Virginia Mechanics lien law change is good

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.

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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.