WEST VIRGINIA MECHANIC S LIEN LAW 2017 Go to: West Virginia Mechanics Lien Forms More Info: www.nationallienlaw.com Section Contents Pre-lien Notice(s) Name of Notice Who Must Use This Notice When How to Serve Verified or notarized? Section Contents West Virginia Mechanic s Lien Who is Entitled to a Lien? When to File/Record Where to File/Record How to Serve Amount of Lien Property Subject to the Lien Furnishing Information Verified or Notarized Priorities Lien Release Bond Miscellaneous Issues Page 1 of 11
Section Contents Lawsuit to Foreclose Lien Introduction When Where to File Arbitration Need a Lawyer? General Notes Be Careful: The courts consider a mechanic s lien to be a privilege and not a right. You receive its benefits only if you strictly adhere to the state law requirements. Bottom line: miss a deadline by one day and you have lost it. Unlike other areas of the law where you can argue equities, find technical exceptions, and lawful excuses, there is no forgiveness here. In this case, knowledge is not only power, it s a necessity. In West Virginia ou will be writing down dates for at least four documents: a) Notice to Owner; b) Notice of Mechanic s Lien; c) Mechanic s Lien; and d) lawsuit to foreclose the mechanic s lien. Write down all the deadlines in your calendar. Use a highlighter or red pen. If you have a staff, use a fail safe system by doubling up and putting it in their calendar also. This reminds you twice. The first calendar entry should be two weeks before the due date as a preliminary reminder. On the second calendar entry, do a white lie to yourself. Put the due date as one week before it is actually due as insurance in case you get busy or need legal advice. Time is money. You will waste a lot of valuable time running around and doing it at the last moment, as opposed to doing it early. PRELIEN NOTICE-OPTIONAL West Virginia requires a Notice be sent out before the mechanic s lien is filed/recorded. The basic information on this Notice is as follows: Name of Notice: Notice to Owner Page 2 of 11
Who May Use this Notice: All contractors, subcontractors, laborers, and material/equipment suppliers who do not have a direct contract with the owner or the owner s agent. For example, a general contractor with a direct verbal or written contract with the owner who acts as the prime would not give the Notice. This traditionally means subcontractors as well as material and equipment suppliers. This West Virginia Notice is entirely optional. It is served upon the owner before the first day on which you furnish labor and materials. The notice informs the owner that if you are not paid, you will look to the owner for payment. If you give such a notice, the owner can require you to furnish a written account within 60 days of last performing labor and materials which sets forth the details of what you have provided and what is owed. However, this is only required if written demand is made by the owner. In many ways, it is beneficial to send the owner such an accounting it means the owner is seriously reviewing his or her records and wants to know how much is unpaid. This could very well be a preamble to your getting paid. Even if you do not give such an accounting, you can still file your mechanic s lien. But, the bottom line is: if the Notice is not required, why should I serve it? It is recommended for a number of reasons. Many owners do not know the existence of subs, sub-subs, and suppliers. If the owner knows of your existence, there is a better chance of your being paid. Even more importantly, the owner might well pay you directly to make sure there are no liens. Especially if he or she knows you are unpaid and could be filing a lien. The owner could also make out joint checks to you and the general or otherwise insist on proof that you have been paid before making payment to the general. Finally, the owner may insist of proof you have been paid pursuant to either a Partial or Final Lien Waiver that you are asked to sign. When: See Time Deadlines table. How to Serve: The West Virginia statutes do not specify how service is to be made. The Notice of Mechanic s Lien (another form described below) is required to be served by a process server just like serving a lawsuit. Some attorney s recommend that form of service, but it appears to be an overkill and may unduly alarm the owner imagine being formally served by a registered Page 3 of 11
process server at the beginning of the job. For this reason, it is suggested the service be made by certified mail, return receipt requested. WEST VIRGINIA MECHANICS LIENS Who is Entitled to a Lien: A West Virginia mechanic s lien is primarily for general contractors, subcontractors, laborers (employees of a general contractor or subcontractor under 38-2-13)), as well as material/equipment suppliers. But it also covers architects, surveyors, engineers, and landscape architects. West Virginia has strict rules as to who may not file a lien. Only contractors and suppliers within the first 3 tiers of the job can file a lien. The first tier are general contractors who have a direct contract with the owner. The second tier are subcontractors and suppliers who have a contract with the prime contractor. The third tier are subcontractors and suppliers who have a direct contract with a subcontractor. In other words, a sub-subcontractor would have a lien, but not a sub-sub-subcontractor, or material suppliers having a contract with a sub-subcontractor. A mechanics lien in West Virginia is called a Notice of Mechanic s Lien. There are three separate forms, including one for a general contractor, subcontractor, and material supplier of equipment or materials. When to File/ Record: Up until recently, there had been much confusion as to the time periods in which the various claimants would file their mechanic s lien. Depending upon whether you were a general, sub, supplier, or laborer, the time periods were all over the map, including 75 days, 90 days, and 100 days, depending upon your status. The good news is that the new law in West Virginia has leveled the playing field so that everyone has the same requirement of recording the mechanic s lien within 100 days of their last furnishing labor or materials. Specifically, the 100 days runs as follows: General contractor: 100 days from completion of the overall project. Page 4 of 11
Subcontractor: 100 days of last furnishing labor or materials on your portion of the job. Material or equipment supplier: 100 days of last furnishing material or equipment to the job. Laborer: 100 days of last furnishing labor. Where to File/Record: The West Virginia clerk of the county commission in the county in which the project is located. How to Serve: Any lien claimant must record his or her Notice of Mechanic s Lien for it to be valid. Then there is the separate step of serving it on the owner. Depending upon your classification, you may or may not be required to serve it as well. On the other hand, as described in more detail hereunder, it is always recommended that everyone serve the owner to be safe. Here are the rules: General Contractor. If the contract is directly with the owner, service is not required. If the contract is with another contractor (for example if you re only doing the framing for another prime contractor) you are probably considered a subcontractor and required to serve the owner (West Virginia Revised Statutes Section 38-2-2 and 38-2-9). Subcontractor. If the contract is directly with the prime contractor or another subcontractor, clearly you are required to serve the owner (38-2-2 and 38-2-9). For example, 38-2-2 speaks in terms of a contract with a general or subcontractor. But there is confusion if the subcontractor has a direct contract with the owner. For example, assume a plumbing subcontractor enters into a contract directly with a residential homeowner. Section 38-2-1 speaks in terms of a Contractor. Contractor is a generic term and would seem to apply to both a general and subcontractor. Under that theory, it would appear that service is unnecessary. However, when you examine 38-2-8, the statute that does not require service, it clearly indicates it is a mechanic s lien for a general contractor. Thus, it would appear that a subcontractor would be under 38-2-9 which requires the service. Supplier/Lessor of material or equipment. If your contract is directly with the owner, there is no need to serve the owner (38-2-3 and 38-2-10). But if your contract is directly with a general contractor or subcontractor, the owner must be Page 5 of 11
served (38-2-4 and 38-2-11). Confused? Don t get bogged down on these technical rules. It is highly recommended that to be safe, everyone should both record and serve the owner. There is simply no reason to do otherwise. The owner will eventually find out about the recording anyway, but serving will alert them early in the process and hopefully this will be sufficient to start a real dialogue for being paid. Is the Notice of West Virginia Mechanic s Lien served before or after the recording? Before the amendments in 2006, it was easy. For example, if you were a subcontractor or material supplier, you were required to serve the owner within 75 days of last furnishing and record the Notice within 100 days. It was logical to serve the Notice first as a warning shot and if you were not paid within a few days, record the Notice. But the current law specifies that both the service and the recording be done within 100 days. It is therefore the recommendation of National Lien Law that you serve the Notice on the owner first and if there is no response within approximately two weeks, follow-up by recording the Notice. Note also that the same form ( Notice of Mechanic s Lien ) is used for both the recording and service. The Notice of Mechanic s Lien must be served by a process server, or any other official who personally hands the lien to the owner. It cannot be served by regular or certified mail. In other words, it has to be served the same way a summons and complaint is served in a lawsuit. If not served properly, the lien will be invalid. Important Note. Both the Notice of Mechanic s Lien and Mechanics Lien itself must be served and recorded within 100 days after you have completed your work. Remember also that the only person you need to serve is the owner. For example, in some states, subcontractors must serve both the owner and general contractor. Not so in West Virginia. Amount of Lien: Primarily for unpaid labor, material, and equipment supplied. Unfortunately, attorney s fees are not allowed, which means that each side must pay their own attorney s fees and cannot get them from the other side, even if they are the prevailing Page 6 of 11
party. If you are a subcontractor or supplier, you can assert your lien for the full amount, even though the owner has made some payments for your segment of the work to the general contractor. In other words, if the owner pays the general contractor and it does not filter through to you, you can still claim your full lien. The same rules apply for someone who has a contract with a subcontractor who does not make payments after receiving them from the general contractor. Prior to the enactment of new laws, suppliers of equipment and material, as well as laborers, were required to go through the hassle of giving a detailed itemization of their lien, including a full description, dates of furnishing, and exact amounts charged. Fortunately, this has been deleted in the statutes so that only a general description is now required. Property Subject to the Lien: A West Virginia mechanic s lien applies only to private projects. No lien is allowed in public projects against government property. A lien can also go against a tenant s interest, both in the lease and that person s trade fixtures. However, the lien will not go against the landlord s interest simply because the lease allows the improvements. As to whether the lien can go against the landlord s interest if he or she participates in or requires the improvements, you should seek competent legal advice. Furnishing Information: Verified or Notarized?: Priorities: Upon request, the general should furnish others with information about the owner so the required notices and lien can be filled out properly. A verified notice simply means you sign it and are representing the contents are true and accurate. A notarized notice is signed in front of a Notary Public or other official. A mechanic s lien must be both verified and notarized. A West Virginia mechanic s lien is ahead of and gets priority over a construction mortgage if the latter is recorded after the first work on the project (38-2-17). However, if the construction mortgage lien is recorded before any contractor or subcontractor performs work, it gets priority. Page 7 of 11
All liens relate back to the date on which the first person or persons performed work on the property. In other words, if someone performs demolition, that is when the priority starts as to all other persons, even if they are performing painting services at the end of the job. As between the lien claimants themselves, if the property is foreclosed, the proceeds are divided in the following priority (38-2-18): 1) Employees of a general contractor or supplier (defined as laborers, artisans, and workmen); 2) material and equipment suppliers; 3) Subcontractors; and then 4) The general contractor. Can the Owner Double Pay? A common issue is whether an owner who has paid everything on the general contractor s agreement, is also responsible, over and above, for the subcontractors who have filed liens. This typically results if money does not filter through from the hands of the general contractor to those subcontractors. The owner can then be required to pay those subcontractors as well Many states forbid such double payment by the owner, but not West Virginia. Section 38-2-21 states that payment to a general contractor will not affect, impair, or limit the lien of any subcontractor, sub-subcontractor, or material supplier. Thus, if an owner wants to protect from the possibility of double payment, they should secure lien waivers during the course of the project. Exception. Under section 38-2-22, if the owner 1) records his or her contract with the general contractor and 2) secures and records a surety bond for the full amount of that contract, liens cannot be in excess of the amounts under such contract. Once a general contractor is paid pursuant thereto, there would be no further lien liability to any other person. Page 8 of 11
Lien Discharge: Under West Virginia Section 38-2-14, the failure to comply with the requirements of pre-lien notices and the recording of the lien itself, shall operate as a complete discharge of such owner and of such property for all claims of liens... Strong language, but the question is whether this would automatically discharge the liens as a matter of record. Sometimes title companies still list them as exceptions, especially if they are not knowledgeable of whether the statutory requirements have been met. In many states, there is still a requirement to bring a petition to formally discharge the lien. The statute is silent as to whether that is required. LAWSUIT TO FORECLOSE LIEN Introduction: Your lien is not valid forever. Because it directly affects the owner s title, it has a limited shelf life and must be enforced within a short period of time. That enforcement is done by filing a lawsuit to foreclose. Just like the time deadlines for a Pre-Lien or Mechanic s Lien, the courts strictly construe these time limits which are called statutes of limitation. Again, if you are literally one day late, the lien is ineffectual. When: Where to File: Arbitration: Within 6 months after the lien claimant has filed and recorded the mechanic s lien. The clerk s office of the court in which the property is located, which is usually within the county. Many construction contracts state that all disputes will be decided by binding arbitration, as opposed to a court proceeding by judge or jury. In fact, it has long been a tradition to do so in the construction industry. Arbitration is usually quicker and less costly, especially because it cuts down on expensive discovery. The decision is final and binding, with no right to appeal. You lose your right for a jury trial, but few contractors want that in the first place. You usually pick an experienced construction attorney or retired judge to hear the case in their conference room. It is just like a court proceeding with the same general rules of evidence, but more informal. On the other hand, you can only foreclose your lien through a court proceeding, not arbitration. So, how do you keep your Page 9 of 11
arbitration rights and at the same time preserve your lien rights? Simple. You bring a lawsuit to protect the lien and then immediately request the court to stay the court proceedings. When arbitration is done, you go back to court and turn the arbitration award into a judgment. Need a Lawyer? In this country, every individual has the statutory right to represent themselves. This means they can prepare all necessary papers, appear at hearings, and actually try the case. In so doing, the court considers you to be acting either in pro se or pro per. Before making this decision, consider the following factors: 1. You are a professional and thoroughly know the ins and outs of not only the construction industry but of the project itself. The best lawyer on his or her best day will probably not know more than 50% of what you know. 2. How is your public speaking abilities? If you are uncomfortable speaking to a group, you will even more uncomfortable in court or arbitration. You could be the sharpest wit in town but may not be able to present your arguments. Remember, appearing uncomfortable is perceived as having deficiencies in your case. People usually think that if you are not comfortable about your own facts, then they must not be that strong. 3. If the other side has a lawyer, you might want to think twice about representing yourself. You will certainly know the facts quite well, but you may be blindsided by legal technicalities. 4. You may also want to think twice if this is a really nasty and emotional case. In other words, if the other side is going for blood. Having a lawyer can shelter you from this emotional trauma. No matter how strong you are, lawsuits are taxing not only on your time, but on your physical and emotional energies. 5. If you have a good case in which you have complied with technicalities and performed good work, you are essentially engaging in a collection action. These actions are typically very simple because there are few defenses or defects alleged by the other side. It makes it easier for you to represent yourself because it is more a question of when and how much they will pay as opposed to whether you will win at all. Page 10 of 11
6. If you have a binding arbitration provision, you may consider representing yourself. These proceedings are much more informal and the arbitrator tends to give you more leeway. There are also fewer rules and not they are usually not quite as strict. 7. You could consider representing yourself but get advice along the way from a lawyer. It is much cheaper that way. On the other hand, the lawyer cannot watch over every move and you might slip up. Many times lawyers can also help you with preparing the forms, simply putting your name on the pleading. You can also bring in your lawyer at the end to actually try the case. 8. Judges and courts do not give legal advice. They only help you with what forms to use. However, clerks can be invaluable in steering you in the right direction as far as where to file, time limitations, the nature of the form or pleading, etc. But, remember when it comes right down to the ultimate advice, they cannot help you. 9. Judges usually treat you the same as an attorney which means they expect strict compliance with the rules. Although some judges give you more slack, don t count on it. 10. The biggest dilemma is whether you should hire an attorney for a smaller case, typically in the $5,000 to $10,000 range. You have to watch this because you may eat up that amount in attorney s fees. You never make money on lawsuits, only lawyers do. Try to settle for the best price you can get and move on. Prepared by: Thank you for your business. Page 11 of 11