Newland's Business Notes

Has a Mechanic Liened on You Yet?

Volume 5 Issue 1 -- January/February 2001

I knew a college football player who used to say "I didnít hit him, I just leaned on him a little bit." If you are an artisan or worker improving property, you can lean on someone another way. You can file a lien to secure payment for work performed for a customer.

The word lien derives from French and means a charge upon real or personal property to secure payment. A mortgage, for example, is a form of lien on your house to secure payment of the mortgage debt.

Mechanics Ė the companies or people who fix your car or renovate your house or business Ė are also able to file a special kind of lien on your property, call a Mechanicís Lien. Such liens provide the Mechanic a measure of protection if the property owner or a general contractor refuses to pay after a job is completed.

Letís say that Lugnut Homes, contracts with All-A-Glow, Inc. (AAG), to build a subdivision of homes. AAG in turn subcontracts with Nerd & Ferd Electrically, Inc. (N&F) to install the electrical systems.

Unbeknownst to N&F, AAG is failing and conveniently forgets to mention that N&F may not be paid for installing the electrical system at the home being built for F-Strated.

Under Virginia law, N&F has 90 days after the last services are performed at F-Stratedís home to file a Mechanicís Lien if N&F is not paid by AAG. N&F learns within that 90-day period that the President of AAG is vacationing, permanently, in Antigua with the funds received from F-Strated and other home-owners, so N&F files its Mechanicís Lien. Then what happens?

After F-Strated stops seeing red, he learns that this thing, the Mechanicís Lien, is a cloud on his title. A lien on the property would probably preclude a mortgage or sale of the property by F-Strated from taking place.

As he views it, those blood-suckers at N&F, who dealt with the crooked AAG, have now filed a public document that affects the title to F-Stratedís new home. This situation, as viewed by F-Strated, is a rotten, dirty mess designed to protect incompetent boobs like N&F who deal with crooks like AAG.

As might be expected, N&F has a substantially different perspective. N&F knows that it has completed the job, using its own materials and skilled workers, and now wants to get paid.

To prevent situations such as N&Fís, I urge Mechanics who are clients of my law firm to state in bids that they routinely file Mechanicsí Liens if they have not been paid within 45 days of the last day services are performed. By having a stated policy and following it, a Builder or Mechanic appears more structured and is more likely to be paid.

I have heard numerous clients lament the fact that they could have filed, but did not file, a Mechanicís Lien in time. Waiting beyond the 90-day filing period to assert a claim against a property owner does not prevent the Builder or Mechanic from collecting through normal collection channels, but such collection measures do not afford the Mechanic the same protection.

After reading about the N&F situation, some readers may believe that Mechanicsí Liens are a plague on innocent property owners. This is not true.

Most Mechanics in the building trades think that, if they file liens, they will not get any more jobs from builders or property owners. It appears that too many Mechanics fail to file such liens because of the desire to please builders and property owners. Other reasons include lethargy and lax record keeping.

Drawing the balance between appearing to be a "hard nosed" Builder or Mechanic who routinely files Mechanicsí Liens and the erstwhile naive artisan who routinely fails to use available remedies and does not get paid, is not all that difficult.

A consideration for the Mechanic is that when payment or an agreement is reached, the Lien can be released. Another is that owners can protect themselves by requiring that any liens be waived prior to making payments. However, that is another matter, too lengthy to discuss here.

One thing is apparent ó if the Mechanic does not lien at the right time, he may have to take the fall.

Copyright 2001

Published by the law firm of Newland & Associates, PLC
9835 Business Way
Manassas, VA 20110
Call us at (703) 330-0000 for a full range of business law and tax-related services.

While designed to be accurate, this publication is not intended to constitute the rendering of legal, accounting, or other professional services or to serve as a substitute for such services.

Redistribution or other commercial use of the material contained in Newland's Business Notes is expressly prohibited without the written permission of Newland & Associates, PLC.

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