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Friday, April 3, 2009

New Mechanic's Lien Statute: Cure of Just Another Hurdle

Several major title insurers refused to continue writing title insurance in Virginia, citing loses from undisclosed mechanic's lien claims. Since the Virginia Code permits notification of a claim even after settlement, many residential properties would be conveyed prior to notification, which caused problems for the new owners and their title insurers.

With the participation of the title companies the Virginia legislature has amended the mechanic's lien statute, which substantially alters the notification procedures relative to one and two-family residential dwellings. A construction project may have a "mechanic's lien agent" for receipt of notices from potential mechanic's lien claimants. The agent will be identified in the building permit, which must be "conspicuously and continuously posted" on the property. If no agent is designated, the normal rules apply.

A claimant must notify the agent in writing within thirty days of the time he first furnishes any work or materials. An agent may be designated after construction begins, in which case the claimant must provide notice within thirty days after such permit is issued. Notice must be sent by registered or certified mail or by physical delivery. The required contents of the notice are set out in Virginia Code Section 43-4.01(B).

Only title insurance companies, banking institutions, and attorneys may perform the duties of a mechanic's lien agent. Builders who fail to disclose at settlement all claims for mechanic's liens will face criminal sanctions.

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This brief article is only meant to provide a very broad overview and cannot be relied upon as a substitute for legal advise. Contact Gross & Romanick if you need information about your specific situation.