Virginia lawmakers are considering a measure that would
require contractors to provide written notice to homeowners 30
days in advance of filing a lien on a property against unpaid
bills for work performed.
House Bill 1265, proposed by Representative Harry R.
("Bob") Purkey (Rebublican of Virginia Beach), calls for
contractors to send notice of intent to lien by registered or
certified letter to the address on the building permit. The
bill passed the Virginia House by a vote of 90 to 7 on February
14, and now proceeds to the state Senate.
As originally written, the bill would have required a 60-day
advance notice of lien. As Virginia attorney Chris Hill pointed
out in a blog post, the notice provision puts contractors in a
new time bind when trying to collect payment for work done
("
A Cloud on the Horizon for Mechanic's Lien Claimants in
Virginia?" by Christopher G. Hill). Notes Hill, "Given that
many construction contract payment terms require payment within
30 days, the amendment would force contractors and
subcontractors to perform title searches, hire attorneys, and
file notices of intent to lien on even the smoothest of
projects, potentially prior to their entitlement to payment, in
order to avoid running up against the 90-day recording
deadline."
As in many other states,
Virginia's lien law is "picky" about details, Hill observes
(see
"
Quick Primer on Virginia Mechanic's Lien Law," by
Christopher G. Hill). Liens can only be filed for work that was
performed within 150 days before the date of the lien; but the
deadline for filing the lien itself is 90 days after the
completion of the last work. Add a requirement for advance
notice into the mix, and the time window for action to collect
unpaid money shrinks to a challenging slot. The proposal, says
Hill, would "turn a tool usually used as a last resort into one
that, should the amendment pass, would require routine notices
of intent to lien prior to any chance for negotiation."
Accordingly, Hill advises contractors to be careful and
diligent about billing and bookkeeping: "The simplest and most
effective way to avoid losing valuable receivables is to apply
receipts to the oldest invoice first, thus pushing the
receivables closer to the end of the project. Notify any
mechanic's lien agent listed on the building permit and send
collection letters at 30, 60 and 90 days from the time you are
owed the money. The mechanic's lien statute requires that you
file any memorandum of lien within 90 days of the last day of
the last month in which you performed work or provided
materials. Having a 30-60-90 day system will act as a set of
reminders to keep you from missing this important
deadline."
While lien laws and the rights of the parties to building or
remodeling contracts vary from state to state, Hill's basic
advice is valid for contractors in any jurisdiction. In a
business that lives or dies on cash flow, a diligent approach
to billing is one of the keys to success
€” and knowing when and how to pull
the trigger on collections action can be a critical business
skill.