Virginia Federal Court Rules that a Mechanic's Lien Cannot Include Furnishings

One of the dilemmas faced by Virginia construction law practitioners is determining what types of materials provided or labor performed on a project are properly the subject of a mechanic’s lien.

While Virginia Code § 43-3 provides that a mechanic’s lien can include the “performing labor or furnishing materials … for the construction, removal, repair or improvement of any building or structure…,” the remaining provisions of Title 43 only hint at what items or services qualify as lienable.

Last Thursday, the U.S. District Court for the Western District of Virginia provided further clarity on the subject by determining whether furnishings present in the building constitute properly lienable items. In Summit Community Bank v. Blue Ridge Shadows Hotel & Conference Center, LLC, 2010 WL 1253175 (W.D. Va. Apr. 1, 2010), a bank with a deed of trust on the debtor’s hotel property appealed from a bankruptcy court ruling upholding the validity of a mechanic’s lien that included a variety of furnishings provided by a creditor design company. These furnishings included sleeper sofas, lounge chairs, ottomans, nightstand lamps, end tables, chairs, and art prints totaling $228,761.33.

On appeal, the district court began its analysis by noting that the Virginia mechanic’s lien statute is intended to protect construction, removal or repair of a building which results in a change to the actual building, not simply the building’s potential use or function. The statute requires a greater connection between the materials furnished to improve the building and the building itself; the materials must be connected to the building by more than their mere presence. In comparing the instant case to the Virginia Supreme Court decision of Moore & Moore General Contractors, Inc. v. Basepoint, Inc., 253 Va. 304, 485 S.E.2d 131 (Va. 1997), in which cabinets were found to be lienable, the district court noted that the Virginia Supreme Court and the statute focused not on whether the items were removable like the cabinets, but rather whether there was some greater connection between the materials and building itself. The district court found that connection could be established if the items were intended to be installed or incorporated into the building.Because the furnishings provided by the design company were not intended to be installed or incorporated into the hotel, the district court overturned the bankruptcy court’s ruling and found that the furniture and other items were not improvements that were properly included in the designer’s mechanic’s lien.

Categories: Legal Updates