2014 was a busy year for mechanics lien law, with significant changes either enacted or contemplated in a large number of states. Changes ranged from providing a more clear definition of what constitutes the “commencement” of an improvement in Nevada, to the creation of an entirely new-from-the-ground-up mechanics lien law scheme in Mississippi. So far through 2015, it looks like the momentum in lien law clarification and modification is continuing, and the general trend seems to be placing an emphasis on fairness from both sides of the payment chain.
Virginia’s New Waiver Law
Perhaps the most significant of the changes contemplated in mechanics lien law so far this year is the revision to Virginia’s law regarding lien waivers. Perhaps the most significant of the changes contemplated in mechanics lien law so far this year is the revision to Virginia’s law regarding lien waivers. Prior to the recent modification, which has flown through the house and senate, subcontractors and suppliers could be forced to waive their rights to a future mechanics lien through contract, prior to work. This type of “no-lien” clause is harsh, unfair, and specifically disallowed, or looked upon with extreme disfavor, in nearly every state. Virginia has joined that party, and determined that: “subcontractor, lower-tier subcontractor, or material supplier may not waive or diminish his lien rights . . . in a contract in advance of furnishing any labor, services, or materials.
This change is significant, and pulls Virginia closer in lien with the vast majority of lien waiver laws throughout the country. Further, this is a large step forward in fairness. In disallowing unfair contract terms in situations in which parties do not have the leverage to evenly negotiate the contract, Virginia has taken a step forward in promoting fair construction payment.
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Don’t File Fraudulent Liens In Illinois – And Be Aware of the Recorder’s Apparent Ability to Decide Not to File Liens
Problems of fairness do not always come from the top of the chain, however. In a recent Illinois case, a man was fined $500 and sentenced to probation for one year for filing a fraudulent mechanics lien. It was shown to the satisfaction of the jury that the lien claimant knew that he was attempting to illegally file a false lien. What makes this case especially interesting, though, is that the lien was never filed – it was noticed as potentially fraudulent by the county recorder’s office, and brought to the attention of the prosecutor.
While the correct result was reached in particular situation, and Illinois statute expressly allows county recorders to institute a “fraud referral and review process”, it seems as if the process contemplated referral and review of documents already recorded, not documents awaiting recordation. This is a significant difference, as a delay in filing an otherwise valid lien may result in a missed deadline that is fatal to the lien claim.
California’s Serious About Timely Payment
In the apparent conclusion of a case that has been being fought over a the course of a decade, a California court of appeals came down firmly on the side of fairness in payment, to the tune of a $9 million award. In the case, it was determined that a public school district retained and didn’t not promptly pay a little less than $700,000 even after stop notices delaying the payment of that money were released.
The court, in neglecting to follow another decision with an opposing outcome, noted that the ability to retain payments after the time for payment mandated by the prompt pay statutes was limited to provide security against potential mechanics liens or bond claims, and that when such security is no longer needed, the payment must be made.
The above amendments and clarifications represent some of the more significant spots in mechanics lien law so far in 2015. Mechanics lien law appears to be a hot topic in 2015, just like it was last year, and the general trend seems to be toward increasing fairness for all parties.
