VBA Journal

WIN 2014

The VBA Journal is the official publication of The Virginia Bar Association.

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WINTER 2014 - 2015 • 29 W I N T E R 2 0 1 4 - 2 0 1 5 • 2 9 M echanic's liens are created by statute and are strictly construed by Virginia courts. 1 As such, courts often rule that liens are invalid because of technical defciencies and inaccuracies in the lien form. 2 Lien claimants have a number of statutory deadlines and re- quirements that they must strictly meet to have an enforce- able lien. For example, lien claimants must record their lien memorandum "not later than 90 days from the last day of the month in which they last perform labor or furnish mate- rials, and in no event later than 90 days from the time such building, structure or railroad is completed, or the work thereon otherwise terminated." 3 In addition, no lien memorandum can include amounts for labor or materials furnished more than 150 days before the last day on which the claimant last performed work or provided materials preceding the fling of such memoran- dum. 4 After recording the lien, lien claimants must fle suit to enforce the lien within "six months from the time when the memorandum of lien was recorded or after 60 days from the time the building, structure or railroad was completed or the work thereon otherwise terminated, whichever time shall last occur." 5 Te fling of bankruptcy by an owner, general contrac- tor or subcontractor can have a material efect on some of these deadlines and on the rights, remedies and deadlines of potential mechanic's lien claimants. Tis article outlines the potential impact of a bankruptcy fling on diferent parties' mechanic's lien rights and remedies. The Automatic Stay When a bankruptcy petition is fled, the automatic stay under 11 U.S.C. § 362 (the "Automatic Stay") goes into efect and stays "any act to create, perfect or enforce any lien against property of the estate." 6 Creditors who will- fully violate the automatic stay can face stif penalties, expensive fnes and sanctions from the court. In Virginia, the recording of the mechanic's lien memorandum does not violate the automatic stay; however, the automatic stay precludes lien claimants from fling a suit to enforce a mechanic's lien. 7 Importantly, 11 U.S.C. § 108(c) tolls the six-month statute of limitations on a suit to enforce a mechanic's lien until 30 days after the automatic stay is terminated. 8 THE EFFECT OF BANKRUPTCY ON MECHANIC'S LIEN RIGHTS IN VIRGINIA CONSTRUCTION LAW BY W. ALEXANDER BURNETT AND ANDREW O. MATHEWS

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