Is messing with mechanics lien laws goos? virginia

First of all, thanks to Scott and the other good folks here at the Construction Payment 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.

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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.