Can I Prevent Subcontractor Liens By Posting A Notice of Contract on the Job Site?
Full Question:
Answer:
Typically, if a person hasn't been fully paid, a conditional release form is used. The answer will depend on the type of release form you signed and whether it was a waiver and/or release. I suggest consulting a local attorney who can review all the facts and documents involved.
During the entire work of construction, the owner may obtain lien releases or waivers of lien from each subcontractor and material supplier. Without these waivers or releases the real estate is subject to liens of all the subcontractors, even if the general contractor, though paid in full, fails to pay the subcontractors. Lien claimants who are contractors or subcontractors are protected under this legal doctrine because all their materials and labor are "buried" in the real estate, having become part of it. Unlike mortgage liens, however, the liens of these claimants cannot force a foreclosure. People having a home built can require contractors and subcontractors to provide lien releases or waivers as part of a written project contract. The contract can mandate a lien release be issued before the contractor receives payment for services, in which case it is called a lien waiver. If payments are made to a general contractor in stages for work performed by subcontractors, the homeowner can obtain lien releases from the various subcontractors as their part of the project is completed. Sometimes, construction loan documents drafted by a bank may indicate that the bank will obtain lien releases, but the bank may do this solely for its own benefit. Therefore, the property owner's requiring lien releases should be clearly stated and independent of any agreement made by or with the bank.
Although the terms lien waiver and lien release seem to be interchangeable, a release demonstrates completion and payment, so as to prove any claim has been satisfied, while a waiver demonstrates a relinquishment of a known right. Waivers are typically obtained prior to commencement of any work, whereas releases are subsequently obtained. Waivers of lien must be in writing, give a sufficient description of the real estate, and be signed by the one with authority to file or claim a lien. No payment needs to be made in advance if the subcontractor agrees to release the land from the lien and rely only on the credit of the owner or general contractor for payment of the debt.
A lien waiver is not a general release of claims; it only waives lien rights. A person signing a lien waiver may still have a claim (or multiple claims) against the person with whom it contracted. Therefore, owners may want their contractor to execute a waiver and release of all claims through the date of each pay application in addition to executing a lien waiver.
You are giving up the right to later file a lien only for the amount of the payment. The lien waiver will not necessarily prevent claims for contested change orders, retention, or breach of contract damages (for example — delay damages, impeded productivity, and other consequential damages).
-Interim Lien Waiver. This is used for progress draws or a partial payment. It waives lien rights through a certain date (and not future unpaid bills) and only to the extent of the payment. Many general contractors and owners require these forms to be signed by the person receiving payment before a check is issued.
-An Unconditional Lien Waiver is used after final payment and means just that: fully and finally releases all future lien rights with no later recourse to file a mechanic's lien. It should be signed only if you are assured you have been paid and are satisfied with the amount received.
-A conditional lien waiver is one that you use when submitting a progress invoice on a project, whether it's the first progress payment or the last. It is conditioned upon receipt of payment, and therefore will typically use the words "upon receipt". An unconditional lien waiver is used when payment has been received and cleared the account. Such a lien waiver will typically state that payment has been received.
When a lien waiver takes effect, the right to file a mechanic lien is given up. However, the lien waiver doesn't prevent a contractor from other remedies, such as a claim for breach of contract, etc.
Please see the following VA statutes:
§ 43-3. Lien for work done and materials furnished;
waiver of right to file or enforce lien. —
A. All persons performing labor or furnishing materials
of the value of $50 or more, including the reasonable
rental or use value of equipment, for the construction,
removal, repair or improvement of any building or structure
permanently annexed to the freehold, and all persons
performing any labor or furnishing materials of like value
for the construction of any railroad, shall have a lien, if
perfected as hereinafter provided, upon such building or
structure, and so much land therewith as shall be necessary
for the convenient use and enjoyment thereof, and upon such
railroad and franchises for the work done and materials
furnished, subject to the provisions of § 43-20. But when
the claim is for repairs or improvements to existing
structures only, no lien shall attach to the property
repaired or improved unless such repairs or improvements
were ordered or authorized by the owner, or his agent.
If the building or structure being constructed, removed or
repaired is part of a condominium as defined in § 55-79.41
or under the Horizontal Property Act (§§ 55-79.1 through
55-79.38), any person providing labor or furnishing
material to one or more units or limited common elements
within the condominium pursuant to a single contract may
perfect a single lien encumbering the one or more units
which are the subject of the contract or to which those
limited common elements pertain, and for which payment has
not been made. All persons providing labor or furnishing
materials for the common elements pertaining to all the
units may perfect a single lien encumbering all such
condominium units. Whenever a lien has been or may be
perfected encumbering two or more units, the proportionate
amount of the indebtedness attributable to each unit shall
be the ratio that the percentage liability for common
expenses appertaining to that unit computed pursuant to
subsection D of § 55-79.83 bears to the total percentage
liabilities for all units which are encumbered by the lien.
The lien claimant shall release from a perfected lien an
encumbered unit upon request of the unit owner as provided
in subsection B of § 55-79.46 upon receipt of payment equal
to that portion of the indebtedness evidenced by the lien
attributable to such unit determined as herein provided. In
the event the lien is not perfected, the lien claimant
shall upon request of any interested party execute lien
releases for one or more units upon receipt of payment
equal to that portion of the indebtedness attributable to
such unit or units determined as herein provided but no
such release shall preclude the lien claimant from
perfecting a single lien against the unreleased unit or
units for the remaining portion of the indebtedness.
B. Any person providing labor or materials for site
development improvements or for streets, stormwater
facilities, sanitary sewers or water lines for the purpose
of providing access or service to the individual lots in a
development or condominium units as defined in § 55-79.41
or under the Horizontal Property Act (§§ 55-79.1 through
55-79.38) shall have a lien on each individual lot in the
development for that fractional part of the total cost of
such labor or materials as is obtained by using "one" as
the numerator and the number of lots as the denominator and
in the case of a condominium on each individual unit in an
amount computed by reference to the liability of that unit
for common expenses appertaining to that condominium
pursuant to subsection D of § 55-79.83; provided, however,
no such lien shall be valid as to any lot or condominium
unit unless the person providing such labor or materials
shall, prior to the sale of such lot or condominium unit,
file with the clerk of the circuit court of the
jurisdiction in which such land lies a document setting
forth a full disclosure of the nature of the lien to be
claimed, the amount claimed against each lot or condominium
unit and a description of the development or condominium,
and shall, thereafter, comply with all other applicable
provisions of this chapter. "Site development
improvements" means improvements which are provided for
the development, such as project site grading, rather than
for an individual lot.
Nothing contained herein shall be construed to prevent the
filing of a mechanic's lien under the provisions of
subsection A.
C. Any right to file or enforce any mechanic's lien granted
hereunder may be waived in whole or in part at any time by
any person entitled to such lien.
§ 43-4. Perfection of lien by general contractor;
recordation and notice. —
A general contractor, or any other lien claimant
under §§ 43-7 and 43-9, in order to perfect the lien given
by § 43-3, provided such lien has not been barred by
§ 43-4.01 C, shall file a memorandum of lien at any time
after the work is commenced or material furnished, but not
later than 90 days from the last day of the month in which
he last performs labor or furnishes material, and in no
event later than 90 days from the time such building,
structure, or railroad is completed, or the work thereon
otherwise terminated. The memorandum shall be filed in the
clerk's office in the county or city in which the building,
structure or railroad, or any part thereof is located. The
memorandum shall show the names of the owner of the
property sought to be charged, and of the claimant of the
lien, the amount and consideration of his claim, and the
time or times when the same is or will be due and payable,
verified by the path of the claimant, or his agent,
including a statement declaring his intention to claim the
benefit of the lien, and giving a brief description of the
property on which he claims a lien. It shall be the duty of
the clerk in whose office the memorandum is filed to record
and index the same as provided in § 43-4.1, in the name of
the claimant of the lien and of the owner of the property.
From the time of such recording and indexing all persons
shall be deemed to have notice thereof. A lien claimant who
is a general contractor, and not lien claimants
under §§ 43-7 and 43-9, also shall file along with the
memorandum of lien, a certification of mailing of a copy of
the memorandum of lien on the owner of the property at the
owner's last known address. The cost of recording the
memorandum shall be taxed against the person found liable
in any judgment or decree enforcing such lien. The lien
claimant may file any number of memoranda but no memorandum
filed pursuant to this chapter shall include sums due for
labor or materials furnished more than 150 days prior to
the last day on which labor was performed or material
furnished to the job preceding the filing of such
memorandum. However, any memorandum may include (i) sums
withheld as retainages with respect to labor performed or
materials furnished at any time before it is filed, but not
to exceed 10 percent of the total contract price and (ii)
sums which are not yet due because the party with whom the
lien claimant contracted has not yet received such funds
from the owner or another third party. The time limitations
set forth herein shall apply to all labor performed or
materials furnished on construction commenced on or after
July 1, 1980.
