Virginia Supreme Court Offers New Insight Into The "150-Day Rule" In Mechanic's Lien Cases

In a mechanic's lien case handed down late last week, the Virginia Supreme Court has stated that the 150-day rule does not have a unitary application for all contractors and subcontractors on a job. In Glasser & Glasser, PLC v. Jack Bays, Inc., No. 120287 (Va. Feb. 28, 2013), a case involving multiple parties and multiple claims, the lenders, in defending against the lien claims, contended that the mechanic's lien claims were barred by the 150-day rule.

A portion of Virginia Code Section 43-4 states that "the lien claimant may file any number of memoranda but no memoranda…shall include sums 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." This 150-day rule has been in effect for many years.

In this case, the lenders argued that the calculation of the 150 day period provided for in Section 43-4 derived from a single date applicable to all lien claimants on the job, rather than separate time periods determined for each lien claimant. The Supreme Court disagreed, however, noting that the statute uses the words "the lien claimant" in the singular and that, because each contractor or supplier on the job was potentially a separate lien claimant, the 150-day period could not be determined based on a single unitary date applicable to all contractors and suppliers on a project.

The lenders also argued that because value was added to the project by subcontractors of Jack Bays after the September 28, 2007 "end date" (the date from which Jack Bays "looked back" in terms of how far back it included work in its lien claim in order to comply with the 150-day rule), Jack Bays used the wrong end date and that its lien violated the 150-day rule and was therefore unenforceable. However, the lenders failed to show that the trial court's decision on that point in favor of Jack Bays was plainly wrong or without evidence to support it. To the contrary, the evidence cited in the Court's decision clearly showed that, while some subcontractors may have added value after that end date, Jack Bays did not add value.

The Court also rejected the lenders' argument that because Jack Bays' billings included amounts billed to Jack Bays by a subcontractor for labor and materials performed and furnished more than 150 days prior to the end date, the Jack Bays lien claim violated the 150-day rule and should be unenforceable. However, the subcontractor's work was performed for Jack Bays on a cost-plus basis, while Jack Bays' contract with the owner was a stipulated sum agreement. Because the latter was based on the value of the work performed in relation to the overall project and not on costs incurred from subcontractors, the Commissioner appointed by the Circuit Court to hear the evidence found that Jack Bays had not included sums for labor and materials furnished more than 150 days prior to the end date. Again, because of the extensive testimony at the trial level, the Supreme Court found that the lower court's decision was not plainly wrong nor was it without evidence to support it.

Even with this new insight, a lien claimant should be extremely cautious in determining the "end date" of its work and determining what labor and materials should be included in a mechanic's lien claim in order to file a valid and enforceable lien claim that complies with the 150-day rule.

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