveying, grading,
         clearing or earth moving required for the improvement of the grounds upon which such building or
         structure is situated shall be deemed to be materials furnished for the improvement of such building or
         structure and permanently annexed to the freehold.

§ 43-3. Lien for work done and materials furnished; waiver of right to file or enforce lien.

         A.       All persons performing labor or furnishing materials of the value of fifty dollars or more, for the
         construction, removal, repair or improvement of any building or structure permanently annexed to the
         freehold, and all persons performing any labor or furnishing materials of like value for the construction of
         any railroad, shall have a lien, if perfected as hereinafter provided, upon such building or structure, and so
         much land therewith as shall be necessary for the convenient use and enjoyment thereof, and upon such
         railroad and franchises for the work done and materials furnished. But when the claim is for repairs or
         improvements to existing structures only, no lien shall attach to the property repaired or improved unless
         such repairs or improvements were ordered or authorized by the owner, or his agent.

                  If the building or structure being constructed, removed or repaired is part of a condominium as
         defined in § 55-79.41 or under the Horizontal Property Act (§§ 55-79.1 through 55-79.38), any person
         providing labor or furnishing material to one or more units or limited common elements within the
         condominium pursuant to a single contract may perfect a single lien encumbering the one or more units
         which are the subject of the contract or to which those limited common elements pertain, and for which
         payment has not been made. All persons providing labor or furnishing materials for the common elements
         pertaining to all the units may perfect a single lien encumbering all such condominium units. Whenever a
         lien has been or may be perfected encumbering two or more units, the proportionate amount of the
         indebtedness attributable to each unit shall be the ratio that the percentage liability for common expenses


“The Mechanic’s Lien in Virginia”                                                                    Page 87
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        appertaining to that unit computed pursuant to § 55-79.83 D bears to the total percentage liabilities for all
        units which are encumbered by the lien. The lien claimant shall release from a perfected lien an
        encumbered unit upon request of the unit owner as provided in § 55-79.46 B upon receipt of payment equal
        to that portion of the indebtedness evidenced by the lien attributable to such unit determined as herein
        provided. In the event the lien is not perfected, the lien claimant shall upon request of any interested party
        execute lien releases for one or more units upon receipt of payment equal to that portion of the
        indebtedness attributable to such unit or units determined as herein provided but no such release shall
        preclude the lien claimant from perfecting a single lien against the unreleased unit or units for the
        remaining portion of the indebtedness.

        B.        Any person providing labor or materials for site development improvements or for streets,
        stormwater facilities, sanitary sewers or water lines for the purpose of providing access or service to the
        individual lots in a development or condominium units as defined in § 55-79.41 or under the Horizontal
        Property Act (§§ 55-79.1 through 55-79.38) shall have a lien on each individual lot in the development for
        that fractional part of the total cost of such labor or materials as is obtained by using "one" as the numerator
        and the number of lots as the denominator and in the case of a condominium on each individual unit in an
        amount computed by reference to the liability of that unit for common expenses appertaining to that
        condominium pursuant to § 55-79.83 D; provided, however, no such lien shall be valid as to any lot or
        condominium unit unless the person providing such labor or materials shall, prior to the sale of such lot or
        condominium unit, file with the clerk of the circuit court of the jurisdiction in which such land lies a
        document setting forth a full disclosure of the nature of the lien to be claimed, the amount claimed against
        each lot or condominium unit and a description of the development or condominium, and shall, thereafter,
        comply with all other applicable provisions of this chapter. "Site development improvements" means
        improvements which are provided for the development, such as project site grading, rather than for an
        individual lot.

                 Nothing contained herein shall be construed to prevent the filing of a mechanic's lien under the
        provisions of subsection A hereof.

        C.        Any right to file or enforce any mechanic's lien granted hereunder may be waived in whole or in
        part at any time by any person entitled to such lien.

§ 43-4. Perfection of lien by general contractor; recordation and notice.

                  A general contractor, or any other lien claimant under §§ 43-7 and 43-9, in order to perfect the lien
        given by § 43-3, provided such lien has not been barred by § 43-4.01 C, shall file a memorandum of lien at
        any time after the work is commenced or material furnished, but not later than ninety days from the last day
        of the month in which he last performs labor or furnishes material, and in no event later than ninety days
        from the time such building, structure, or railroad is completed, or the work thereon otherwise terminated.
        The memorandum shall be filed in the clerk's office in the county or city in which the building, structure or
        railroad, or any part thereof is located. The memorandum shall show the names of the owner of the
        property sought to be charged, and of the claimant of the lien, the amount and consideration of his claim,
        and the time or times when the same is or will be due and payable, verified by the oath of the claimant, or
        his agent, including a statement declaring his intention to claim the benefit of the lien, and giving a brief
        description of the property on which he claims a lien. It shall be the duty of the clerk in whose office the
        memorandum is filed to record and index the same as provided in § 43-4.1, in the name of the claimant of
        the lien and of the owner of the property. From the time of such recording and indexing all persons shall be
        deemed to have notice thereof. The cost of recording the memorandum shall be taxed against the person
        found liable in any judgment or decree enforcing such lien. The lien claimant may file any number of
        memoranda but no memorandum filed pursuant to this chapter shall include sums due for labor or materials
        furnished more than 150 days prior to the last day on which labor was performed or material furnished to
        the job preceding the filing of such memorandum. 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


“The Mechanic’s Lien in Virginia”                                                                    Page 88
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        exceed ten percent of the total contract price. The time limitations set forth herein shall apply to all labor
        performed or materials furnished on construction commenced on or after July 1, 1980.

§ 43-4.01. Posting of building permit; identification of mechanics' lien agent in building permit; notice to
mechanics' lien agent; effect of notice.

        A.        The building permit for any one- or two-family residential dwelling unit issued pursuant to the
        Uniform Statewide Building Code shall be conspicuously and continuously posted on the property for
        which the permit is issued until all work is completed on the property. The permit shall be posted on the
        property before any labor is performed or any material furnished on the property for which the building
        permit is issued.

        B.       If, at the time of issuance, the building permit contains the name, mailing address, and telephone
        number of the mechanics' lien agent as defined in § 43-1, any person entitled to claim a lien under this title
        may notify the mechanics' lien agent that he seeks payment for labor performed or material furnished by
        registered or certified mail or by physical delivery. Such notice shall contain (i) the name, mailing address,
        and telephone number of the person sending such notice, (ii) the building permit number on the building
        permit, (iii) a description of the property as shown on the building permit, and (iv) a statement that the
        person filing such notice seeks payment for labor performed or material furnished. A return receipt or
        other receipt showing delivery of the notice to the addressee or written evidence that such notice was
        delivered by the postal service or other carrier to but not accepted by the addressee shall be prima facie
        evidence of receipt. An inaccuracy in the notice as to the description of the property shall not bar a person
        from claiming a lien under this title or filing a memorandum or otherwise perfecting or enforcing a lien as
        provided in subsection C if the property can otherwise be reasonably identified from the description.

        C.       Except as provided otherwise in this subsection, no person other than a person claiming a lien
        under § 43-3 (b) may claim a lien under this title or file a memorandum or otherwise perfect and enforce a
        lien under this title with respect to a one- or two-family residential dwelling unit if such person fails to
        notify any mechanics' lien agent identified on the building permit in accordance with subsection B above (i)
        within thirty days of the first date that he performs labor or furnishes material to or for the building or
        structure or (ii) within thirty days of the date such a permit is issued, if such labor or materials are first
        performed or furnished by such person prior to the issuance of a building permit. However, the failure to
        give any such notices within the appropriate thirty-day period as required by the previous sentence shall not
        bar a person from claiming a lien under this title or from filing a memorandum or otherwise perfecting and
        enforcing a lien under this title, provided that such lien is limited to labor performed or materials furnished
        on or after the date a notice is given by such person to the mechanics' lien agent in accordance with
        subsection B above. A person performing labor or furnishing materials with respect to a one- or
        two-family residential dwelling unit on which a building permit is not posted at the time he first performs
        his labor or first furnishes his material shall determine from appropriate authorities whether a permit of the
        type described in subsection B above has been issued and the date on which it is issued.

                 No person shall be required to comply with this subsection as to any memorandum of lien which is
        recorded prior to the issuance of a building permit nor shall any person be required to comply with this
        subsection when the building permit does not designate a mechanics' lien agent.


        D.        Unless otherwise agreed in writing, the only duties of the mechanics' lien agent shall be to receive
        notices delivered to him pursuant to subsection B and to provide any notice upon request to a settlement
        agent, as defined in § 6.1-2.10, involved in a transaction relating to the residential dwelling unit.

        E.       Mechanics' lien agents are authorized to enter into written agreements with third parties with
        regard to funds to be advanced to them for disbursement, and the transfer, disbursement, return and other
        handling of such funds shall be governed by the terms of such written agreements.


“The Mechanic’s Lien in Virginia”                                                                   Page 89
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www.katzandstone.com
        F.       A mechanics' lien agent as defined in § 43-1 may charge a reasonable fee for services rendered in
        connection with administration of notice authorized herein and the disbursement of funds for payment of
        labor and materials for the construction or repair of improvements on real estate.

§ 43-4.1. Liens to be recorded in deed books and indexed in general index of deeds.

                 Notwithstanding the provision of any other section of this title, or any other provision of law
        requiring documents to be recorded in the miscellaneous lien book or the deed books in the clerk's office of
        any court, on and after July 1, 1964, all memoranda or notices of liens, in the discretion of the clerk, shall
        be recorded in the deed books in such clerk's office, and shall be indexed in the general index of deeds, and
        such general index shall show the type of such lien.

§ 43-5. Sufficiency of memorandum and affidavit required by § 43-4.

                  The memorandum and affidavit required by § 43-4 shall be sufficient if substantially in form and
        effect as follows:

                                    Memorandum for Mechanic's Lien Claimed by General Contractor.

        Name of owner:
        Address of owner:
        Name of claimant:
        Address of claimant:
        1. Type of materials or services furnished:


        2. Amount claimed: $
        3. Type of structure on which work done or materials furnished:

        4. Brief description and location of real property:

        5. Date from which interest on the above amount is claimed:
        Date:

                      (Name of claimant).



                                                                           Affidavit.

        State of Virginia,
        County (or city) of . . . . . . . . . . . . . . . . . ., to wit:

                      I,.................... (notary or other officer) for the county (or city) aforesaid, do certify that . . . . . . . . . . . . .
        claimant, or . . . . . . . . . . . . . . . ., agent for claimant, this day made oath before me in my county (or city) aforesaid that
        . . . . . . . . . . . . . . . . . . (the owner) is justly indebted to claimant in the sum of . . . . . . . . . . . . . . dollars, for the
        consideration stated in the foregoing memorandum, and that the same is payable as therein stated.

                     Given under my hand this the . . . . . . . . day of . . . . . . . . . . . . . . . . ., 20. . . .

                     (Notary Public or Magistrate, et cetera.)




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§ 43-7. Perfection of lien by subcontractor; extent of lien; affirmative defense; provisions relating to
time-share estates.

        A.        Any subcontractor, in order to perfect the lien given him by § 43-3 shall comply with § 43-4, and
        in addition give notice in writing to the owner of the property or his agent of the amount and character of
        his claim. But the amount for which a subcontractor may perfect a lien under this section shall not exceed
        the amount in which the owner is indebted to the general contractor at the time the notice is given, or shall
        thereafter become indebted to the general contractor upon his contract with the general contractor for such
        structure or building or railroad. It shall be an affirmative defense or affirmative partial defense, as the case
        may be, to a suit to perfect a lien of a subcontractor that the owner is not indebted to the general contractor
        or is indebted to the general contractor for less than the amount of the lien sought to be perfected.

        B.       Where the property referred to in subsection A hereof is a time-share unit, as defined by § 55-362,
        the word "agent," as used in subsection A, shall be deemed to include the developer, during the developer
        control period, or the time-share estate owners' association, after the developer control period.

                  Within ten days of receipt of the notice, the developer or the time-share estate owners' association
        shall mail by first class mail a copy of the notice to all time-share estate owners whose interests are affected
        by the subcontractor's lien on the time-share unit. Failure on the part of the developer or time-share estate
        owners' association to so notify the appropriate time-share estate owners within the time period set forth
        above shall result in the developer's or the association's being liable for the full amount of the
        subcontractor's claim, but such failure shall not affect the validity of any lien perfected under this section.
        Assessments levied by the estate owners' association to pay the liability hereby imposed shall be made only
        against the time-share estate owners of record in the time-share estate project at the time the liability was
        incurred.

        C.      Where the property referred to in subsection A hereof is a time-share unit, as defined by § 55-362,
        the memorandum required to be filed pursuant to § 43-4 need show only the name of the developer during
        the developer control period, or the time-share estate owners' association, after the developer control
        period.


§ 43-8. Sufficiency of memorandum, affidavit and notice required by § 43-7.

                The memorandum, affidavit and notice required by § 43-7 shall be sufficient if substantially in
        form and effect as follows:

                                Memorandum for Mechanic's Lien Claimed by Subcontractor.

        Name of owner:
        Address of owner:
        Name of general contractor (if any):
        Name of claimant:
        Address of claimant:
        1. Type of materials or services furnished:


        2. Amount claimed: $
        3. Type of structure on which work done or materials furnished:
        4. Brief description and location of real property:

        5. Date from which interest on above amount is claimed:
        Date:
                                                                          (Name of claimant).



“The Mechanic’s Lien in Virginia”                                                                     Page 91
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                                                        Affidavit.

        State of Virginia,

        County (or city) of .................... to wit:

                      I, .................... (notary or other officer) for the county (or city) aforesaid, do certify that . . . . . . . . . . . .,
        claimant, or . . . . . . . . . . . . . . . ., agent for claimant, this day made oath before me in my county (or city) aforesaid that
        . . . . . . . . . . . . . . . . . . . . . . . . . . is justly indebted to claimant in the sum of . . . . . . . . . . . . . . dollars, for the
        consideration stated in the foregoing memorandum, and that the same is payable as therein stated.

                    Given under my hand this the . . . . . . day of . . . . . . . . . . . ., 20. . . . . .

                                                                                     (Notary Public or Magistrate, et cetera.)



                                                                         Notice.

        To .................... (owner).

                        You are hereby notified that . . . . . . . . . . . . . . . . . . . . (general contractor) is indebted to me in the sum of . . .
        . . . . . . . . . . . . . dollars ($ . . . . . . . . . .) with interest thereon from the . . . . . . . . . . day of . . . . . . . . . ., 20 . . . ., for
        work done (or materials furnished, as the case may be,) in and about the construction (or removal, etc.,) of a
        .................... (describe structure, whether dwelling, store, or etc.,) which he has contracted to construct (or remove,
        etc.,) for you or on property owned by you in the county (or city) of . . . . . . . . . . . . . ., and that I have duly recorded a
        mechanic's lien for the same.

                    Given under my hand this the . . . . . . . . . . . . . . . . day of . . . . . . . . . ., 20. . . . .

                                                                                     (Subcontractor).

§ 43-9. Perfection of lien by person performing labor or furnishing materials for a subcontractor; extent of
lien.

                 Any person performing labor or furnishing materials for a subcontractor, in order to perfect the
        lien given him by § 43-3, shall comply with the provisions of § 43-4, and in addition thereto give notice in
        writing to the owner of the property, or his agent, and to the general contractor, or his agent, of the amount
        and character of his claim. But the amount for which a lien may be perfected by such person shall not
        exceed the amount for which such subcontractor could himself claim a lien under § 43-7.

§ 43-10. Sufficiency of memorandum, affidavit and notice required by § 43-9.

                The memorandum, affidavit and notice required by § 43-9 shall be sufficient if substantially in
        form and effect as follows:




“The Mechanic’s Lien in Virginia”                                                                                                     Page 92
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                     Memorandum for Mechanic's Lien Claimed by Sub-subcontractor.

        Name of owner:
        Address of owner:
        Name of general contractor (if any) and subcontractor:
        Name of claimant:
        Address of claimant:
        1. Type of materials or services furnished:


        2. Amount claimed: $
        3. Type of structure on which work done or materials furnished:

        4. Brief description and location of real property:
        5. Date from which interest on above amount is claimed:
        Date:
                                                                                        (Name of claimant).
                                                                                        (Signature of claimant or agent for claimant).


                                                                           Affidavit.

        State of Virginia,
        County (or city) of ...................., to wit:
                   I, .....................(notary or other officer) for the county (or city) aforesaid do certify that ....................
        claimant, or .............., agent for claimant, this day made oath before me in my county (or city) aforesaid that ...............
        is justly indebted to claimant in the sum of.......... dollars for the consideration stated in the foregoing memorandum,
        and that the same is payable as therein stated.

                     Given under my hand this the . . . . . . . . . . . . . . . . day of . . . . . . . . . . . . . . ., 20. . . .

                     (Notary Public or Magistrate, et cetera.)



                                                                            Notice.

        To .................... (owner) and ....................
                                                          (general contractor):

                        You are hereby notified that ................., a subcontractor under you, said .................(general contractor) for
        the construction (or removal,etc.,) of a .....................(describe structure) for you, or on property owned by you, said
        (owner) is indebted to me in the sum of ................................. dollars ($ ...........) with interest thereon from the
        ...................................................day of ..............................., 20. .......... ., for work done (or materials furnished) in and
        about the construction (or removal, etc.,) of said .......................................................................(naming structure), situate
        in the county (or city) of ....................Virginia, and that I have duly recorded a mechanic's lien for the same.

        Given under my hand this the . . . . . . . . . . . . . . . . . . day of . . . . . . . . . . . . . . ., 19. . . . . . .

                                                                                        (Sub-subcontractor).

§ 43-11. How owner or general contractor made personally liable to subcontractor, laborer or materialman.

                 Any subcontractor or person furnishing labor or material to the general contractor or
        subcontractor, may give notice in writing to the owner or his agent or the general contractor, stating the
        nature and character of his contract and the probable amount of his claim, and if such subcontractor, or
        person furnishing labor or material shall at any time after the work is done or material furnished by him and
        before the expiration of thirty days from the time such building or structure is completed or the work

“The Mechanic’s Lien in Virginia”                                                                                                       Page 93
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www.katzandstone.com
        thereon otherwise terminated furnish the owner thereof or his agent and also the general contractor, or the
        general contractor alone in case he is the only one notified, with a correct account, verified by affidavit, of
        his claim against the general contractor or subcontractor, for work done or materials furnished and of the
        amount due, the owner, or the general contractor, if he alone was notified, shall be personally liable to the
        claimant for the amount due to the subcontractor or persons furnishing labor or material by the general
        contractor or subcontractor, provided the same does not exceed the sum in which the owner is indebted to
        the general contractor at the time the notice is given or may thereafter become indebted by virtue of his
        contract with the general contractor, or in case the general contractor alone is notified the sum in which he
        is indebted to the subcontractor at the time the notice is given or may thereafter become indebted by virtue
        of his contract with the general contractor. But the amount which a person supplying labor or material to a
        subcontractor can claim shall not exceed the amount for which such subcontractor could file his claim.

                Any bona fide agreement for deductions by the owner because of the failure or refusal of the
        general contractor to comply with his contract shall be binding upon such subcontractor, laborer or
        materialman.

                  The provisions of this section are subject to the qualification that before any such personal liability
        of the owner or general contractor herein provided for shall be binding the notice herein required, with such
        return thereon as is sufficient under § 8.01-325, shall be recorded and indexed as provided in § 43-4.1 in
        the appropriate clerk's office; or the notice herein required shall be mailed by registered or certified mail to
        and received by the owner or general contractor upon whom personal liability is sought to be imposed, and
        a return receipt therefor showing delivery to the addressee shall be prima facie evidence of receipt.

§ 43-13. Funds paid to general contractor, subcontractor, owner-developer, etc., must be used to pay persons
performing labor or furnishing material.

                 Any contractor, subcontractor or owner-developer, as defined in § 54.1-1100, or any officer,
        director or employee of such contractor, subcontractor or owner-developer who shall, with intent to
        defraud, retain or use the funds, or any part thereof, paid by the owner or his agent, the contractor or lender
        to such contractor or owner-developer or by the owner or his agent, the contractor or lender to a
        subcontractor under any contract for the construction, removal, repair or improvement of any building or
        structure permanently annexed to the freehold, for any other purpose than to pay persons performing labor
        upon or furnishing material for such construction, repair, removal or improvement, shall be guilty of
        larceny in appropriating such funds for any other use while any amount for which the contractor,
        subcontractor or owner-developer may be liable or become liable under his contract for such labor or
        materials remains unpaid, and may be prosecuted upon complaint of any person or persons who have not
        been fully paid any amount due them.

                 The use by any such contractor, subcontractor or owner-developer or any officer, director or
        employee of such contractor, subcontractor or owner-developer of any moneys paid under the contract,
        before paying all amounts due or to become due for labor performed or material furnished for such building
        or structure, for any other purpose than paying such amounts, shall be prima facie evidence of intent to
        defraud.

§ 43-13.1. Use of lien waiver form; forgery or signing without authority.

                 Any person who knowingly presents a waiver of lien form to an owner, his agent, contractor,
        lender, or title company for the purpose of obtaining funds or title insurance and who forges or signs
        without authority the name of any person listed thereon shall be guilty of a felony and punished as provided
        in § 18.2-172.




“The Mechanic’s Lien in Virginia”                                                                     Page 94
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
§ 43-13.2. When affidavit of payment required of owner prior to sale.

                   A person who is both the owner of a one- or two-family residential dwelling unit and either a
         developer of such property, a contractor in connection with the development or improvement of such
         property or a contractor or subcontractor furnishing labor or material in connection with the development or
         improvement of such property shall, at the time of settlement on the sale of such property, provide the
         purchaser with an affidavit stating either (i) that all persons performing labor or furnishing materials in
         connection with the improvements on such property and with whom such owner is in privity of contract
         have been paid in full or (ii) the name, address and amount payable or claimed to be payable to any person
         so performing labor or furnishing materials and with whom such owner is in privity of contract. Willful
         failure to provide such statement or any willful material misrepresentation with respect to such a statement
         which causes a monetary loss to a financial institution, title company, contractor, subcontractor, supplier,
         owner, mechanics' lien agent or any other person or institution shall be punishable as a Class 5 felony.

§ 43-13.3. Affidavit of payment required of owner prior to sale or refinance; penalty.

                  Any person who is the owner of a one-family or two-family residential dwelling unit not included
         within the scope of § 43-13.2 shall, at the time of settlement on the sale of such property, provide the
         purchaser, or lender in the case of a permanent loan or refinance, with an affidavit stating either (i) that all
         persons performing labor or furnishing materials in connection with any improvements on such property
         within 120 days prior to the date of settlement and with whom such owner is in privity of contract have
         been paid in full, or (ii) the name, address and amount payable or claimed to be payable to any person so
         performing labor or furnishing materials and with whom such owner is in privity of contract. Any willful
         material misrepresentation in the affidavit which causes a monetary loss to any financial institution, title
         company, or purchaser shall be punishable as a Class 3 misdemeanor.

§ 43-14.1. Service of notices.

                 Any notice authorized or required by this chapter, except the notice required by § 43-11, may be
         served by any sheriff or constable who shall make return of the time and manner of service; or any such
         notice may be served by certified or registered mail and a return receipt therefor shall be prima facie
         evidence of receipt.

§ 43-15. Inaccuracies in memorandum or description not affecting lien.

                   No inaccuracy in the memorandum filed, or in the description of the property to be covered by the
         lien, shall invalidate the lien, if the property can be reasonably identified by the description given and the
         memorandum conforms substantially to the requirements of §§ 43-5, 43-8 and 43-10, respectively, and is
         not wilfully false.

§ 43-16. What owner may do when contractor fails or refuses to complete building, etc.

                  If the owner is compelled to complete his building, structure, or railroad, or any part thereof
         undertaken by a general contractor in consequence of the failure or refusal of the general contractor to do
         so, the amount expended by the owner for such completion shall have priority over all mechanics' liens
         which have been or may be placed on such building, structure, or railroad by such general contractor, a
         subcontractor under him, or any person furnishing labor or materials to either of them.

§ 43-17. Limitation on suit to enforce lien.

                  No suit to enforce any lien perfected under §§ 43-4, 43-5 and 43-7 to 43-10 shall be brought after
         six months from the time when the memorandum of lien was recorded or after sixty days from the time the
         building, structure or railroad was completed or the work thereon otherwise terminated, whichever time


“The Mechanic’s Lien in Virginia”                                                                     Page 95
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
         shall last occur; provided, however, that the filing of a petition to enforce any such lien in any suit wherein
         such petition may be properly filed shall be regarded as the institution of a suit under this section; and,
         provided further, that nothing herein shall extend the time within which such lien may be perfected.

§ 43-17.1. Hearing on validity of lien.

                  Any party, having an interest in real property against which a lien has been filed, may, upon a
         showing of good cause, petition the court of equity having jurisdiction wherein the building, structure,
         other property, or railroad is located to hold a hearing to determine the validity of any perfected lien on the
         property. After reasonable notice to the lien claimant and any party to whom the benefit of the lien would
         inure and who has given notice as provided in § 43-18 of the Code of Virginia, the court shall hold a
         hearing and determine the validity of the lien. If the court finds that the lien is invalid, it shall forthwith
         order that the memorandum or notice of lien be removed from record.

§ 43-18. Lien of general contractor to inure to benefit of subcontractor.

                   The perfected lien of a general contractor on any building or structure shall inure to the benefit of
         any subcontractor, and of any person performing labor or furnishing materials to a subcontractor who has
         not perfected a lien on such building or structure, provided such subcontractor, or person performing labor
         or furnishing materials shall give written notice of his claim against the general contractor, or
         subcontractor, as the case may be, to the owner or his agent before the amount of such lien is actually paid
         off or discharged.


§ 43-19. Validity and priority of lien not affected by assignments.

                   Every assignment or transfer by a general contractor, in whole or in part, of his contract with the
         owner or of any money or consideration coming to him under such contract, or by a subcontractor of his
         contract with the general contractor, in whole or in part, or of any money or consideration coming to him
         under his contract with the general contractor, and every writ of fieri facias, attachment or other process
         against the general contractor or subcontractor to subject or encumber his interest arising under such
         contract, shall be subject to the liens given by this chapter to laborers, mechanics, and materialmen. No
         such assignment or transfer shall in any way affect the validity or the priority of satisfaction of liens given
         by this chapter.

§ 43-20. Extent of lien where owner has less than fee in land.

                   Subject to the provisions of § 43-3, if the person who shall cause a building or structure to be
         erected or repaired owns less than a fee simple estate in the land, then only his interest therein shall be
         subject to liens created under this chapter. When the vendee under a contract for the sale of real estate
         causes a building or structure to be erected or repaired on the land which is the subject of the contract and
         the owner has actual knowledge of such erection or repairs, the interest of the owner in the land shall be
         subject to liens created under this chapter; and for the purposes of § 43-21, the interest of such an owner in
         the land, to the extent of the unpaid purchase price, shall be deemed to be a recorded purchase money deed
         of trust lien created at the time the contract of sale was fully executed. As used in this section, "a contract
         for the sale of real estate" shall not include a lease of real estate containing an option to purchase the leased
         real estate or an option to purchase real estate unless the option is enforceable against the optionee.

§ 43-21. Priorities between mechanics' and other liens.

                  No lien or encumbrance upon the land created before the work was commenced or materials
         furnished shall operate upon the building or structure erected thereon, or materials furnished for and used in
         the same, until the lien in favor of the person doing the work or furnishing the materials shall have been


“The Mechanic’s Lien in Virginia”                                                                      Page 96
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
         satisfied; nor shall any lien or encumbrance upon the land created after the work was commenced or
         materials furnished operate on the land, or such building or structure, until the lien in favor of the person
         doing the work or furnishing the materials shall have been satisfied.

                 Unless otherwise provided in the subordination agreement, if the holder of the prior recorded lien
         of a purchase money deed of trust subordinates to the lien of a construction money deed of trust, such
         subordination shall be limited to the construction money deed of trust and said prior lien shall not be
         subordinate to mechanics' and materialmen's liens to the extent of the value of the land by virtue of such
         agreement.

                   In the enforcement of the liens acquired under the previous sections of this chapter, any lien or
         encumbrance created on the land before the work was commenced or materials furnished shall be preferred
         in the distribution of the proceeds of sale only to the extent of the value of the land estimated, exclusive of
         the buildings or structures, at the time of sale, and the residue of the proceeds of sale shall be applied to the
         satisfaction of the liens provided for in the previous sections of this chapter. Provided that liens filed for
         performing labor or furnishing materials for the repair or improvement of any building or structure shall be
         subject to any encumbrance against such land and building or structure of record prior to the
         commencement of the improvements or repairs or the furnishing of materials or supplies therefor. Nothing
         contained in the foregoing proviso shall apply to liens that may be filed for the construction or removal of
         any building or structure.

§ 43-22. How liens enforced.
                   The liens created and perfected under this chapter may be enforced in a court of equity by a bill
         filed in the county or city wherein the building, structure, or railroad, or some part thereof is situated, or
         wherein the owner, or if there be more than one, any of them, resides. The plaintiff shall file with his bill an
         itemized statement of his account, showing the amount and character of the work done or materials
         furnished, the prices charged therefor, the payments made, if any, the balance due, and the time from which
         interest is claimed thereon, the correctness of which account shall be verified by the affidavit of himself, or
         his agent. When suit is brought for the enforcement of any such lien against the property bound thereby, all
         parties entitled to such liens upon the property or any portion thereof may file petitions in such suit asking
         for the enforcement of their respective liens to have the same effect as if an independent suit were brought
         by each claimant.

§ 43-23. Priority among liens perfected under this chapter.

                  There shall be no priority among the liens created and perfected under this chapter, except that the
         lien of a subcontractor shall be preferred to that of his general contractor; the lien of persons performing
         labor or furnishing materials for a subcontractor, shall be preferred to that of such subcontractor; and liens
         filed by persons performing manual labor shall have priority over materialmen to the extent of the labor
         performed during the thirty days immediately preceding the date of the performance of the last labor.

§ 43-23.1. Forfeiture of lien.

                   Any person who shall, with intent to mislead, include in his memorandum of lien work not
         performed upon, or materials not furnished for, the property described in his memorandum shall thereby
         forfeit any right to a lien under this chapter.

§ 43-23.2. Remedies cumulative.

                   The remedies afforded by this chapter shall be deemed cumulative in nature and not be construed
         to be in lieu of any other legal or equitable remedies.




“The Mechanic’s Lien in Virginia”                                                                      Page 97
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
§ 43-70.Release of mechanic's lien upon payment into court or filing of bond after suit brought.

                   In any suit brought under the provisions of § 43-22, the owner of the building and premises to
         which the lien, or liens, sought to be enforced shall have attached, the general contractor for such building
         or other parties in interest may, after five days' notice to the lienor, or lienors, apply to the court in which
         such suit shall be pending, or to the judge thereof in vacation, for permission to pay into court an amount of
         money sufficient to discharge such lien, or liens, and the costs of the suit or for permission to file a bond in
         the penalty of double the amount of such lien, or liens, and costs, with surety to be approved by the court,
         or judge, conditioned for the payment of such judgment adjudicating the lien or liens to be valid and
         determining the amount for which the same would have been enforceable against the real estate as may be
         rendered by the court upon the hearing of the case on its merits, which permission shall be granted by the
         court, or judge, in either such case, unless good cause be shown against the same by some party in interest.

                   Upon the payment of such money into court, or upon the filing of such bond, as the case may be,
         after the court has granted permission for the same to be done, the property affected thereby shall stand
         released from such lien, or liens, and the money so paid in, or the bond so filed, as the case may be, shall be
         subject to the final judgment of the court upon the hearing of the case on its merits.

§ 43-71. Release of mechanic's lien upon payment into court or filing bond before suit.

                   At any time after the perfecting of any such lien and before a suit be brought for the enforcement
         thereof, the owner of the property affected thereby, the general contractor or other parties in interest may,
         after five days' notice to the lienor, apply to the court having jurisdiction of a suit for the enforcement of
         such lien, or to the judge thereof in vacation, for permission to make such payment into court, or to file
         such bond, as prescribed in § 43-70, which permission, in either such event, shall be granted by such court,
         or judge, unless good cause be shown against the same by some party in interest. Upon the granting of such
         permission, and the payment of such money into court, or the filing of such bond, as the case may be, the
         property affected thereby shall stand released from such lien.

                   Such money, or bond, as the case may be, shall be held under the control of the court and shall be
         subject to the final judgment of the court adjudicating the lien or liens to be valid and determining the
         amount for which the same would have been enforceable against the real estate in any suit or action
         thereafter brought for the ascertainment of the rights of the parties in interest, with respect hereto, or, shall
         be paid out and disposed of as the parties in interest may direct, in the event the matters in controversy with
         respect thereto be settled and adjusted between the parties without suit or action.

                  The sureties on any such bond, which may be involved in any suit or action brought under the
         provisions of this section, shall be made parties to such suit or action.

§ 11-2.4. Notice of possible filing of mechanics' lien required.

                  Every contract made on or after July 1, 1992, for the purchase of residential real property shall
         include the following provision:




“The Mechanic’s Lien in Virginia”                                                                      Page 98
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                                      NOTICE

                  Virginia law (§ 43-1 et seq.) permits persons who have performed labor or furnished materials for
        the construction, removal, repair or improvement of any building or structure to file a lien against the
        property. This lien may be filed at any time after the work is commenced or the material is furnished, but
        not later than the earlier of (i) 90 days from the last day of the month in which the lienor last performed
        work or furnished materials or (ii) 90 days from the time the construction, removal, repair or improvement
        is terminated.

        AN EFFECTIVE LIEN FOR WORK PERFORMED PRIOR TO THE DATE OF SETTLEMENT MAY
        BE FILED AFTER SETTLEMENT. LEGAL COUNSEL SHOULD BE CONSULTED.

                  Failure of a contract for the purchase of residential real property to include the notice required by
        this section shall not void such contract.




“The Mechanic’s Lien in Virginia”                                                                   Page 99
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                               THE MILLER ACT


§ 270a. Bonds of contractors of public buildings or works

          (a)      Type of bonds required. Before any contract, exceeding $ 25,000 in amount, for the construction,
alteration, or repair of any public building or public work of the United States is awarded to any person, such person
shall furnish to the United States the following bonds, which shall become binding upon the award of the contract to
such person, who is hereinafter designated as "contractor":

                   (1)    A performance bond with a surety or sureties satisfactory to the officer awarding such
contract, and in such amount as he shall deem adequate, for the protection of the United States.

                  (2)     A payment bond with a surety or sureties satisfactory to such officer for the protection of
all persons supplying labor and material in the prosecution of the work provided for in said contract for the use of
each such person. Whenever the total amount payable by the terms of the contract shall be not more than
$1,000,000, the said payment bond shall be in a sum of one-half the total amount payable by the terms of the
contract. Whenever the total amount payable by the terms of the contract shall be more than $1,000,000 and not
more than $5,000,000, the said payment bond shall be in a sum of 40 per centum of the total amount payable by the
terms of the contract. Whenever the total amount payable by the terms of the contract shall be more than
$5,000,000, the said payment bond shall be in the sum of $2,500,000.

         (b)      Waiver of bonds for contracts performed in foreign countries. The contracting officer in respect of
any contract is authorized to waive the requirement of a performance and payment bond for so much of the work
under such contract as is to be performed in a foreign country if he finds that it is impracticable for the contractor to
furnish such bonds.

         (c)       Authority to require additional bonds. Nothing in this section shall be construed to limit the
authority of any contracting officer to require a performance bond or other security in addition to those, or in cases
other than the cases specified in subsection (a) of this section.

          (d)      Coverage for taxes in performance bond. Every performance bond required under this section
shall specifically provide coverage for taxes imposed by the United States which are collected, deducted, or
withheld from wages paid by the contractor in carrying out the contract with respect to which such bond is
furnished. However, the United States shall give the surety or sureties on such bond written notice, with respect to
any such unpaid taxes attributable to any period, within ninety days after the date when such contractor files a return
for such period, except that no such notice shall be given more than one hundred and eighty days from the date when
a return for the period was required to be filed under the Internal Revenue code of 1954 (26 U.S.C.S. §§ 1, et seq.).
No suit on such bond for such taxes shall be commenced by the United States unless notice is given as provided in
the preceding sentence, and no such suit shall be commenced after the expiration of one year after the day on which
such notice is given.

§ 270b. Rights of persons furnishing labor or material

          (a)      Every person who has furnished labor or material in the prosecution of the work provided for in
such contract, in respect of which a payment bond is furnished under this Act [40 USCS §§ 270a--270d] and who
has not been paid in full therefor before the expiration of a period of ninety days after the day on which the last of
the labor was done or performed by him or material was furnished or supplied by him for which such claim is made,
shall have the right to sue on such payment bond for the amount, or the balance thereof, unpaid at the time of
institution of such suit and to prosecute said action to final execution and judgment for the sum or sums justly due
him: Provided, however, That any person having direct contractual relationship with a subcontractor but no
contractual relationship express or implied with the contractor furnishing said payment bond shall have a right of

“The Mechanic’s Lien in Virginia”                                                                     Page 100
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www.katzandstone.com
action upon the said payment bond upon giving written notice to said contractor within ninety days from the date on
which such person did or performed the last of the labor or furnished or supplied the last of the material for which
such claim is made, stating with substantial accuracy the amount claimed and the name of the party to whom the
material was furnished or supplied or for whom the labor was done or performed. Such notice shall be served by
mailing the same by registered mail, postage prepaid, in an envelope addressed to the contractor at any place he
maintains an office or conducts his business, or his residence, or in any manner in which the United States marshal
of the district in which the public improvement is situated is authorized by law to serve summons.

         (b)      Every suit instituted under this section shall be brought in the name of the United States for the
use of the person suing, in the United States District Court for any district in which the contract was to be performed
and executed and not elsewhere, irrespective of the amount in controversy in such suit, but no such suit shall be
commenced after the expiration of one year after the day on which the last of the labor was performed or material
was supplied by him. The United States shall not be liable for the payment of any costs or expenses of any such suit.

§ 270c. Right of person furnishing labor or material to copy of bond

         The department secretary or agency head of the contracting agency is authorized and directed to furnish, to
any person making application therefor who submits an affidavit that he has supplied labor or materials for such
work and payment therefor has not been made or that he is being sued on any such bond, a certified copy of such
bond and the contract for which it was given, which copy shall be prima facie evidence of the contents, execution,
and delivery of the original. Applicants shall pay for such certified copies such fees as the department secretary or
agency head of the contracting agency fixes to cover the cost of preparation thereof.

§ 270d. Definition of "person"

         The term "person" and the masculine pronoun as used throughout this Act [40 USCS §§ 270a--270d] shall
include all persons whether individuals, associations, co-partnerships, or corporations.

§ 270e. Waiver of 40 USCS §§ 270a--270d with respect to Army, Navy, Air Force, and Coast Guard contracts

         The Secretary of the Army, the Secretary of the Navy, the Secretary of the Air Force, or the Secretary of
the Treasury may waive the Act of August 24, 1935 (49 Stat. 793) [40 USCS §§ 270a--270d], with respect to cost-
plus-a-fixed fee and other cost-type contracts for the construction, alteration, or repair of any public building or
public work of the United States and with respect to contracts for the manufacturing, producing, furnishing,
construction, alteration, repair, processing, or assembling of vessels, aircraft, munitions, materiel, or supplies of any
kind or nature for the Army, Navy, Air Force, or Coast Guard, respectively, regardless of the terms of such contracts
as to payment or title.

§ 270f. Waiver 40 USCS §§ 270a--270d with respect to transportation contracts

         The Secretary of Transportation may waive the Act of August 24, 1935 (49 Stat. 793--794) [40 USCS §§
270a--270d], with respect to contracts for the construction, alteration, or repair, of vessels of any kind or nature,
entered into pursuant to the Act of June 30, 1932 (47 Stat. 382, 417--418), as amended, the Merchant Marine Act,
1936 [46 USCS Appx §§ 1101 et seq.], or the Merchant Ship Sales Act of 1946 [50 USCS Appx §§ 1735 et seq.],
regardless of the terms of such contracts as to payment or title.




“The Mechanic’s Lien in Virginia”                                                                     Page 101
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                                                   [Date}



Comptroller General of the United Sates
General Accounting Office
441 G Street, N.W.
Washington, D.C. 20548

            RE:      Request for Copy of Miller Act Payment Bond
                     for [identify applicable construction project]

Dear Sir:

          In accordance with the provisions of the Miller Act, 40 U.S.C. §270c, we request that you furnish us with a
certified copy of the payment bond and contract for which it was given on the above-referenced project.

        The undersigned has supplied labor and/or materials for work performed on the above-referenced project,
and payment therefor has not been made.

            We will reimburse you for any of the costs of responding to this request.

                                                          Very truly yours,




STATE OF

CITY/COUNTY OF

        This day personally appeared before me, the undersigned Notary Public,                                , who
acknowledged to me that the above statements are true and correct to the best of his/her knowledge, information and
belief.


                                                          Notary Public




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KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                                        [Date




VIA REGISTERED MAIL

Prime Contractor
Address
[any place where he maintains
 his office or conducts his
 business, or his residence]

            RE:   [Identify applicable construction project]

Dear Sir:

         In accordance with the provisions of the Miller Act, 40 U.S.C. §270b, and the terms of the Payment Bond
furnished by you for the above-referenced project, notice is hereby given of our claim against the Payment Bond in
the amount of $ [state total dollar amount of claim with substantial accuracy]. This amount is due and owing to the
undersigned for labor and/or materials furnished to [insert name of the party to whom the labor and/or materials
were furnished].

                                                      Very truly yours,




“The Mechanic’s Lien in Virginia”                                                                Page 103
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                 PARTIES PROTECTED BY A MILLER ACT BOND



                                                Federal Government



                                     Prime Contractor




               Supplier                                                   Subcontractor




    Supplier               Subcontractor                          Supplier                  Second-Tier
                                                             (90 days’ written             Subcontractor
                                                              notice required)            (90 days’ written
                                                                                          notice required)


 Parties above the black bar are covered by
 a Miller Act Payment bond. Those below
 the bar are not protected.
                                                             Subcontractor or                Third-tier
                                                                Supplier                  Subcontractor or
                                                                                             Supplier




“The Mechanic’s Lien in Virginia”                                                          Page 104
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
                                            Chapter 7
                                   VIRGINIA LITTLE MILLER ACT

§ 11-57. Bid bonds.

        A.       Except in cases of emergency, all bids or proposals for construction contracts in excess of
        $100,000 shall be accompanied by a bid bond from a surety company selected by the bidder which is
        legally authorized to do business in Virginia, as a guarantee that if the contract is awarded to such bidder,
        that bidder will enter into the contract for the work mentioned in the bid. The amount of the bid bond shall
        not exceed five percent of the amount bid.

        B.       No forfeiture under a bid bond shall exceed the lesser of (i) the difference between the bid for
        which the bond was written and the next low bid, or (ii) the face amount of the bid bond.
        C.       Nothing in this section shall preclude a public body from requiring bid bonds to accompany bids
        or proposals for construction contracts anticipated to be less than $100,000.

§ 11-58. Performance and payment bonds.

        A.       Upon the award of any public construction contract exceeding $100,000 awarded to any prime
        contractor, such contractor shall furnish to the public body the following bonds:
                 1.        A performance bond in the sum of the contract amount conditioned upon the faithful
                 performance of the contract in strict conformity with the plans, specifications and conditions of the
                 contract.
                 2.        A payment bond in the sum of the contract amount. Such bond shall be for the protection
                 of claimants who have and fulfill contracts to supply labor or materials to the prime contractor to
                 whom the contract was awarded, or to any subcontractors, in the prosecution of the work provided
                 for in such contract, and shall be conditioned upon the prompt payment for all such material
                 furnished or labor supplied or performed in the prosecution of the work. "Labor or materials" shall
                 include public utility services and reasonable rentals of equipment, but only for periods when the
                 equipment rented is actually used at the site.

        B.      Each of such bonds shall be executed by one or more surety companies selected by the contractor
        which are legally authorized to do business in Virginia.

        C.      If the public body is the Commonwealth of Virginia, or any agency or institution thereof, such
        bonds shall be payable to the Commonwealth of Virginia, naming also the agency or institution thereof.
        Bonds required for the contracts of other public bodies shall be payable to such public body.

        D.        Each of the bonds shall be filed with the public body which awarded the contract, or a designated
        office or official thereof.

        E.       Nothing in this section shall preclude a public body from requiring payment or performance bonds
        for construction contracts below $100,000.

        F.       Nothing in this section shall preclude such contractor from requiring each subcontractor to furnish
        a payment bond with surety thereon in the sum of the full amount of the contract with such subcontractor
        conditioned upon the payment to all persons who have and fulfill contracts which are directly with the
        subcontractor for performing labor and furnishing materials in the prosecution of the work provided for in
        the subcontract.




“The Mechanic’s Lien in Virginia”                                                                  Page 105
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com
§ 11-59. Action on performance bond.

                 No action against the surety on a performance bond shall be brought unless within five years after
        completion of the work on the project to the satisfaction of the chief engineer, Department of
        Transportation, in cases where the public body is the Department of Transportation, or within one year after
        (i) completion of the contract, including the expiration of all warranties and guarantees, or (ii) discovery of
        the defect or breach of warranty, if the action be for such, in all other cases.

§ 11-60. Actions on payment bonds.

        A.       Subject to the provisions of subsection B hereof, any claimant who has performed labor or
        furnished material in accordance with the contract documents in the prosecution of the work provided in
        any contract for which a payment bond has been given, and who has not been paid in full therefor before
        the expiration of ninety days after the day on which such claimant performed the last of such labor or
        furnished the last of such materials for which he claims payment, may bring an action on such payment
        bond to recover any amount due him for such labor or material, and may prosecute such action to final
        judgment and have execution on the judgment. The obligee named in the bond need not be named a party
        to such action.

        B.       Any claimant who has a direct contractual relationship with any subcontractor from whom the
        contractor has not required a subcontractor payment bond under § 11-58 F but who has no contractual
        relationship, express or implied, with such contractor, may bring an action on the contractor's payment
        bond only if he has given written notice to such contractor within 180 days from the day on which the
        claimant performed the last of the labor or furnished the last of the materials for which he claims payment,
        stating with substantial accuracy the amount claimed and the name of the person for whom the work was
        performed or to whom the material was furnished. Any claimant who has a direct contractual relationship
        with a subcontractor from whom the contractor has required a subcontractor payment bond under § 11-58 F
        but who has no contractual relationship, express or implied, with such contractor, may bring an action on
        the subcontractor's payment bond. Notice to the contractor shall be served by registered or certified mail,
        postage prepaid, in an envelope addressed to such contractor at any place where his office is regularly
        maintained for the transaction of business. Claims for sums withheld as retainages with respect to labor
        performed or materials furnished, shall not be subject to the time limitations stated in this subsection.

        C.       Any action on a payment bond must be brought within one year after the day on which the person
        bringing such action last performed labor or last furnished or supplied materials.

§ 11-61. Alternative forms of security.

        A.       In lieu of a bid, payment, or performance bond, a bidder may furnish a certified check or cash
        escrow in the face amount required for the bond.

        B.        If approved by the Attorney General in the case of state agencies, or the attorney for the political
        subdivision in the case of political subdivisions, a bidder may furnish a personal bond, property bond, or
        bank or savings and loan association's letter of credit on certain designated funds in the face amount
        required for the bid, payment or performance bond. Approval shall be granted only upon a determination
        that the alternative form of security proffered affords protection to the public body equivalent to a corporate
        surety's bond.

§ 11-62. Bonds on other than construction contracts.

                 A public body may require bid, payment, or performance bonds for contracts for goods or services
        if provided in the Invitation to Bid or Request for Proposal.



“The Mechanic’s Lien in Virginia”                                                                   Page 106
KATZ & STONE, L.L.P., Vienna, Virginia
www.katzandstone.com

				
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Description: Mechanics Lien Waiver Form document sample