Don’t Sign a Release Unless it Says This 1 Thing Virginia Webinar

In this blog, presented by SunRay Construction Solutions and Ryan C. Suit, Attorney, Peder & Coward, construction professionals in Virginia can learn in detail about how releases work in Virginia, key points to bear in mind before signing a release, etc.  

Virginia Mechanic’s Lien Refresher

Let’s begin with a quick refresher on Virginia’s mechanic’s lien. A mechanic’s lien is basically a lien on a property that was improved either by performing labor o furnishing materials. So, who can file a mechanic’s lien in Virginia?

• Any person performing labor or furnishing materials worth $150 or more.

• Any person providing labor or furnishing materials to condo units or limited common elements or site development.

• Any person in the contractor tier from general contractor, subcontractors, sub-subcontractors, laborers to materialmen.

The most important thing about a mechanic’s lien in Virginia is to ensure that you are following all the rules and timelines. Below are some of the key deadlines to follow:

• The deadline to file your lien is 90 days from the last day of the month on which the last work was performed. For example, if you finished your work on 15^th November, then you have 90 days from 30^th November to file your lien.  

• Virginia follows the 150-day rule which means that liens can only ‘look back’ for 150 days prior to the last date of work is completed. This means that if you performed work six months ago and are filing your lien now, then you can only file the lien for the work that was done in the prior 150 days. Including anything beyond the 150-day mark could invalidate your lien and make it unenforceable.

• Once the lien is filed, it should be enforced within 6 months or 60 days after completion or termination of the project, whichever occurs later. For example, if you are only working at the beginning of the project and then file a lien and the project goes on for a year, you could then file or enforce the lien within 60 days of when the project actually ends.

• These are some pretty technical and strict deadlines, so if you are not sure about them, it is recommended that you consult an attorney to protect your lien rights.  

What is a Release?

This blog primarily focuses on releases and their various aspects. But what exactly is a release? In simple words, a release is a waiver of your lien or bond rights. What it means is that by signing a release, you are giving up your rights to file a mechanic’s lien, enforce a lien, or file suit on a payment bond, depending on the project.  

There are different types of releases:

• Partial Release – When you sign a partial release, it means that you are only giving up a part of your lien rights. Partial releases are typical in projects where you have progress payments. So, if you are paid in the middle of the project, then you may sign a release wherein you will give up your right to file a lien on the work that was completed, while maintaining your rights to file a lien on work that has not yet been completed.

• Full Release – As the name sounds, this is a full release which is typically signed at the end of the project, and it means that you are giving up all your rights to file a lien on the project. Even if you have signed multiple partial releases during the course of the project, the party making the payments will ask you to sign one full release at the end of the project.

This always depends on the terms of the contract, so make sure that the terms of any release you sign are clear and unambiguous. Apart from the partial and full release, there are two more types of releases:

• Conditional Release – A conditional release is a release that is conditioned upon a specific item, such as payment being made within a certain period. From example, you sign a conditional release stating that you will release your right to lien if the payment is received within 30 days. If you don’t receive the payment within 30 days, then it means that the release is no longer valid, and you will retain your rights to file a lien.

• Unconditional Release – An unconditional release on the other hand is not conditioned upon anything which means that once your sign an unconditional release, you have given up all your rights to file a lien.  

An unconditional release is quite a drastic term, and a drastic term in a contract like that could be deemed unconscionable, depending on what other language is used in the contract. And if that were the case, then that unconditional release would be potentially unenforceable. This is why you need to make sure that your contract terms are clear and unambiguous.  

Where is the Release?

Now that you know what a release and its different types is, the next key aspect is to know where to look for the release.  

• Typically, the release will be somewhere in the contract. It will be a provision or a clause title release or waiver.

• Always watch out for terms that may limit your rights.

• In Virginia, it can be commonly found in the payment section of the contract because in Virginia, releases and waivers must be signed after work begins.

Ideally, you may sign a contract which includes the payment terms, and you may also sign a release but that is not your actual release of waiver of rights. Instead, once you begin your work and send out your invoice, the person who is making the payment will ask you to sign a document which is your actual release document.

Why do I Need to Sign?

So, why do you need to sign a release? Well, it primarily depends on where you stand in the construction chain.

A) Higher tier contractors

• If you are a higher tier contractor, a general contractor or subcontractors and suppliers working under you, then the purpose of the release is to protect you from any potential lien.

• If a subcontractor signs the release, then you have a valid argument in court as to why they cannot file a lien against the property you're working on.

• It also ensures the work is final by any subcontractors because the lower subcontractor signing the release is incentivized to get their work done right the first time because they're going to be giving up their rights.

• Sometimes, the owner may also require the release forms before making the payment to the general contractor.

B) Lower tier contractors

• If you are a lower tier contractor, then the main reason why you want to sign a release is to get paid. This is just a requirement of the job. Typically, a contractor will not pay a sub or supplier until they sign a release.

• However, a release doesn’t necessarily get rid of all your rights. Even if you sign a release, there are other ways of recovering payment due to you, such as suing for breach of contract.  

Virginia Laws on Releases and Waivers

Here are some Virginia-specific laws on release and waivers.

A) Right to Waive; Requirements for Waiver of Lien Rights

• For mechanic’s lien, the statute Virginia Code § 43-3(C) specifically identifies when a contractor or subcontractor or supplier can get rid of their rights to file a lien.  

• As per the statute, any right to file or enforce any mechanic’s lien may be waived in whole or in part except that the party may not waive or diminish their lien rights in a contract in advance of furnishing any labor, services, or materials.

• A provision that waives or diminishes lien rights in a contract prior to providing any work is null and void.

B) Requirements for Waiver of Payment Bond Rights

• Virginia Code § 2.2-4341 refers specifically to payment bond rights.  

• As per this statute, any waiver of the right to sue on the payment bond will be void, unless:

• It is in writing;

• Signed by the person whose right is waived; and

• Executed after such person has performed labor or furnished materials in accordance with the contract documents.  

C) Releasing a Filed Mechanic’s Lien

• Virginia Code § 43-17.2 is the statute that allows an owner to challenge a lien.

• As per the statute, any party having an interest in rea property against which a lien has been filed, may, upon a showing of good cause, petition the court to determine the validity of any perfected lien on the property.

• So, you cannot file a mechanic’s lien on a property and wait to enforce it whenever you want to. This statute will allow the owner to challenge the lienor.  

• Often, the owners will do this if they say that they have paid the lien or made payments that would make the lien invalidated, but the lien is still on the property because it would have to be officially released from the record before the owner would be fully satisfied with it.

D) Caselaw

• For a waiver of a mechanic’s lien to be valid, it mut be supported by consideration, which means that the party waiving the lien must receive something of value in return. It's a requirement of the release to have certain language saying that the waiver was supported by consideration but it's not necessarily something that entitles you to a ton of additional funds.

• A waiver must be express or, if implied, must be established by clear and convincing evidence. It means that any waiver of your rights needs to be totally clear and unambiguous.

E) When is a Lien Released

• A lien is typically released when the party seeking release proves that the lien has been paid or discharged. The party has to then file a release of lien into the land record to prove that the amounts have been paid and that the lien is longer enforceable or effective.

• A lien is also automatically released after 20 years on the property.

• If you file a lien but don't enforce it, then it's going to be still in the records but no longer enforceable. The court can go ahead and release the lien if it is not enforced within 6 months of filing the lien or 60 days after completion or termination of the project.  

Words to the Wise

Here are some of the key takeaways:

• You must always review the contract thoroughly. You don’t want to sign something and then later it backfires on you just because you did not read it carefully before signing it. If you are unsure about anything in the contract, consult an attorney.

• You need to make sure that your licensure is accurate and up to date before you sign the contract or before the project starts. In Virginia, contractors need to be properly licensed with the Department of Professional and Occupational Regulation (DPOR). You also need to ensure that the entity signing the contract is also properly licensed. Ideally, you must ensure that you personally as well as your entity, both are registered with DPOR.

• Lastly, you need to specify the scope of work in progress payments with specificity. This will ensure that you are being paid for exactly the work that you have performed. So, identifying the scope of work in your invoice can be crucial, especially if any dispute arises.

To summarize, the key thing to remember is to always read your documents before you sign them to ensure that you are not signing something that can later backfire on you.

Common Questions Contractors Ask

1. Why is understanding lien releases important?

Signing a lien release without understanding its implications could result in losing your lien rights, leaving you without recourse to secure payment. This webinar will help you understand how to protect your rights.

2. What is the Virginia-specific rules for lien releases?

In Virginia:

• You cannot waive lien rights in a contract before providing labor, materials, or services (Virginia Code § 43-3(C)).

• Waivers must be signed, in writing, and executed after work has been performed.

• Filed mechanic’s liens must be enforced within six months or 60 days after project completion, whichever is later.

3. What’s the difference between a partial and full lien release?

• Partial Release: Waives lien rights for a portion of the work performed, typically tied to progress payments.

• Full Release: Waives all lien rights on a project, often required at project completion.

4. How do conditional and unconditional releases differ?

• Conditional Release: Effective only after a condition, such as receipt of payment, is met.

• Unconditional Release: Immediately waives lien rights without any conditions, which can be risky if payment has not been received.

5. What should I look for before signing a release?

• Specific language waiving lien rights.

• Conditions tied to the release (e.g., payment receipt).

• Whether it includes all or only part of your work.

• Clear, unambiguous terms.

6. What is the 150-day rule for mechanic’s liens in Virginia?

Virginia allows liens to include only work performed within the 150 days prior to the last date of work. Filing for work done beyond this timeframe may invalidate the lien.

7. Can lien rights be waived through a contract?

Lien rights cannot be waived in advance of providing labor or materials. Any pre-work waiver clause is considered null and void under Virginia law.

8. What are the deadlines for filing and enforcing a mechanic’s lien in Virginia?

• Filing: 90 days from the last day of the month when work was last performed.

• Enforcing: Within six months of filing or 60 days after project completion, whichever is later.

9. What if I accidentally sign an unconditional release?

Consult an attorney immediately. In some cases, an unconditional release may be challenged if it’s proven to be unconscionable or signed under duress.

10. Can I still recover payment if I sign a release?

Yes, you may still have legal remedies such as suing for breach of contract, but your ability to file a lien or bond claim may be limited depending on the terms of the release.

11. What if my lien is challenged in court?

Under Virginia Code § 43-17.2, property owners can petition the court to challenge the validity of a lien. Be prepared to provide evidence supporting your lien claim.