Builders and Contractors Exchange
Weekly Bulletin: 30 Oct 2006
Mechanics Liens for Equipment Not Permanently Attached To Realty
By: John R. Lockard
The Code of Virginia provides contractors the right to file a mechanic’s lien for any labor or materials “for the construction, removal, repair or improvement of any building or structure permanently annexed” to real property, including the “reasonable rental value or use value of equipment” used for that purpose. The statute does not address directly equipment or materials that are not permanently connected to the property, like generators or manufacturing equipment. Can a mechanic’s lien be filed for such equipment?
A Supreme Court of Virginia case from 1897 held that any such equipment that was “permanent in its character and essential to the purposes for which the building is occupied” would be covered by a mechanic’s lien even if the equipment could be removed from the building. Unfortunately, this holding does not provide a bright-line rule that contractors and suppliers can follow in determining whether they will have mechanic’s lien rights in order to secure payment for the equipment they provide for a building. No Supreme Court of Virginia case has directly addressed this issue since 1897.
A contractor or supplier can take other actions to secure payment for equipment supplied for a building. For example, the contractor can insist upon receiving a purchase money security interest in the equipment that, when perfected by the filing of a financing statement, would provide a lien on the equipment itself, including the right to regain possession of the equipment if payments are not fully made. When in doubt, a contractor should pursue both a security interest directly on the equipment and a mechanic’s lien in order to secure their payment rights.
Unlike a mechanic’s lien, however, a contractor will need to include certain provisions in its contract before supplying the equipment in order to retain a security interest in the equipment itself. Contractors should consult with an attorney experienced in mechanic’s liens and security interests to determine their options and requirements to secure such rights.
Questions?
If you have any questions about this article or any other related matters, please contact:
John R. Lockard
This article is meant to bring awareness to this topic and is not intended to be used as legal advice.