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.
