Recent Amendments to Virginia Mechanics' Lien Statute Require Contractor Licenses

by Baker Donelson

Under March 2013 amendments to the Virginia mechanics’ lien statute, contractors seeking mechanics’ liens must now demonstrate that they are licensed to complete their work. As a result, contractors who do not obtain the requisite licenses forfeit their rights to mechanics’ liens for unpaid work. Because Virginia courts demand strict compliance with the statutory perfection requirements, complying with contractor licensing requirements will be crucial to obtaining a mechanics’ lien.

The Professional Regulations section of the Virginia Code (Title 54.1, Chapter 11) generally requires any contractor who engages in work in Virginia to obtain a license from the Virginia Board for Contractors. For purposes of licensing, a “contractor” is any person who undertakes “performing, managing, or superintending in whole or in part, the construction, removal, repair, or improvement of any building or structure permanently annexed to real property” for a fixed price. Title 54.1 divides contractors into three classes (A, B, and C) based on the value of their work, and there are separate licensing procedures for each class. These licenses are issued by the Board for Contractors.

Complying with the Title 54.1 licensing regulations is the first step. When perfecting a mechanics’ lien, contractors must also demonstrate that they have obtained a license pursuant to Title 54.1. In Virginia, a claimant must file a memorandum of lien within 90 days of completing its work. The memorandum of lien must contain the names of the owner and claimant, the amount and consideration of the claim, and the due date for payment. The March amendment requires that the memorandum also list the claimant’s license or certificate number, and the issuance and expiration dates of the license. The memoranda and affidavit templates in the Code have been amended to reflect this requirement. If a contractor is not required to obtain a license, it must certify that fact on the memorandum.

In addition to filing a lien memorandum and affidavit, claimants must submit various forms of notice depending on whether they are general contractors, subcontractors, or sub-subcontractors. A general contractor must mail a copy of the memorandum to the owner, and file a certificate of mailing with the memorandum and affidavit. A subcontractor must give written notice to the owner or its agent. A sub-subcontractor must give written notice to both the owner or its agent and the general contractor. When a building permit lists a mechanics’ lien agent, the lien claimant may also notify that agent. The March 2013 amendments only affect this latter notice provision - - lien claimants who provide notice to a mechanics’ lien agent must now include in that notice, the license or certificate number and issuance and expiration dates.

Contractors should be mindful of notice and perfection requirements because failure to comply could result in invalidation of a mechanics’ lien. Virginia courts strictly construe and enforce lien perfection requirements. For example, one Virginia court invalidated a general contractor’s mechanics’ lien because the contractor failed to submit the certificate of mailing with its memorandum and affidavit. Virginia courts have also declared liens invalid based on errors such as naming the wrong lien claimant, failing to allege that the affiant was an agent of the named lien claimant, or mis-identifying the owner. However, deficiencies in the description of a contractor’s license or certificate may not have as dramatic an effect, because the Code now confirms that such errors are not fatal to a lien. The amendment to the statute clarifies that an error in the licensing information will not render the lien invalid, as long as the claimant can otherwise be reasonably identified in the records of the Board for Contractors.

The Virginia courts have not yet addressed the licensing amendments, but it is likely that they will require strict compliance with the statute. For example, it is unclear whether a contractor who erroneously obtains the wrong license would be able to perfect a lien. It is likely, however, that the courts would not be sympathetic to innocent mistakes, and contractors should make sure that they are complying with all licensing requirements. Although clerical errors will not invalidate a lien, it is safe to assume that any other mistake presents a risk of forfeiting a mechanics’ lien.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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