Legal issues contractors are struggling with don’t disappear just because Coronavirus is happening, and addressing them now--the right way, can be particularly important for your business.
That’s why I answered three legal questions contractors in Virginia recently asked about payment on Levelset’s Expert Center, and I wanted to share my answers to them in case they might help someone else who is having the same problem.
If you have a construction payment question you can visit the Expert Center to ask a question for free.
1. When is the best time to file a mechanics lien?
Getting paid can be a delicate dance. A Washington material supplier who sold materials for a project in Virginia suspected that they would need to exercise their legal protections to get paid, and their deadline to file a mechanics lien was approaching. Since the general contractor claimed that they would receive payment soon (and therefore maybe pay for the materials), the supplier was worried that they might upset them if they took any action before the date they claimed. They asked: Should I file a mechanics lien before they GC has been paid?
This answer has two components. First, the deadline for a supplier to file a mechanics lien in Virginia is 90 days from the last day services were performed or materials were furnished on a project. In this particular example, the deadline would be only a couple days beyond the date that the GC said they’d get paid for the project. Therefore, if they decide not to pay the supplier on that day, the supplier would need to scramble to file a mechanics lien before the deadline. For this reason, it would make sense to file the mechanics lien before hearing back from the GC to ensure payment.
This may seem concerning in terms of putting stress on the business relationship. However, this can be counterintuitive. Clearly communicating that you are owed can reduce time and energy otherwise spent on keeping track of every detail of a complex project, and also avoid things bubbling up into a surprise dispute later on. This can actually improve business relationships.
In other words, there’s likely less harm in filing a mechanics lien than it may seem, and it may be your best bet to get paid. Plus, if saving a relationship potentially requires accepting nonpayment, that relationship may not be worth saving.
2. Is preliminary notice required to file a mechanics lien?
Speaking of tense relationships, a property owner refused to pay the final retainage on a project because they were unhappy with some last minute material changes. The contractor technically finished the project, and told the homeowner that a mechanics lien would be filed if not paid. The owner asked: Can a mechanics lien be filed if no preliminary notice was sent?
Generally, Virginia mechanics liens do not require preliminary notice to be sent in order to file.
However, this isn’t to say that Virginia contractors shouldn’t send preliminary notice just because it’s not required. Consistent communication of payment rights and awareness of who is on a job can lead to faster payments and less disagreements in the first place.
3. How many preliminary notices for mechanics liens should be sent per project?
For some reason, a general contractor decided to write up a separate contract for every section of the job, including drywall, framing, paint, and four more. The subcontractor understood the value of sending a preliminary notice, but wasn’t sure quite how to do it. They asked: Do I need to send a preliminary notice for every contract involved in a project, or just one per project?
This isn’t very common, so Virginia law doesn’t have a direct answer. For this reason, sending one preliminary notice referencing the information across all of the contracts shouldn’t be a problem. Especially given that preliminary notice isn’t required for protecting mechanics lien rights.
However, sending a preliminary notice for every contract cannot hurt, in the same way that choosing to send a preliminary notice in the first place can’t hurt despite not being required. Since there’s no downside, it’s better to be safe than sorry.