Open Accounts and Mechanics Liens

The following post was written by a guest contributor to the Construction Payment Blog, Christopher Hill.    Chris a construction attorney in the state of Virginia, leading the construction practice group at Durrette Bradshaw.  He publishes a construction law blog titled “Construction Law Musings.”   [Chris’ profile at Construction Payment Blog]

Scott Wolfe, one of the contributors to this blog asked me for a piece on Virginia Mechanic’s Liens.  Scott has written several good pieces on liens in the Commonwealth of Virginia, and I hope that this one proves as helpful.

In researching liens in the Commonwealth of Virginia, I ran across a question that should be on the minds of construction professionals in Virginia, particularly suppliers of materials.  The question is simply “On an open account (based on a credit agreement or other arrangement), is each delivery to a particular contractor its own “work” such that the 90 day clock runs from the completion of each delivery, or do all deliveries to a particular project constitute the “work” on that project such that the 90 day clock only runs from the last delivery to the job site?” (How’s that for simple!)

The answer to this question is (drum roll please!)- “It depends.” (I know, you are shocked at such a “lawyerly” answer.)

The Virginia Supreme Court weighed in on this question in United Savings Association of Texas, F. S. B. v. Jim Carpenter Company, Record No. 951470 (2006).  The Jim Carpenter case involved three different cases of liens that were filed by material men pursuant to various forms of open account contracts.  You can read the case to see the particular facts of the case but in essence the owners/general contractors on the project argued that the material men could not lien for any materials delivered to a particular project outside of the 90 day lien window and the material men argued that all of the materials were delivered to the same projects and therefore all constituted one continuous contract.

The Virginia Supreme Court held that the intent of the parties controls.  On the one hand, general deliveries to a contractor for general use (i. e. warehousing for use at some time in the future) each constitute a separate contract, each with its own 90 day clock.  On the other, if the material deliveries upon which the lien is based are all delivered for the benefit of a particular project then they all constitute one continuous contract and the 90 day clock does not start to run until the last delivery is completed.

What do you, as a construction professional, take from this case?  Be careful with your open accounts.  Make sure that when delivering materials to a job site based upon an open account you are exceedingly clear with your purchase order or takeoff language that certain materials are to be delivered to a certain project.  Failure to do so may lead a court to decide that the materials were a general delivery and cut off much or all of your recovery.

As with everything else to do with the picky issues with mechanic’s liens, all of the other requirements (150 day look back, notice, etc.) apply and good legal assistance is a must.

If you are interested in more thoughts on Virginia construction law, please check out my Construction Law Musings blog and join the conversation.

, ,

  • Christopher G. Hill

    Thank you for this guest post opportunity.