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If a lease is terminated by landlord can we still file a lien on the tenant?

We have completed a project per terms of our contract, the tenant decided not to open the space days before opening. The owner of the space is telling us we cannot lien it because they have terminated the lease. This was a large project and there is $417k outstanding.

1 reply

Jan 3, 2020

Generally, when performing work for a tenant in Virginia, mechanics lien rights will be limited to the tenant's interest in the property (i.e. the lease). So, if there's no lease, then a would-be lien claimant may have to pursue some other method of recovering payment. Note, though, that if the lease agreement between the owner and the tenant required that the construction take place, or if the owner was otherwise substantially involved in the project, there's a chance that lien rights might be available against the owner's interest in the land. Levelset discusses mechanics liens and tenant improvements in-depth here: What Happens to Mechanics Lien Rights If My Project is a Tenant Improvement?

Recovery tools outside of the mechanics lien process

Of course, there are always other options outside of the mechanics lien processs that can help to recover construction payments. For one, contract claims against a customer will generally be available. And, even in a situation where contract claims might not be all that valuable, it's possible that unjust enrichment claims might be on the table against the owner of the property. What's more, recall that the mere threat of action can often be enough to get paid. Sending a document like a Notice of Intent to Lien is often valuable, even in a situation where lien rights might be in a grey area. While an owner who's confident the lien wouldn't stand might not be all that threatened, making the threat of the lien claim could at least help put pressure on the tenant to pay for the work. It's entirely possible the owner may force their would-be tenant to resolve the matter to keep the property free and clear of liens - and that could make the path to recovery more clear. Additionally, or alternatively, sending a payment demand letter could be helpful too. A demand letter that includes specific legal threats and sets a hard deadline for payment will often at least get payment talks moving in the right direction. More on that here: Demand Letters for Contractors – How To Write One That Gets You Paid.

Consulting a Virginia construction attorney should help

Considering the size of this debt, it might be time to talk to a lawyer. The absolute best way to get clarity on what recovery options are on the table and best suited for your situation would be to consult a local Virginia construction attorney, such as one of these Virginia Construction Payment Experts. They'll be able to review your circumstances and project documentation then advise on how best to move forward.

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