Complying with timing requirements is crucial to mechanics lien claims, but, as we’ve mentioned before, calculating these deadlines can sometimes be difficult. This is especially true in states with more than one date that must be calculated, and when there are different methods to calculating those dates. Even when the deadlines have been successfully navigated, and the lien claim is valid and enforceable, the process is still not yet complete. If the property must be foreclosed to satisfy the mechanics lien, is the whole property sold, or just part? A recent Virginia case provides some insight to the calculation of deadlines, and raises some questions related to the sale of property to satisfy valid mechanics liens.
Background of the Recent Virginia Mechanics Lien Case
In Glasser & Glasser, PLC v. Jack Bays, Inc., 285 Va. 358, 364 (Va. 2013), the Virginia Supreme Court provided some insight into the multiple timing requirements of Virginia mechanics lien law, as well as posing a question as to how a sale of a property to satisfy mechanics liens should be effected.
Jack Bays, Inc. (“Bays”), was the general contractor on a project to construct a new church building. The property as a whole was 22 acres, and the buildings were to be located on 2.8 acres of that total. After work had been ongoing for approximately two years, the church ran out of money and stopped paying Bays. Because of this nonpayment, Bays sent a letter to the subcontractors on the project on September 28, 2007 stating that Bays was stopping work on the church, and immediately did so; the subcontractors remained onsite demobilizing and securing the site.
Bays filed a mechanics lien against the property on December 28, 2007, and 12 subcontractors followed suit and recorded mechanics liens later that month, and in January 2008.
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90-Day Rule for Virginia Mechanics Liens
Virginia, like every other state, imposes a strict deadline by which mechanics liens must be filed. Virginia is unique, however, in that it is a two-part deadline. Virginia, like every other state, imposes a strict deadline by which mechanics liens must be filed. Virginia is unique, however, in that it is a two-part deadline. For a Virginia mechanics lien to be valid, it must be filed within 90 days of the last day of the month in which the lien claimant furnished labor and/or materials to the project. It is also required that the mechanics lien be filed within 90 days from the completion or termination of the project as a whole. The Bays case provided an opportunity for the court to discuss these requirements and give some insight into the calculation of the 90-day deadline.
Bays filed its mechanics lien on December 28, 2007, and last performed work in September, 2007. Clearly the filing of Bays’s mechanics lien complies with at least the first prong of the 90-day rule – December 28 is within 90 days of the last day of September. It was argued, however, that since December 28 is 91 days from September 28, Bays missed the second prong of the deadline by one day, a result which would have rendered the mechanics lien ineffective. The court did not agree with this argument. The court determined that the end of the project was not the September 28 date on which Bays stopped work, and sent the letter to the subcontractors stating that it was stopping its active work on the project. In reaching this determination, the court noted that subcontractors stayed on the project site into November demobilizing the site and performing work to render the site safe. Because of this ongoing work, the court concluded that the lien filed by Bays on December 28 met both prongs of the 90-day requirement, because it was filed within 90 days of the last day of the month in which the claimant last performed work, and it was filed within 90 days of the completion of the project.
150-Day Rule for Virginia Mechanics Liens
The court rejected this argument, stating that the additional work performed by the subcontractors after the September 28 date did not add value to the project to extend the 150-day calculation. Virginia mechanics liens are also bound by the “150-day Rule“, an interesting rule discussed on the Construction Payment Blog previously, and which provides the “real deadline” for filing a mechanics lien in Virginia. The 150-day rule states that a Virginia mechanics lien can only include amounts for labor and/or materials furnished in the 150 days immediately preceding the day the lien claimant last furnished labor and/or materials to the project. Getting this calculation right is essential to Virginia mechanics lien claims – including amounts outside of this 150-day window can invalidate the entire mechanics lien claim.
The court examined an argument that Bays violated the 150-day rule by using September 28 as the look-back date, even though Bays was onsite through its subcontractors for an additional period of time. The court rejected this argument, stating that the additional work performed by the subcontractors after the September 28 date did not add value to the project to extend the 150-day calculation; it was merely demobilization and safety work, not work adding value to the property.
Sale of Property
Because the two findings above rendered the mechanics liens valid and enforceable, the court was required to review the lower court’s order that the entire property be sold to satisfy the mechanics liens. As you will recall, the construction took place on 2.8 acres of a 22 acre property. Virginia mechanics lien law states that the a mechanics lien does not necessarily apply to an entire property, but only to “so much land. . .necessary for the convenient use and enjoyment thereof”. Evidence must be provided to demonstrate whether all of the land, or what portion of the land, is necessary to be sold for the enjoyment thereof. As no evidence had been presented to such in Bays, the court remanded the case for consideration of that issue. It will be enlightening to see what the lower court determines on this issue, and the finding will provide some guidance as to how a foreclosure proceeding may proceed, and to what lien claimants can expect when forcing the sale of a property to satisfy a lien claim.