Construction Payment Blog recently discussed changes to the mechanics lien law scheme in Virginia. These changes mandate that every mechanics lien claimant have a license, and that the license number and dates of issue and expiration be listed on the face of the lien document, in order for the claimant’s lien to be valid.

How Much Does This Actually Change Virginia Mechanics Lien Law?

This looks to be a large change to the structure of lien law in Virginia; a previously (potentially) protected party is no longer entitled to mechanics lien rights, and the formal requirements of the lien claim and certain notices have been altered. There is no question that the mandatory inclusion of the lien claimant’s license number, and the dates of issuance and expiration of that license, is a significant change to the law. The mandatory licensing provision seems to be a large change, as well. But, are they really?

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Formal Requirements – License Number & Dates of Issuance Expiration

The inclusion of the license number and dates of issuance and expiration is modified by some savings-clause language in the statute. This savings language,

An inaccuracy in the memorandum as to the claimant’s license or certificate number, if any, the date such license or certificate was issued, or the date such license or certificate expires shall not bar a person from perfecting a lien if the claimant can otherwise be reasonably identified in the records of the Board of Contractors.

seems to remove some of the teeth from the requirement. While the mechanics lien law statutes are strictly read and interpreted in Virginia, the above clause provides a significant “out” for the contractor who fails to properly identify his or her license number (and associated dates) on the lien claim. Generally, it seems likely that a contractor could be reasonably identified in the records of the Board of Contractors by the other information that may be provided on a lien claim[/quote] Since the statute doesn’t specifically address this issue, it is up for interpretation whether a contractor who fails to list a license number and dates of issuance/expiration at all may be able to gain the benefit of the above savings clause by claiming the absence of the license and dates is merely an inaccuracy. While, at first glance, that would seem to be stretching the application of the saving language, there may be at least a colorable claim there. Generally, it seems likely that a contractor could be reasonably identified in the records of the Board of Contractors by the other information that may be provided on a lien claim, i.e. Name of Business, Address, Phone Number, etc.

Mandatory Licensing for Lien Rights

Potentially, the most significant change to Virginia lien law is the new requirement that a lien claimant be licensed in order to have a valid lien claim. Va. Code Ann. Sec. 43-3(D) states that:

A person who performs labor or furnishes materials without a valid license or certificate issued by the Board of Contractors pursuant to Chapter 11 (§ 54.1-1100 et seq.) of Title 54.1, or without the proper class of license for the value of the work to be performed, when such a license or certificate is required by law for the labor performed or materials furnished shall not be entitled to a lien pursuant to this section.

There is at least some Virginia jurisprudence in which courts have agreed with an interpretation of Virginia law disallowing mechanics lien rights to unlicensed parties – when those parties knew a license was required for their work. How new is this requirement, however? While this newly amended statute clearly draws a bright-line distinction between those entitled to lien rights and those who are not, some version of a licensing requirement has been floating around the periphery of the mechanics lien law in Virginia for some time, at least in respect to parties who were aware that a license was required for the work they were performing.

There is at least some Virginia jurisprudence in which courts have agreed with an interpretation of Virginia law disallowing mechanics lien rights to unlicensed parties – when those parties knew a license was required for their work. In Lower v. Cranch, 32Va. Cir. 110 (1993), the court noted that if a subcontractor had actual knowledge that the general contractor on a project was not licensed, that knowledge would bar recovery on the subcontractor’s mechanic’s lien. Also, the court in Butler v. Creative Design Builders Inc., 24 Va. Cir. 362 (1991), the court concluded that an ower could assert a lack of license as a defense against a subcontractor’s mechanics lien to the same extent as it could be asserted against the general contractor.

Both of the above cases make reference to the licensing law noted by the recent revision to the mechanics lien law – Section 54.1. Section 54.1-1115(C) provides that no person can assert lack of licensure as a defense to a lawsuit “if the party who seeks to recover from such person gives substantial performance within the terms of the contract in good faith and without actual knowledge that a license … was required … to perform the work for which he is seeking to recover payment.” (emphasis added). This statute has been interpreted by at least the courts noted above, to mean that lack of licensure could be asserted (even against a mechanics lien) when the lien claimant did have knowledge that a license was required.

So, what does this mean for Virginia lien claimants? Now, a Virginia lien claimant is required to be licensed to have a valid mechanics lien claim, whether or not they know it.