A Contractor’s, Subcontractor’s & Supplier's Step By Step Guide to Getting Paid - Virginia - Webinar

In this blog, presented by SunRay Construction Solutions and Ryan C. Suit, Attorney, Pender & Coward, we'll look at crucial tips and strategies to ensure your contracts are airtight and your rights are protected.

General Contract Tips in Virginia

In Virginia, construction contracts play a crucial role in ensuring smooth project execution. Here are some essential contract tips specific to the state:

1. Annual Contract Review: Conducting an annual review of your contract is crucial for several reasons. Firstly, it ensures that the contract remains relevant and up-to-date with any changes in the project's scope, timeline, or requirements. This review also allows you to confirm that all parties involved still agree with the terms outlined in the contract. By keeping the contract current, you minimize the risk of misunderstandings or disputes arising from outdated or inaccurate information.

2. Identifying Parties Correctly: Clearly identifying all parties involved in the contract is essential for establishing accountability and preventing confusion or disputes down the line. Include not only the primary contractors and property owners but also subcontractors, suppliers, and any other relevant stakeholders. Use full legal names and addresses to avoid any ambiguity regarding the identities of the parties bound by the contract.

3. Specifying Scope of Work: The scope of work section is one of the most critical aspects of a construction contract. It should comprehensively outline the specific tasks, services, materials, and deliverables expected from each party. Include detailed descriptions, quantities, quality standards, and any relevant technical specifications. Clearly defining the scope of work helps prevent misunderstandings, delays, and disputes related to project expectations.

4. Payment Terms: Detailed payment terms are essential for maintaining a smooth cash flow throughout the project and avoiding payment-related disputes. Specify the payment schedule, including milestones for progress payments and the final payment. Address issues such as retainage (the amount withheld until project completion), interest on late payments, and penalties for non-payment or delayed payments. Clarity on payment terms fosters trust and accountability among all parties involved.

5. Attorney's Fees Provision: Including a provision regarding attorney's fees is a proactive measure to protect your interests in case of contract disputes or legal challenges. This provision typically states that the prevailing party in a legal dispute will be entitled to recover reasonable attorney's fees and legal costs from the non-prevailing party. It incentivizes fair and swift resolution of conflicts and reduces the financial burden of legal proceedings.

6. Choosing Venue and Jurisdiction: Determining the venue and jurisdiction for legal matters in the contract helps streamline the resolution process if disputes arise. Specify a specific court or arbitration venue where legal proceedings will take place, along with the governing law that will apply. This clarity avoids jurisdictional conflicts and ensures that legal disputes can be addressed efficiently and according to mutually agreed-upon terms.

By paying attention to these key aspects and incorporating them into your construction contracts, you can mitigate risks, foster clear communication, and promote smoother project execution.

Securing Lien Rights in Virginia

In Virginia, securing lien rights is vital for contractors and subcontractors to protect their interests. Let’s first look at who can actually file a lien in Virginia.

Who Can File a Mechanic’s Lien?

• All persons performing labor or furnishing materials worth $150 or more
• Any person providing labor or furnishing material to condo units or limited common elements
• Any person providing labor or materials for site development
• General Contractors, Subcontractors, Sub-subcontractors, Laborers and Materialmen

There are other factors that come into play for securing lien rights in Virginia. Here's what you need to know:

• Timeline for Filing Mechanic's Liens: Virginia law stipulates that mechanic's liens must be filed within 90 days from the last work day of the month in which work was last performed. This means that contractors, subcontractors, and suppliers must ensure that they file their liens within this timeframe to preserve their right to seek payment for work done or materials supplied.

• Multiple Liens for Long Projects: For long-term projects that span several months or years, it's advisable to consider filing multiple liens to cover ongoing work. This approach helps ensure you protect your rights and potential claims for payment throughout the project. By filing liens strategically as work progresses, you can safeguard your interests and maintain leverage in case of payment disputes.

• Enforcing Liens Within Deadlines: In Virginia, it's critical to enforce mechanic's liens within six months from the date of filing or within 60 days after project completion, whichever comes first. Failure to enforce the lien within these deadlines can lead to its expiration and loss of the associated rights. Therefore, it's essential to be vigilant about enforcing liens promptly to preserve their validity and effectiveness.

• Completing Lien Documents: When preparing mechanic's liens in Virginia, it's crucial to ensure that all required documents are completed accurately and in compliance with the state's legal requirements. This includes providing proper notices, documenting the work performed or materials supplied, and filing the lien with the appropriate court or authority within the specified timeframe. Adhering to these requirements strengthens the validity of the lien and enhances your ability to recover payment for services rendered.

How to Perfect the Lien in Virginia?

To perfect a lien in Virginia, file a Memorandum that includes the following details:

• Names and addresses of the property owner.
• Information about the claimant of the lien.
• Amount and consideration of the claim.
• Time(s) when the amount is or will be due and payable.
• Date from which interest is claimed.
• Affidavit demonstrating the intention to claim the benefit of the lien.
• Description of the property.
• Claimant's license or certificate number, along with the date of issuance and expiration.

By ensuring that all these elements are included in the memorandum, you can effectively perfect the lien in Virginia.

In addition -

• General Contractors must file a certification of mailing of a copy of the lien on the owner of the property at owner’s last known address
• Subcontractors and laborers/materialmen of subcontractors must also give notice in writing to owner of amount and character of claim

Securing Bond Rights in Virginia

While Virginia doesn't require bonds for private projects, they are essential for public projects. Bonds, particularly performance and payment bonds, play a crucial role in construction projects, especially on public works contracts.  

These bonds provide financial security and assurance to project owners (government agencies or public entities) that contractors will fulfill their contractual obligations, including completing the work as specified and paying subcontractors, suppliers, and laborers. Bonds also protect subcontractors and suppliers by ensuring they receive payment for their services and materials, even if the contractor defaults.

Here's an overview of the importance of bonds in construction projects, specifically performance and payment bonds for public projects, along with details about limitations and filing deadlines under Virginia's Little Miller Act:

• Obtaining Performance and Payment Bonds: Contractors working on public projects exceeding specific thresholds are typically required by law to obtain performance and payment bonds. Performance bonds guarantee that the contractor will perform the work according to the contract terms, while payment bonds ensure that subcontractors, suppliers, and laborers are paid for their contributions to the project. These bonds provide a level of assurance to project owners and stakeholders that the project will be completed satisfactorily and that payment obligations will be met.

• Limitations and Filing Deadlines: Under Virginia's Little Miller Act, which governs bond requirements for public projects, there are limitations and filing deadlines related to bond claims. Contractors, subcontractors, and suppliers seeking to make a claim against a bond must adhere to these provisions. It's essential to understand the specific limitations, such as the maximum amount that can be claimed under a bond, and the filing deadlines for initiating bond claims. Failing to meet these deadlines or exceeding the limitations can jeopardize the ability to recover payments or seek remedies under the bond.

By recognizing the importance of bonds, obtaining the necessary performance and payment bonds for public projects, and understanding the limitations and filing deadlines under relevant laws like Virginia's Little Miller Act, stakeholders in construction projects can mitigate risks, ensure financial security, and promote fair and efficient project execution.

Specific Rules and Exceptions

Virginia's construction laws specify timelines for filing liens, which may vary based on project completion. Contractors should understand the specific deadlines for different types of projects, including residential, commercial, and public works projects. Timely filing of liens is crucial to preserving lien rights and seeking remedies for non-payment.

• Special Rules for Residential Construction: Virginia has special rules regarding notices for residential construction projects. Contractors working on residential projects may be required to provide preliminary notices to property owners or obtain lien waivers from subcontractors and suppliers. These requirements aim to promote transparency and protect the rights of all parties involved in residential construction projects.

• Unreasonable Delay Damages: Contractors should be aware of provisions related to unreasonable delay damages in construction contracts. These provisions outline the consequences of delays caused by either party and may specify remedies or compensation for the non-defaulting party. Understanding unreasonable delay damages is essential for managing project timelines and addressing delays effectively.

• Waiver Rights on Public Projects: Contractors working on public projects should understand the rights and limitations regarding waivers of lien rights. Waiver rights on public projects may differ from those on private projects, and contractors must comply with specific legal requirements related to lien waivers, releases, and waivers of claims. Failing to adhere to these requirements can impact a contractor's ability to assert lien rights or seek recourse for non-payment on public projects.

Avoiding Lien Traps in Virginia

To avoid common lien traps and protect your interests in Virginia's construction industry, here are the key points regarding lien filings in Virginia:

• Proper License and Work Classification: Ensure that all parties involved in the construction project, including contractors, subcontractors, and suppliers, possess the necessary licenses and work classifications required by Virginia law. License requirements vary based on the type of work and the scope of the project, and compliance with these requirements is essential to avoid legal issues and ensure the quality and legality of the work performed.

• Adhering to Deadline for Lien Filings: Contractors should strictly adhere to Virginia's 90-day deadline for filing mechanic's liens. This deadline is calculated from the last work day of the month in which work was last performed. Failing to file a lien within this timeframe can result in the loss of lien rights and may lead to disputes over payment.

• Including Only Performed Work in Lien Filings: When filing mechanic's liens in Virginia, it's crucial to include only work that has been completed or materials that have been supplied as per the contract terms. Including work that has not been performed or materials that have not been delivered can invalidate the lien and may result in legal consequences.

• Understanding Personal Liability: Contractors should have a clear understanding of their personal liability regarding lien filings. In Virginia, contractors are responsible for ensuring compliance with notice requirements, filing deadlines, and the accuracy of lien documents. Failure to comply with these requirements can lead to personal liability, including potential legal action and financial penalties.

By prioritizing proper licensing, adhering to lien filing deadlines, accurately documenting performed work in lien filings, and understanding personal liability, contractors can navigate Virginia's construction laws effectively and protect their legal rights and interests in construction projects.

The Right Way to Exchange a Release for a Check

In Virginia, the process of exchanging releases for payments is crucial for resolving claims effectively and ensuring project completion.

• Wiring Funds for Immediate Availability: Consider wiring funds when making payments to expedite the release process and avoid delays. Wiring funds ensures immediate availability and reduces the time required for transactions to clear, which can be especially beneficial for time-sensitive payments in construction projects.

• Reviewing Releases for Specificity: When reviewing release documents, pay close attention to ensure they are specific and accurately reflect the terms of the agreement between parties. The release should clearly identify the parties involved, the project or contract to which it applies, the scope of work or materials covered, and the amount being released. Specificity in release documents helps prevent misunderstandings and disputes over payment obligations.

• Legal Requirements for Lien Waivers: Be aware of Virginia's legal requirements for lien waivers, including the content and timing of waivers. Lien waivers in Virginia must be in writing, signed by the claimant, and must specifically identify the property, the parties involved, the amount of payment or lien being waived, and the date of the waiver. It's important to ensure that lien waivers comply with these requirements to protect your rights and interests and avoid potential challenges or disputes related to lien rights and claims.

By following these tips and understanding Virginia's legal requirements for payments, release documents, and lien waivers, contractors and stakeholders in construction projects can navigate payment processes more effectively and protect their legal rights and interests.

Key Points to Note

Here are the key points to note when working on construction projects in Virginia:

• Annual Contract Review: Regularly review and update contracts to ensure they accurately reflect current project details and terms.
• Clear Identification: Clearly identify all parties involved in the contract to avoid confusion and disputes.
• Scope of Work: Specify the scope of work, including materials, timelines, and any unique project requirements.
• Payment Terms: Include detailed payment terms, interest on late payments, and penalties for non-payment to ensure smooth financial transactions.
• Attorney's Fees Provision: Consider adding a provision for attorney's fees to prepare for potential disputes and legal expenses.
• Venue and Jurisdiction: Specify the legal venue and jurisdiction in the contract for clarity in legal matters.
• Timeline for Lien Filings: File mechanic's liens within 90 days from the last work day of the month to protect lien rights.
• Multiple Liens for Long Projects: Consider filing multiple liens for long-term projects to cover ongoing work.
• Enforce Liens Within Deadlines: Enforce liens within six months of filing or 60 days after project completion to maintain their validity.
• Bond Requirements: Understand bond requirements for public projects and obtain performance and payment bonds as necessary.
• Special Rules and Exceptions: Be aware of special rules for residential construction, unreasonable delay damages, and waiver rights on public projects.
• Avoiding Pitfalls: Ensure proper licensure, adhere to lien filing deadlines, include only performed work in liens, and understand personal liability.
• Exchanging Releases: Wire funds for immediate availability, review releases for specificity, and comply with legal requirements for lien waivers.

Key Takeaway

In conclusion, by mastering these contract essentials, you'll empower yourself to navigate the complexities of construction law with confidence and protect your interests effectively. If you have any further questions or need assistance, don't hesitate to reach out. Your success is our priority!

If you find yourself in a situation where you need assistance to get paid in Virginia, then ensure that you get in touch with SunRay’s experts well in advance, so that they can take all the required steps promptly. Call 800-403-7660 today and get paid what you deserve!

Other Questions Contractors Ask

What are the key deadlines for filing mechanic's liens in Virginia?

Mechanics liens in Virginia must be filed within 90 days from the last work day of the month in which work was last performed.

What are the requirements and steps for filing multiple liens on long-term projects?

Contractors must follow specific procedures and legal requirements for each separate lien filing on long-term projects, ensuring accuracy and timeliness.

How can contractors ensure they are correctly identifying parties in contracts to protect their rights?

Contractors should meticulously identify all parties involved in contracts, including property owners, contractors, subcontractors, and suppliers, to safeguard their legal rights.

What are the key elements to include in lien waivers to ensure they are legally valid and enforceable in Virginia?

Lien waivers in Virginia must include precise information and adhere to specific timing requirements to be legally valid and enforceable, avoiding potential disputes.

What steps should be taken to mitigate personal liability risks for contractors related to lien filings?

Contractors can minimize personal liability risks associated with lien filings by following legal procedures accurately, ensuring contracts are clear, and seeking legal advice when necessary.