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Problem SOLVING Is Our Business
1. OVERVIEW MECHANIC’S LIEN LAW
West Virginia law provides statutory protection to all parties that provide labor, equipment or materials for the improvement of real property to secure the payment of such contract price or other compensation therefor.
The statutory provisions regarding such liens have been codified as West Virginia Code §38-2-1, et seq. These statutes have been declared remedial, and are to be liberally construed in order to serve their enacted purpose.
a. Does West Virginia law require any notice or filing prior to the performance of work?
West Virginia law does not require any notice or filing prior to the performance of the work by a contractor, subcontractor, or materialman furnishing supplies to an owner; materialmen furnishing supplies to contractor or subcontractor; mechanic or laborer working for an owner; or a mechanic or laborer working for a contractor or subcontractor. The lien is created automatically. All parties should thoroughly understand their specific rights and obligations as set forth in the statutes in order to protect their lien rights.
W.Va. Code 38-2-1 through 38-2-6.
b. What is the time frame for filing a claim of lien?
Contractors must perfect and preserve their lien within 100 days from completion of the contract, or last supplying materials or performing work on the project.
Subcontractors must perfect and preserve their lien within 100 days from completion of the subcontract, or last supplying materials or performing work on the project.
Materialmen furnishing supplies to owner must perfect and preserve their lien within 100 days from the furnishing of the last of the materials, machinery or other supplies and equipment.
Mechanics or laborers working for an owner must perfect and preserve their lien within 100 days from the date of the performing of the last work and labor.
Materialmen furnishing supplies to a contractor or subcontractor must perfect and preserve their lien within 100 days from the date of the furnishing of the last of the materials, machinery, or other equipment or supplies.
Mechanics or laborers working for a contractor or subcontractors must perfect or preserve their lien within 100 days from the date of the performing of the last of the work and labor.
W.Va. Code 38-2-7.
c. Does West Virginia law impose mandatory notice requirements?
Yes. Subcontractors must provide the owner with a notice of lien within 75 days after the completion of the subcontract. Service of the notice must be by any of the methods provided by law for the service of a legal notice or summons.
d. What is the deadline for filing suit to initiate a lien foreclosure action?
A suit to enforce a mechanic’s lien authorized by W.Va. Law must be brought within 6 months of recording the notice of lien in the Clerk’s office.
W.Va. Code 38-2-34.
e. Does West Virginia law impose special requirements or limitations on lower tier subcontractors or supplies?
Yes. Subcontractors not in privity of contract with an owner must perfect and preserve their lien within 75 days of last performing work or providing materials.
W.Va. Code 38-2-7.
f. When is a contractor or supplier deemed to have last performed work or furnished material so as to trigger the start of the lien filing period?
As to a contractor, completion of the contract; as to a subcontractor, completion of the subcontract; as to a materialman, the last date materials, machinery or other supplies and equipment are provided; as to a mechanic or laborer, the last date of the performing of the last of the work or labor.
W.Va. Code 38-2-6.
g. Does West Virginia provide a procedure for bonding or otherwise removing the claim of lien?
Yes. An owner or other against whom a lien is claimed may apply to court to have the lien released by depositing with the court cash equal to the amount of the lien, plus interest likely to accrue on the lien.
W.Va. Code 38-2-36.
h. What construction project participants are not protected by the lien law?
It appears to the author that most participants in the construction process are protected by the lien law; including contractors, subcontractors, materialmen, mechanics, laborers, architects, surveyors, engineers and landscape architects. The protection, however extends to second tier subcontractors and materialmen; entities further removed from the owner are not protected. If a particular participant cannot demonstrate the criteria to meet any of the statutory classes created by §38-2-1-6A, protection may not be afforded.
W.Va. Code 38-2-1 though 6.
2. PROPERTY SUBJECT TO LIEN CLAIMS
In West Virginia, the lien interest is upon the building or other structure and the real property whereupon the building or other structure stands or may have been removed.
A leasehold estate, being an interest in land, is subject to a lien under this section. However, a party may not assert a mechanic’s lien against the property interest of the lessor in a leased premises where the terms of the lease simply authorize the lessee to make improvements to the leased premises, although the improvements become the property of the lessor upon termination of the lease.
Liens created pursuant to W.Va. 38-2-1 are limited to the lot upon which the building or structure is erected. It has been held that in a multi-lot residential development, the lien extends no further than the boundaries of the lot where the building stands, although the owner may own adjacent parcels.
Public property has been held exempt from mechanic’s liens, such liens being contrary to public policy.
3. PARTIES ENTITLED TO PROTECTION
West Virginia law provides protection to: contractors in privity of contract with the owner of the structure and/or real property; subcontractors in privity of contract with the contractor; furnishers of materials, machinery or other equipment or supplies necessary to the completion of such building, structure or improvement to the owner, his contractor or his subcontractor; and to workmen, artisans, mechanics, laborers or providers of other services to the owner, his contractor or subcontractor. Architects, surveyors, engineers and landscape architects are also provided protection by these statutes.
Only those persons enumerated in the statutory framework are accorded the protection of the lien provided. It has been held that these sections (38-2-1 though 38-2-6) provide liens only to general contractors, subcontractors, and those contracting with them. Beyond those three classes, the statute affords no protection.
4. NOTICE REQUIREMENTS
No formal notice of a lien is required prior to or during the performance of the work, or during the provision of materials or equipment. However, the lien created by the statutory framework must be perfected and preserved within the time period set forth in the statutes.
As to contractors, materialmen and laborers in privity of contract with the owners, the lien must be perfected and preserved within 100 days of the completion of the work; the date of last providing of machinery, equipment or supplies; or the date of last performance of the work and labor.
As to subcontractors, materialmen and laborers in privity of contract
with the contractor or subcontractors, the lien must be perfected
and preserved within 100 days of the date of the completion of
the subcontract; the date of last providing of machinery, equipment
or supplies, or the date of last performance of the work and labor.
Subcontractors must also provide notice to the owner within 100
days of completion of work. West Virginia Code §38-2-9 (amended
March 9, 2006, effective June 7, 2006). Notice to the owner must
be provided in the same manner as legal notice or summons is served.
5. FILING REQUIREMENTS
Notice of a mechanic’s lien must be filed in accordance with the applicable code provisions. Generally speaking, a lien must be recorded in the Office of the Clerk of the County Court (County Commission) where the property is located.
Form of the notice must substantially comply with the forms provided in the statutes.
6. CLAIM OF LIEN REQUIREMENTS
The West Virginia Code sets forth the requirements for a claim of lien, by providing a simple and quick method of securing a lien for work done and materials furnished. A claim of lien must substantially comply with the forms provided in the statutes.
It has been held that proper notice must be filed with the Clerk, who is required to “record” the notice. The filing of the notice with the Clerk for purposes of recordation has been held to be tantamount to its recordation.
While it has been held that “substantial compliance” is sufficient to satisfy the statute, counsel places himself at peril by failing to make advantageous use of the statutory forms.
The name of the owner of the property must be given, if known. Also, if the lienor is not in privity of contract with the owner, notice of the lien must be served upon the owner of the property.
The notice of lien must also describe the structures, buildings and improvements with sufficient definiteness that they may be readily identified. It has been held that a description of the improvement and a description of the property upon which the improvements are located are necessary in the lien notice. Failure to describe the nature of the improvement has been determined to be insufficient to perfect the contractor’s right to a lien.
Also, the oath as set forth in the forms has been held to be essential to the creation of the lien. In order to be effectuated, the oath must be in writing as a part of the notice filed for record.
7. PERFECTING A CLAIM OF LIEN
See, Notice Requirements and Filing Requirements, infra.
8. LIEN CLAIM FORECLOSURE
A properly noticed and filed mechanic’s lien must be acted upon within six months to remain valid and enforceable. The lien holder must file suit to enforce the lien within six months of the filing of notice in the clerk’s office. However, a suit filed by another lienholder on the same property inures to the benefit of all other lienors, who may intervene in the suit in order to enforce their liens. It has been held that the bringing of suit is necessary to preserve the lien.
The suit should allege all facts necessary to show the existence of a valid lien including:
the existence of the contract and its terms;
the work and material was furnished in accordance with the contract;
the filing of the account with the proper officer within the time required by law;
a description of the property against which the lien is claimed;
the name of the owner of the property at the time the work and/or materials were furnished; that the suit was brought within the time required by law;
the existence of the debt at the time suit was filed; and
when the suit is by a subcontractor that the labor and/or material furnished was in pursuance of the contract with such contractor.
In a suit to enforce a lien, if the owner denies the propriety of the lien, the allegations must be sustained by proof in order to prevail.
If a lien holder prevails in the suit, the court is required to order sale of the property on which the liens are established, or a portion of the property sufficient to satisfy such claims. The court may also issue a personal judgment (decree) against any party against whom the lien may be established.
If it is determined that a lien was invalid, such decree is not res judicata in an action for breach of contract. In other words, the mechanism for lien enforcement is cumulative rather than exclusive.
As to obtaining of a personal judgment, there must be privity of contract or an assumption of liability by the individual sought to be held liable. The mere relation of the parties to the construction project, without more, is an insufficient basis for the assertion of personal liability.
Regarding the sale of the property, it is first necessary to determine the amount of the liens and their priorities, prior to the sale. Further, it has been held error to order more of the property sold than necessary to satisfy the amount of the lien.
9. PROCEDURES FOR DISCHARGING LIEN
When a lien is fully paid after notice has been filed in Clerk’s office, such creditor is required to have the clerk enter a discharge of such lien, or execute a release of such lien, which is then recorded.
If a party refuses to release or discharge a satisfied lien, the circuit court may order a release of the lien after providing notice to the refusing party, and there being no good cause shown against the release.
10. LIEN WAIVERS AND AFFIDAVITS
There are two basic types of lien waiver provisions which may by presented in a construction contract. The first and most onerous is the “no liens” contract. This type of contract waives the contractor’s right to file a mechanic’s lien. It is undetermined whether a lien waiver of this type could be construed against a party lacking privity with the contract purporting to waive these rights.
The second is a partial lien waiver, executed at the time partial payment is made. This is common practice in the construction trades as the Code specifically provides that payment to the contractor by the owner is not a defense to any subcontractor, laborer or materialman’s lien.
11. LIEN PRIORITY ISSUES
Once a mechanic’s lien has been perfected, it attaches as of the first date that such labor, materials, machinery or equipment was furnished, and has priority over any other lien secured by a deed of trust, or otherwise which is created after such date. A mechanic’s lien is subordinate to any other lien created by a deed of trust or otherwise which is recorded or otherwise perfected prior to the first date labor, materials, machinery or equipment was furnished.
As among mechanic’s lienors only; laborers, artisans, mechanics, workmen and materialmen have first liens and when perfected and preserved take precedence over any lien of a contractor or subcontractor indebted to them to the extent of the amount of the lien of such contractor or subcontractor. The lien of a subcontractor takes precedence over the contractor’s lien to the extent of the amount of the lien of such contractor. Every assignment or proceeding in attachment of a contract between an owner and contractor or contractor or subcontractor is subordinate to the liens of all subcontractors, laborers, workmen, artisans & materialmen who perfect and preserve their liens.
All such mechanic’s lien holders are of equal dignity without priority among themselves except as provided by statute. It has been held that in determining priority among creditors, all mechanic’s liens attach at the date of the first provision of work or materials.
As the mechanic’s lien attaches when the labor has begun or the materials have begun to be furnished, the lien takes precedence over all other subsequent liens, created by deed of trust or otherwise. However, the lien will only attach to such title as the person who contracted for the work and materials had at the time the lien attached, and does not attach to a title subsequently taken.
12. OWNER DEFENSES AND REMEDIES
Payment by an owner to a contractor or subcontractor does not impair or affect the lien of a subcontractor, laborer, or materialmen to claim a lien on the property. It has been held that a partial payment by an owner to a contractor for part or all of the contract price constitutes no defense against a lien, which is incipient upon the performance of work or furnishing of labor prior to payment.
The statutes allow an owner to limit his liability by recording with the Clerk the contract and a bond equal to the contract price. The requirements of this section are not compulsory, however if the owner wishes to limit the amount the property may be made liable to the amount of the contract, the contract and bond must be recorded in accordance with the statutes.
In order for a mechanic’s lienor to recover under the bond, the lienor must comply with the mechanic’s lien law. Where the claimant has failed to provide proper notice of his lien to the owner, he is not entitled to recover under the bond.
If an owner fails to record his contract and bond, then the owner may be made liable for the full and true value of all work, labor and materials even if the amount exceeds the original contract price.
In a suit to enforce a mechanic’s lien, the owner may raise as a defense the value of the work performed, as well as other common-law defenses. It has been held that a suit to enforce a mechanic’s lien is an “in personam” action rather than an “in rem” action.”
13. LENDER ISSUES
As discussed previously, mechanic’s liens take priority over all other subsequent liens created by deed of trust or otherwise. It has been held that a purchaser of a premises upon which buildings are in the process of erection is required to make inquiry and take notice of any mechanic’s lien rights that have attached prior to purchase.
14. COSTS INCLUDABLE IN LIEN CLAIMS
Generally, the amount of the lien claim is equal to the contract price, value of the work performed, or value of the material or equipment provided. Attorneys fees are not recoverable, in accordance with the American rule, whereby each party is responsible for their own attorney’s fees. It has been held that attorney’s fees are not allowed as damages in typical mechanic’s lien cases.
15. SPECIAL REQUIREMENTS OF LOWER TIER SUBCONTRACTORS
Parties not in privity of contract with the owner of the property, structure or improvement must provide separate notice to the owner in addition to the notice required to be recorded with the clerk. There are separate forms for notice to the owner and notice filed with the Clerk.
There also are separate time requirements to provide notice to the owner, which is within 75 days from the completion of work or last provision of materials. Notice to the owner must be provided in the same manner as legal notice or summons is served. It has been held that failure to properly serve notice on the owner is fatal to the lien.
Parties not in privity of contract with the owner may provide preliminary or advance notice to the owner prior to providing work or materials stating that the party will look to the owner for payment if unpaid by the party with whom he has contracted such preliminary notice relieves the party from providing separate notice to the owner of his claim of lien. Such preliminary notice is optional, and failure to do so does not impair a lien if otherwise perfected and preserved.
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