This is a guest post from friend-of-the-blog Christopher Hill. Christopher is a construction attorney in Virginia, and the author of the Construction Law Musings blog.

First of all, thanks to Scott and the other good folks here at the Lien Blog for their continued support of my Construction Law Musings blog with both these opportunities to post and with Scott’s guest posts at Musings (the latest of which is here).

Scott has asked me to blog at a time when it seems that a group of statutes that have served contractors well here in Virginia for a long long time without change are in the crosshairs of the General Assembly like no other time I can remember.  These statutes are, of course, the Virginia mechanic’s lien statutes.  As you can tell by the titles of both my blog and the one you are reading right now, mechanic’s liens are near and dear to our hearts.  Changes to these statutes are changes to my law practice and to the way that contractors do business in Virginia.

While I have described the mechanic’s lien process in Virginia as tricky and at times overly form driven, once this process is understood (with the help of a construction attorney in Virginia), a mechanic’s lien becomes a powerful and necessary tool in a construction professional’s arsenal of collection tools.  In short (and by way of disclaimer), I like the statutes the way they are.

All of this said I can see where some legislators may see the necessity to occasionally tweak these years’ old statutes.  Two recent attempts to amend these statutes hit the Virginia General Assembly this term.  The first, a re-submission of a change I blogged about both in 2012 and this session, monkeyed with the notice and timing requirements for residential liens in a way that would be highly detrimental to construction in Virginia.  Luckily, this attempt was thwarted in subcommittee (Senate in 2012 and House in 2013) before it could become law.

Another, more debatable, change is currently wending its way through the legislative process.  With the support of the AGC of Virginia, and as more thoroughly described in the blog post linked above, the new bill seeks to require the listing of a Virginia contractor license within the four corners of any properly recorded memorandum of lien.  The bill also specifically precludes any contractor that is required to be licensed in Virginia from asserting a lien without such a license.

On its face, this change does not seem to be at all controversial.  States have licensing requirements for a reason and those that shirk those requirements should not be allowed the freedom to assert liens for work that they are most likely performing illegally.  A no brainer, right?

Not so fast.  Consider the changes in light of the very form driven nature of the various court opinions relating to mechanic’s liens in Virginia.  No amount of good faith seems to allow even the smallest deviation from the requirements of the form or statute.  Now, consider the contractor performing work under a personal license who then changes his operating entity from a sole proprietorship/dba to an LLC (a common and laudable action).  The new entity is then properly assigned its own license number.  Contractor performs work through the LLC and is not paid and files a lien, but lists the license number for his dba that he had used for the prior 20 years.

In this situation, and despite the alleged savings statute in Va. Code 43-15, I think that the contractor, under the bill as currently drafted, would lose his lien rights despite this being a clear case of a properly licensed contractor making a simple mistake.  Such a result would not move the public policy of requiring licensure forward.  It would only punish a contractor for a scrivener’s error and for using a past license number.

As you can see, the law of unintended consequences can kick in for statutory changes with the most laudable of goals.

In short, while some goals are good ones (namely requiring licensure), legislators need to be careful when making even the smallest of changes to a statute that is so strictly read as the Virginia Mechanic’s Lien statute.

What are your thoughts?  I’d love to hear your points (pro or con) relating to this statute.

Written by Christopher Hill See original article at Is Messing With Mechanic’s Lien Statutes a Good Idea? Originally posted on the LIEN

Accounts receivables are a concern for any business. They age, they go unpaid, and they impact your bottom line. An entire industry is built on the simply managing accounts receivables, aptly named the “accounts receivable management” industry.

Accounts receivable and credit management is especially challenging in the construction and building material supply industries. It’s something we’ve written about here under the “Credit Management” tag, and it is the topic I address in a guest blog post published this morning at Construction Law Musings.

Here is the opening paragraph to wet your appetite:

Managing account receivables in the construction and building material supply industries presents unique challenges and unique solutions. This post reviews the industry-specific reasons why accounts will age and go unpaid, as well as the industry-specific credit and collections solutions available to controllers and credit managers.

Head over to Christopher Hill’s very well-done construction law blog for the full article: Why Accounts Age And Solutions For Construction Industry Credit Managers.

And thanks very much to Christopher Hill and his Construction Law Musing blog for inviting me back to guest post in his weekly “Guest Post Fridays” column. This is the fourth or fifth time I’ve had the honor (which I think is a record!), and it’s always great to be a part of his publication.

Be sure to follow and read the Construction Law Musings blog to constantly read about interesting developments in construction law.

Written by Scott Wolfe Jr See original article at Guest Post About Accounts Receivables Problems and Solutions Published On Construction Law Musings Originally posted on the LIEN

This is a guest post from our friend Christopher Hill of the Construction Law Musings blog. Christopher is a construction attorney in Virginia who has contributed to the Lien Blog in the past. We follow his blog closely to keep up to date on mechanics lien law in Virginia and are honored to have him contribute here again.

As always, thanks to Scott for the kind invitation to guest post here.  I always enjoy sharing a few nuggets of Virginia mechanic’s lien wisdom here at the Mechanic’s Lien Blog.

Mechanic’s liens are near and dear to Construction Law Musings.  Mechanic’s liens are a great weapon in the toolbox of any construction contractor in Virginia.  However, the rules for perfection of these liens are strict and failing to follow them to the letter will cause the lien to be thrown out.

The Loudoun County, Virginia Circuit Court issued another reminder of this fact in a recent opinion.  As a bit of background, Va. Code 43-3(B) contains provisions whereby a site contractor (or other contractor that provides work and material that benefits and entire subdivision) can file a single lien memorandum and apportion the burden of that lien on a per lot basis.  In order to do so, that contractor must also file a disclosure statement at the local courthouse in order to be able to lien common areas and the lots that are subdivided and sold.  Like everything relating to the proper recording and perfection of a Virginia mechanic’s lien, this statute creates strict technical requirements that the Virginia courts will strictly enforce.

In William A Hazel, Inc v Sycolin Center the Court faced a question of agreement between a disclosure statement filed by a site contractor and the lien filed by that same subcontractor.  The Court looked at a disclosure statement filed by the Plaintiff that listed 3 lots for the subdivision and properly allocated the amounts due per the statute.  However, when filing the lien, the site contractor only listed two of the lots found in the initial disclosure statement and then divided the total by 2 (the number of lots liened, not the number in the subdivision).  The Court examined past cases regarding mechanic’s liens, apportionment and errors and then threw out the lien as having been improperly apportioned.  For more details, be sure to read the case in its entirety, it contains a great analysis.

This case is yet another example of the need to be diligent in the filing of mechanic’s liens in the Commonwealth of Virginia.  These powerful tools will be strictly construed and the assistance of an experienced Virginia construction attorney can be invaluable in the proper perfection and enforcement of them.

Thanks again to Scott for the great opportunity.

Written by Christopher Hill See original article at The Strict Nature of Virginia Lien Apportionment Rules Originally posted on the LIEN

Christopher G. Hill, LEED AP is solo practitioner, Virginia Supreme Court certified General District Court mediator, lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC.  Chris has been nominated and elected by his peers to Virginia’s Legal Elite in the Construction Law category on multiple occasions and is a member of the Virginia Super Lawyers “Rising Stars” for 2011. He is a current member of the Board of Governors of the Virginia State Bar Construction Law & Public Contracts Section.  Chris also authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.  Additionally, Chris is active in the Associated General Contractors of Virginia.

Recently, here in the Commonwealth of Virginia, mechanic’s liens have taken a front seat for us construction attorneys.  Of course the biggest headlines and uproar took place over an attempt to effectively shorten the mechanic’s lien deadline relating to residential construction to 30 days.  Thankfully, construction contractors and suppliers dodged this bullet (at least temporarily) when the State Senate tabled the bill.

While this storm of activity was both justified and in the forefront, the Virginia General Assembly (surprisingly and refreshingly) made a change to the mechanic’s lien statute that will make things easier rather than harder for those that provide site improvements and utilities that benefit the entire development.

The recent changes to Va. Code §43-3 (effective July 1, 2012) clarify several points regarding the allocation of lien amounts to individual lots.  The main points of clarification are as follows:

• Common areas are explicitly excluded from the “denominator” of the lien allocation equation.  In other words, where there are 10 home sites and one common area, a site or utility contractor no longer needs to worry if it should allocate part of its lien amount to the common area and can safely allocate the amount owed to the ten home sites;
• Traffic signalization, and installation of electric, gas, cable, or other utilities are explicitly included in the definition of “site development improvements;”
• Any payments to the contractor for which the owner/developer does not designate a particular lot will apply to any previously sold lot and the remaining lots will continue to bear their share of the liability.

Of course, the remaining provisions of 43-3(B ), including the memorandum of disclosure requirement, will need to be followed in order to take full advantage of these clarifications.

For a further analysis, check out this recent newsletter by Fullerton & Knowles.

Thanks again to Scott for the opportunity, and please contact me with any questions.

Written by Christopher Hill See original article at A Virginia Mechanic’s Lien Change for the Better Originally posted on the LIEN

Hanley Wood’s Professional Deck Builder magazine published an article I wrote in this month’s issue, and of course, I highly recommend reading it .  The article appears in the Deck Ledger section of the magazine, and is titled “Ins and Outs of Mechanic’s Liens.”  Read the article at their website here (PDF| HTML).

The article is an adaptation from the a guest post we wrote on Christopher Hill’s great Construction Law Musings blog, titled “The Life of A Mechanics Lien Claim: Preserve, Perfect, Enforce.”  And even this article had an original inspiration in one of the more popular posts here on this blog, “Filing A Lien is a Discipline, and Not A Knee Jerk Reaction.” The life of this post has been long, and I’m quite proud of the Ins & Outs article appearing in Professional Deck Builder, since it’s really an improvement on both original posts.

Thanks to the Professional Deck Builder team for publishing the piece, and the work they did to help put it together.

Written by Scott Wolfe Jr See original article at Mechanics Lien Article Published In Current Issue of Deck Builder Magazine Originally posted on the LIEN

UPDATE: Christopher Hill informed me this morning that the bill has now been tabled until the next session, and therefore, is dead for now.  Chris had testified before the legislature this morning regarding the bill. While the bill is tabled for not, it’s still worth anaylzing as it may creep back into discussions in the next session.

Hat tip to our good friend Christopher Hill and his Construction Law Musings blog for his great commentary on House Bill 1265 currently pending before the Virginia legislature and threatening to change Virginia’s mechanics lien deadlines. Chris wrote two posts over the past few weeks about the pending Virginia HB 1265, both of which I recommend:

• A Cloud On The Horizon fr Mechanics Lien Claimants In Virginia
• The Cloud Dissipates (a bit)

Review these two posts, as well as James Fullerton’s “New Deadlines on Virginia Mechanic’s Lien” post, to get a good understanding of both the proposed law changes and the fiery debate surrounding the proposal.  Further, after reviewing these posts and the full text of the proposed bill, we’ve prepared this summary of the changes and the issues presented.

The New Rules Will Apply To Single & Two Family Residential Projects Only

This should come as a relief to the construction industry, because the bill as first proposed would have applied to all private construction projects. However, after some pressure from construction industry lobbyist, the bill’s effectiveness has been limited, and is only applicable to construction work performed or materials furnished to single or two family residential properties.

Therefore, the new proposed regulations would only affect the projects that already have the Mechanics Lien Agent (MLA) notice requirement, and would have absolutely no effect on the mechanics lien laws applicable to commercial and industrial projects.

HB 1265 Creates A Burdensome Notice of Intent to Lien Requirement

HB 1265′s main feature is to require potential mechanics lien claimants to deliver a “pre-lien notice” 30 days before recording the memorandum of lien. The “pre-lien notice” must contain the following data:

(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, (iv) a statement that the person sending such notice intends to file a lien on the property, and (v) the amount for which the person sending such notice intends to file a memorandum of lien.

HB 1265 doesn’t call this a “Notice of Intent to Lien” requirement, but it is exactly that. If passed, Virginia would join only nine other states in having a notice of intent to lien requirement, and its requirement for the notice to be filed 30 days before the mechanics lien would make Virginia tied to have the longest notice of intent period in the nation, and certainly the most burdensome.

Most states with notice of intent requirements mandate the notice get sent at least 10 days before the mechanic lien’s filing. Virginia’s notice of intent requirement mandates the notice be sent at least 30 days before recording the mechanics lien. As expressed by Chris Hill and James Fullerton in their respective articles, this would effectively shorten the mechanics lien filing period from 90 days to 60 days in Virginia.

The only other state with such a long notice of intent period is Wisconsin, which also requires a notice of intent be delivered at least 30 days before recording the mechanics lien. The difference between Wisconsin and Virginia, however, is the mechanics lien period. Wisconsin mechanics liens are due within 6 months from last furnishing labor or materials to a project, which is more than twice as long as the Virginia period.  Instead of reducing the mechanics lien period by 1/6 like Wisconsin, the Virginia mechanics lien period would be shortened by a full 1/3.

Why Virginia’s Mechanics Lien Bill Is A Change For The Worse

There seem to be ten to twenty really terrific reasons why HB 1265 doesn’t make any sense. I personally like the letter sent by James Fullerton to the Virginian Senate, and copied to his online newsletter above-linked, which provides:

Virginia’ mechanic’s lien statute have held fairly steady for over two hundred (200) years and I have not heard any argument to the contrary. The apparent problem is that some innocent Virginia homeowners, and perhaps one member of the house of delegates personally, get drawn into disputes involving construction projects.

A mechanic’s lien in Virginia is only valid to the extent that the owner owes funds to the general contractor at the time that the owner receives notice of the mechanic’s lien. The owner is only required to pay for the project once. Once the owner has paid, the owner has a complete defense to any mechanic’s lien.

In addition to this payment defense available to homeowners, there are other problems with this bill.

In my mind, one of the biggest problems is that the bill may result in more mechanics lien claims against Virginia homeowners. The original mechanics lien filing period is 90 days in Virginia, with retainage withholdings, pay-when-paid provisions and credit terms sometimes greater than 45 or 60 days, this 90 day period is a small window for a lot of contractors and suppliers. A lot of mechanic liens already get filed by claimants who will eventually get paid, but just aren’t yet.  Shortening the mechanics lien period by 30 days (by requiring the notice of intent) is just going to increase these types of filings.

Stay tuned to the ConstructionLienBlog for updates on this bill. And if it does become law, rest assured that the new pre-lien notice form and deadline will be added to our software.

Read the bill’s full text and history here.

Written by Scott Wolfe Jr See original article at Is Virginia Poised To Change Its Mechanics Lien Law For The Worse? Originally posted on the LIEN

Thanks to guest blogger Christoper G. Hill for his contribution to our State Bond Claims Blog Series, addressing the topic as it relates to Virginia’s Little Miller Act. Christopher G. Hill is lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC, a LEED AP, and member of Virginia’s Legal Elite in Construction Law. He specializes in mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals.  Mr. Hill authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.

First off, thanks to Scott for the opportunity to discuss payment bond claims in Virginia.

At my Construction Law Musings blog, I have discussed the topic of mechanic’s liens extensively.  However, a mechanic’s lien may not be appropriate depending on the type of project that you work on.  For instance, in Virginia (as in most states), a contractor cannot place a mechanic’s lien on a public project.

In Virginia, the legislature has adopted the “Little Miller Act,” modeled after its federal counterpart.  The Virginia Act requires that a contractor post both a payment and procurement bond on any public project valued at over $500,000.00 (this change in value of contract was implemented in 2011).  These bonds secure just what you would think that they would,  i. e. payment of subcontractors and second tier subcontractors and performance of the work. The payment bond is a substitute for the lien rights that a subcontractor would have on a private project.

Essentially, the Little Miller Act allows a subcontractor or material supplier the right to collect under the bond if it has not been paid within 90 days of the date that the last material or labor was provided to a project. Once the subcontractor or material man shows that the labor or material was in fact provided, the claim is collectible absent some proof by the bonding company or contractor that it has some sort of payment defense (setoff, delay, etc.).

In order to take advantage of this powerful tool, and if you are a first tier subcontractor, you need only file a claim within a year of the last date of work/material supply if you are in direct contract with the general contractor and 90 days after your last work for which you claim payment was performed.

If you are a second tier subcontractor, you must send a notice to the general contractor within 90 days of the last date of work (another July 2011 change). As a practical matter, all subcontractors should also copy the surety on the notice in order to begin the pressure on the general contractor to get payments flowing.

Unfortunately, if you are more than two degrees of separation from the general contractor the Little Miller Act’s protection does not apply to you and you may be stuck with a contract claim against a subcontractor.

This brief overview should give the basics of Virginia’s Little Miller Act.  As always, consult with a knowledgeable attorney when making any sort of construction claim.

Written by Christopher Hill See original article at A Guide To Virginia Payment Bond Claims Originally posted on the LIEN

A special thanks to Christopher Hill and his recommended Construction Law Musings blog, for letting me post for a record 5th time as part of his Guest Post Friday series. I love his construction law blog. He’s been blogging about construction law matters in Virginia for a few years, and he brings an unique voice to the construction law conversation out there on the Internets.

While I’ve focused on immigration issues my past submissions, this time, I wrote an article outlining the life of a mechanics lien claim: The Life Of A Mechanics Lien Claim: Preserve, Perfect, Enforce.

I really like how this post turned out, as it gives a big picture overview to the entire mechanic lien process. Here on this blog, I sometimes get bogged down on the nuances in mechanic lien law, addressing the little things that differ state-to-state.

It’s important to step back sometimes and take a view from above apporach to the liens laws, because while they vary drastically from state to state, there are a lot of underlying principles that are consistent. Understanding these principles can take companies a long way.

In any event, thanks to Chris, and I recommend heading his way to read the article.

Written by Scott Wolfe Jr See original article at Guest Post About Life Of The Mechanics Lien At Construction Law Musings Originally posted on the LIEN

My friend Chris Hill recently posted a blog post on Construction Law Musings discussing a recent Virginia trial level decision in TWP Enterprises v. Dressel, wherein the court addressed the question of whether contractual provisions can alter a party’s mechanic lien rights.  The blog post is highly recommended:  Where Mechanic’s Liens and Contracts Collide.

Chris explains the issue in the case well:

[T]he Court considered a provision of a contract between the TWP Enterprises, a supplier of materials to the construction project, and the builder for the defendant. The provision between the supplier and builder essentially stated that until such time as TWP’s materials were paid for in full, TWP kept title to them…

The owners argued – essentially – that since the supplier maintained ownership interest in the materials, they had – in effect – waived their right to lien the project, because they couldn’t lien their own materials.

As an attorney, this argument seems dubious at best; one that doesn’t pass the “smell test.”  With that said, it does have a logical foundation and I suppose I understand how the attorneys got this concept.

The Virginia trial court gave four or five different reasons in rejecting the argument and holding that the mechanic lien was indeed valid. One of the enumerated reasons that caught my attention was one directed to Virginia’s public policy, summarized by Chris in his blog post as follows: “To enforce the provision described above as argued by the owners would create and implied waiver of lien rights.”

In other words, this argument would allow the suppliers – in a round-about way – to waive their lien rights before performing work. And this, as we previously discussed on the Construction Lien Blog – isn’t allowed in most states.

Written by Scott Wolfe Jr See original article at Can Contract Provisions Alter Your Lien Rights? Originally posted on the LIEN

We’re pleased to welcome Christopher Hill back to the Construction Lien Blog for this guest post, bringing information about important changes to mechanic lien statutes in Virgina.  Christopher G. Hill is lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC, a LEED AP, and member of Virginia’s Legal Elite in Construction Law. He specializes in mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals. Mr. Hill authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.

I want to thank Scott for, once again, letting me guest post here at the Construction and Mechanic’s Lien blog.

I have discussed the picky nature of Virginia mechanic’s liens often over at my Construction Law Musings blog. Not only are the requirements and details strictly enforced, but the Virginia General Assembly seems to feel the need to tweak them in each of its sessions.

The latest change involves the use of a mechanic’s lien agent on residential projects. Beginning at the start of this month, July 1, 2010, a contractor can no longer depend on the failure of the owner to list a mechanic’s lien agent on the posted building permit. The new statute requires that a contractor go beyond merely reading the building permit and make a reasonable inquiry with the local building authority to determine the identity of the mechanic’s lien agent.

Another key change to this provision allows an owner to amend a building permit to add a mechanic’s lien agent at a date sometime after the beginning of construction. Based on this change to the statute, contractors must be constantly vigilant to any lien agent changes to assure that their required 30 day notices to the agent are properly filed because the owner is likely to bring a defense of failure to give notice by a contractor or subcontractor (regardless of if the trade is finished or not) should such notices remain un-filed or un-amended.

Aside from the obvious need to keep abreast of the changes to the mechanic’s lien statutes in Virginia, contractors and other construction professionals must also update their long standing policies for notices on residential projects. Consultation with an experienced construction attorney is key in assuring that you are both up to speed on legislative and judicial changes and that your business procedures take such changes into account.

Written by Scott Wolfe Jr See original article at Alert: Virginia General Assembly Tweaks Mechanic’s Lien Notice Requirements Originally posted on the LIEN