Real Estate: Perfecting Mechanic's Liens

     In prior blogs we have been discussing the benefits of using real estate to improve creditors’ positions. Last month we began a discussion of the benefits of using mechanic’s liens to aid in the collection of your debt. 

     Virginia Code §§43-4, 43-7 and 43-9 provide for the perfection of the lien by general contractors, subcontractors, and laborers and suppliers. In each section the creditor must file a memorandum of lien at any time after the work is commenced or material furnished, but not later than 90 days from the last day of the month in which he last performs labor or furnishes material, and in no event later than 90 days from the time such building, structure, etc., is completed, or the work thereon otherwise terminated. The memorandum must contain specific information as set forth in the code (and there are forms in the code), and must be filed in the clerk's office in the county or city in which the building, structure etc., or any part thereof is located. The memorandum shall show the names of the owner of the property sought to be charged, and of the claimant of the lien, the amount and consideration of his claim, and the time or times when the same is or will be due and payable, verified by the oath of the claimant, or his agent, including a statement declaring his intention to claim the benefit of the lien, and giving a brief description of the property on which he claims a lien. 

      In a future blog we will explore suits to enforce the lien. 

     We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same. 

Real Estate: Using Homeowner Association Liens to Secure an Interest in Real Estate

     In previous blogs, we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this edition, we will review the benefits of using homeowner association liens to aid in the collection of your debt. 

   Virginia Code §55-516 provides for special procedures for the collection of homeowners association dues. This code section allows associations to place a lien on the land for unpaid assessments, as well as give associations a priority over certain other debts. To perfect the lien, however, it must be filed before the expiration of twelve months from the time the first such assessment became due and payable. This filing must be by a memorandum filed in the circuit court of the county or city where the development is located. The memorandum must contain the information specified in the statute. Before filing the lien, written notice must be sent to the property owner by certified mail giving at least ten days prior notice that a lien will be filed. Suit to foreclose on the lien must be brought within thirty six months of filing. We will review foreclosure suit procedures in the next issue. 

     We have experienced attorneys and staff who can examine title, file homeowner association liens, and litigate to enforce the same. 

Real Estate: Making Owners and General Contractors Personally Liable to Subcontractor, Laborer or Materialman

     Virginia Code §43-11 provides a way for owners or general contractors to be made personally liable to subcontractor, laborer or materialman if notice is appropriately given, and if the payer makes payment to the owing party without paying the notifying creditor. Specifically, §43-11 (2) states that: 

     “…if such subcontractor, or person furnishing labor or material shall at any time after the work is done or material furnished by him and before the expiration of thirty days from the time such building or structure is completed or the work thereon otherwise terminated furnish the owner thereof or his agent and also the general contractor, or the general contractor alone in case he is the only one notified, with a second notice stating a correct account, verified by affidavit, of his actual claim against the general contractor or subcontractor, for work done or materials furnished and of the amount due, then the owner, or the general contractor, if he alone was notified, shall be personally liable to the claimant for the actual amount due to the subcontractor or persons furnishing labor or material by the general contractor or subcontractor, provided the same does not exceed the sum in which the owner is indebted to the general contractor at the time the second notice is given or may thereafter become indebted by virtue of his contract with the general contractor, or in case the general contractor alone is notified the sum in which he is indebted to the subcontractor at the time the second notice is given or may thereafter become indebted by virtue of his contract with the general contractor. But the amount which a person supplying labor or material to a subcontractor can claim shall not exceed the amount for which such subcontractor could file his claim.” 

     The notices referred to in this code section are commonly referred to in the industry as “42-11 letters”. We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same. If you have a need, please call us. 

Real Estate: Using Mechanic's Liens to Secure an Interest in Real Estate

    In recent blogs we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this blog, we will begin a review of the benefits of using mechanic’s liens to aid in the collection of your debt. 

    Virginia Code §43-3 et. seq. provides for special procedures for the collection of unpaid bills related to work performed on, or products supplied for, real estate. §43-3 A states: 

    “All persons performing labor or furnishing materials of the value of $150 or more … for the construction, removal, repair or improvement of any building or structure permanently annexed to the freehold … shall have a lien, if perfected as hereinafter provided, upon such building or structure, and so much land therewith as shall be necessary for the convenient use and enjoyment thereof … subject to the provisions of § 43-20. But when the claim is for repairs or improvements to existing structures only, no lien shall attach to the property repaired or improved unless such repairs or improvements were ordered or authorized by the owner, or his agent.” 

 Virginia Code §43-3 B provides for special rules regarding condominiums.

    Virginia Code §§43-4, 43-7 and 43-9 provide for the perfection of the lien by general contractors,subcontractors, and laborers and suppliers. We will explore this more in a future blog.

    We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Collections: Foreign Judgment Enforceable in Virginia

     The Richmond U.S. District Court found that the plaintiff, a British developer of computer and video games, may enforce a judgment from a United Kingdom court finding a breach of a settlement agreement by defendant, a Virginia company, that agreed to distribute the British company’s video game and then failed to pay the company.
     Plaintiff, Codemasters Group Holdings Ltd., stated that it issued invoices for the video products it shipped to defendant, SouthPeak Interactive Corp., but SouthPeak failed to pay. The parties subsequently entered into a settlement agreement in which defendant agreed to pay plaintiff $2 million. Plaintiff contended that defendant failed to make all payments and breached the settlement agreement, leaving an outstanding balance of $1,265,000 plus interest and late fees.
     Plaintiff filed suit in the UK and a court there ordered default judgment against defendant. Plaintiff subsequently sued to enforce the UK judgment in Virginia.
     The court noted that Virginia has adopted the Uniform Foreign Money-Judgments Recognition Act, which allows for the enforcement of a foreign country money judgment that is final and conclusive and enforceable where rendered.
     Two issues were raised in the Richmond court: whether the UK court had personal jurisdiction over SouthPeak, and, whether Southpeak had received notice of the UK action in sufficient time to enable it to defend.
     The settlement agreement contained a forum selection clause designating the UK as the forum for resolution of the parties’ dispute. The agreement established the acquiescence of SouthPeak to the jurisdiction of the UK court. Thus, because prior to the commencement of the UK action SouthPeak agreed to submit to the jurisdiction of the UK court, the UK had personal jurisdiction over SouthPeak.

     SouthPeak argued that proper service of process did not occur pursuant to Virginia law, so enforcement of the foreign judgment should not be allowed. The court disagreed. The court determined that a plain reading of the Uniform Foreign Money-Judgments Recognition Act simply requires notice, and, SouthPeak had actual notice of the proceedings in the UK. Accordingly, the foreign judgment could be enforced.

Real Estate: The Virginia Property Owners' Association Act - Memorandums of Lien

      In a previous blog, I began discussing the Virginia Property Owners’ Association Act.

     The Act specifically provides for remedies outside of the more common remedy of filing suit for the amount owed and receiving a judgment. A memorandum of lien to a holder of a credit line deed of trust under the Act is given in the same fashion as if the association’s lien were a judgment. Under the Act, the association can file for and perfect a lien against the homeowner that is prior to all other subsequent liens and encumbrances except real estate tax liens, liens and encumbrances recorded prior to the recordation of the declaration, and sums unpaid on and owing under any mortgage or deed of trust recorded prior to perfection of this lien.
     To perfect the memorandum of lien, the association must file with the clerk of the circuit court in the county or city in which the development is situated a memorandum verified by the oath of the principal officer of the association or another officer provided for in the declaration. The memorandum must be filed within 12 months from the first assessment became due and payable. Additionally, prior to filing a memorandum of lien, a written notice must be sent to the property owner by certified mail, at the owner’s last known address, informing the owner that the lien will be filed in the circuit court clerk’s office at least 10 days before the actual filing date of the lien. The memorandum must name the development, describe the lot, name the person(s) constituting the owners of the lot, list the amount of unpaid assessments currently due or past due relative to such lot together with the date when each fell due, list the date of issuance of the memorandum, name the association with a name and address of the contact for the person to contact to arrange for payment or release of the lien, and state that the association is obtaining a lien in accordance with the provisions of the Virginia Property Owners’ Association act as set forth in Chapter 26 (section 55-508 et seq.) of Title 55.
     The Act provides that a judgment or decree in this action must include, without limitation, reimbursement for costs and reasonable attorney’s fees for the prevailing party. Also, if the association prevails, it may also recover interest at the legal rate for the sums secured by the lien from the time each sum became due and payable. If the owner then satisfies the debt, the lien must be released, and failure to release the lien results in a penalty.
     Once a lien has been perfected, the association must enforce the lien within 36 months from the time when the memorandum of lien was recorded. This time period cannot be extended.
     In a future blog, I will discuss foreclosure on a lien.

Real Estate: Suit to Enforce Mechanic's Liens

     In recent blogs we have been discussing the benefits of using real estate to improve creditors’ positions. Recently we discussed perfection of liens. In this blog we will discuss suit to enforce mechanic’s liens.
     Virginia Code §43-17 provides that no suit to enforce a mechanic’s lien can be brought:
“…after six months from the time when the memorandum of lien was recorded or after sixty days from the time the building, structure or railroad was completed or the work thereon otherwise terminated, whichever time shall last occur; provided, however, that the filing of a petition to enforce any such lien in any suit wherein such petition may be properly filed shall be regarded as the institution of a suit under this section; and, provided further, that nothing herein shall extend the time within which such lien may be perfected.”
     Virginia Code §43-17.1 provides that:
“Any party, having an interest in real property against which a lien has been filed, may, upon a showing of good cause, petition the court of equity having jurisdiction wherein the building, structure, other property, or railroad is located to hold a hearing to determine the validity of any perfected lien on the property. After reasonable notice to the lien claimant and any party to whom the benefit of the lien would inure and who has given notice as provided in § 43-18 of the Code of Virginia, the court shall hold a hearing and determine the validity of the lien. If the court finds that the lien is invalid, it shall forthwith order that the memorandum or notice of lien be released from record.”
     Virginia Code §43-18 provides:
“The perfected lien of a general contractor on any building or structure shall inure to the benefit of any subcontractor, and of any person performing labor or furnishing materials to a subcontractor who has not perfected a lien on such building or structure, provided such subcontractor, or person performing labor or furnishing materials shall give written notice of his claim against the general contractor, or subcontractor, as the case may be, to the owner or his agent before the amount of such lien is actually paid off or discharged.”
     We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Collection: Bank Loses Without Aggressive Action

     The need for aggressive action was again proven when a bank lost a priority in assets due to the bank's non-action.
     In the case of First Union National Bank of Virginia v Craun, a federal court found that the bank obtained a consent judgment from the debtor (a limited partner in a Virginia limited partnership), but took no further action. A year later the limited partnership perfected a security interest in the debtor's partnership interest by filing a financing statement with the State Corporation Commission. The partnership's security interest was to perfect a loan by the debtor from the partnership.
     Eventually a dispute arose on the priority of liens on the proceeds between the bank, based on its judgment, and the partnership, based on its perfected assignment.
     The partnership had priority, the court ruled, because the bank had not sought to enforce the judgment or levy on the limited partner before the assignment was perfected. The Court stated:
 "… had a writ of execution issued, and had such a writ been delivered into the hands of the marshal, defendant's inchoate intangible rights in distributions from the limited partnerships could have subjected to the lien of the writ....Plaintiff could then argue the writ of execution would have taken priority over a security interest perfected after the writ was issued and placed in the hands of the serving official, assuming the secured lienor was provided notice of the issuance of execution...But, that is not the case here. Plaintiff did not cause a writ of execution to issue. Instead, it merely sought the entry of a charging order armed only with what may be best described as a "naked" final judgment...Therefore, until a charging order entered, the judgment debtor...virtually was free, as against the instant plaintiff, to encumber intangible property, including interests to discretionary distributions of a limited partnership."
     The lesson of Craun is simple - take aggressive action and consult with counsel early in the process.

Real Estate: Suit to Enforce Mechanic's Liens

     In recent editions of Creditor News (which can be viewed at http://lawplc.com) we have been discussing the benefits of using real estate to improve creditors’ positions. Last month we discussed perfection of liens. This month we will discuss suit to enforce mechanic’s liens.
     Virginia Code §43-17 provides that no suit to enforce a mechanic’s lien can be brought:
“…after six months from the time when the memorandum of lien was recorded or after sixty days from the time the building, structure or railroad was completed or the work thereon otherwise terminated, whichever time shall last occur; provided, however, that the filing of a petition to enforce any such lien in any suit wherein such petition may be properly filed shall be regarded as the institution of a suit under this section; and, provided further, that nothing herein shall extend the time within which such lien may be perfected.”
     Virginia Code §43-17.1 provides that:
“Any party, having an interest in real property against which a lien has been filed, may, upon a showing of good cause, petition the court of equity having jurisdiction wherein the building, structure, other property, or railroad is located to hold a hearing to determine the validity of any perfected lien on the property. After reasonable notice to the lien claimant and any party to whom the benefit of the lien would inure and who has given notice as provided in § 43-18 of the Code of Virginia, the court shall hold a hearing and determine the validity of the lien. If the court finds that the lien is invalid, it shall forthwith order that the memorandum or notice of lien be released from record.”
     Virginia Code §43-18 provides:
“The perfected lien of a general contractor on any building or structure shall inure to the benefit of any subcontractor, and of any person performing labor or furnishing materials to a subcontractor who has not perfected a lien on such building or structure, provided such subcontractor, or person performing labor or furnishing materials shall give written notice of his claim against the general contractor, or subcontractor, as the case may be, to the owner or his agent before the amount of such lien is actually paid off or discharged.”
     We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Collections: Uniform Enforcement of Foreign Judgment Act

     Virginia and almost all other states have adopted the Uniform Enforcement of Foreign Judgments Act (UEFJA) (Virginia Code §8.01-465.1 et seq.). In so doing, creditors may enforce out-of-state judgments by properly filing the foreign judgment in a Virginia Circuit Court. Virginia Code §8.01-465.2 states:
                     The Clerk must treat the foreign judgment in the same manner

                     as a judgment of the circuit court of any city or county

                     of this Commonwealth. A judgment so filed has the same

                     effect and is subject to the same procedures, defenses, and

                     proceedings for reopening, vacating or staying as a judgment

                     of a circuit court of any city or county of this Commonwealth

                     and may be enforced or satisfied in like manner.

     As creditors it is important to be aware that out-of-state judgments can be enforced in Virginia, and that Virginia judgments can be enforced in foreign states, provided that the state has adopted the UEFJA.
     In Virginia, Code §8.01-465.5 allows bringing an action to enforce an out-of-state judgment in lieu of proceeding under the Uniform Act, if you so desire. Virginia Code §8.01-389(B) states:
     Every court of this Commonwealth shall give such records of courts not of this Commonwealth the full faith and credit given to them in the courts of the jurisdiction from whence they come.
     Virginia Code §8.01-252 states that an action brought in Virginia to enforce a judgment rendered in another state shall not be barred by the laws of the other state. The Code bars action upon a judgment rendered more than ten years before the commencement of the suit.
     In the case of Atlantic Funding Corp. v. Peterson, the Fairfax County Circuit Court granted a debtor's motion to quash debtor interrogatories because the creditor had failed to file the federal judgment pursuant to the UEFJA, and thus, the Clerk of the Circuit Court could not treat the federal judgment as a judgment of the Virginia state court.
     Virginia Code §8.01-447 governs the docketing of judgments and decrees of federal district courts in Virginia state courts. That provision clearly requires the Clerk of the Circuit Court to treat it in the same manner all judgments rendered within the Commonwealth when docketing judgments. The statute speaks only to the process of docketing judgments, however. It does not necessarily provide a method of enforcing docketed judgments, and it does not authorize the clerk to treat docketed judgments from local federal courts as docketed judgments of this circuit court.
     In Peterson the Fairfax Circuit Court ruled that unlike Virginia Code §8.01-447, the UEFJA clearly requires identical treatment and enforcement of properly filed federal and state court judgments. Had the judgment creditor properly filed the judgment of the District Court, the Clerk of the Circuit Court would have been compelled to enforce that judgment as a judgment of the Circuit Court. The Fairfax Circuit Court ruled that the record in Peterson, however, revealed that the creditor failed to authenticate the District Court judgment, or to pay the fee prescribed in Virginia Code §14.1-112(22). The Court ruled that since the creditor did not properly file the District Court judgment in Peterson it was not entitled to the benefits of the UEFJA.

Real Estate: Docketing Judgments to Secure an Interest in Real Estate

     In previous editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this edition, we will review the benefits of docketing judgments to aid in the collection of your debt.
     Docketed judgments create a lien against the debtor’s real estate in the county or city in which the lien is docketed. Accordingly, make sure that you know where your debtor owns, or may own (e.g., through future purchase or inheritance), real estate. Once recorded, the lien will take priority in line with the date of recording (with some limited exceptions). Depending upon your debtor’s problems, you may have equity to cover your lien. Obviously you will want to “get in line” sooner rather than later to give you the best chance of collection.
     Once a lien is in place, it must be addressed at any sale or refinance of the real estate. The lien must also be addressed in bankruptcy -- if the debtor does not file a motion to strip the lien, the lien will survive a bankruptcy discharge.
     If all other collection measures are unsuccessful, you can consider bringing a creditor’s bill, which is an action to force the sale of real estate to satisfy a judgment under Virginia Code §8.01-462:

                                Jurisdiction to enforce the lien of a judgment

                                shall be in equity.  If it appears to the court that the

                                rents and profits of all real estate subject to the lien

                                will not satisfy the judgment in five years, the court

                                may decree such real estate, any part thereof, to be sold,

                                and the proceeds applied to the discharge of the judgment.
     Although creditor’s bills may be costly, given the right judgment it is an effective collection tool. Determining what judgments are "right" requires experience and good judgment.
     We have experienced attorneys and staff who can seek judgment and then docket and enforce the same.