Real Estate Law

Update Relating to SB891 and Bond Claim Waivers

Several bills were passed and will go into effect on July 1, 2015 that affect the construction industry here in Virginia. The most interesting of these was an amendment to the mechanic’s lien statutes relating to waivers of lien rights.

As I posted in March, SB891, [enhanced version available to subscribers], amended the mechanic’s lien statute, Va. Code Section 43-3, [enhanced version available to subscribers], to remove proactive waivers of lien and bond rights. This bill has been signed into law with a minor modification.

Instead of lumping the payment bond waiver protections in with the mechanic’s lien protections, the bill, as passed, now removes that bond protection from 43-3 and adds Va. Code Section 11-4.1:1, [enhanced version available to subscribers], to read as follows:

A subcontractor as defined in § 43-1, lower-tier subcontractor, or material supplier may not waive or diminish his right to assert payment bond claims or his right to assert claims for demonstrated additional costs in a contract in advance of furnishing any labor, services, or materials. A provision that waives or diminishes a subcontractor’s, lower-tier subcontractor’s, or material supplier’s right to assert payment bond claims or his right to assert claims for demonstrated additional costs in a contract executed prior to providing any labor, services, or materials is null and void.

As has been pointed out by my friend and colleague Jack Rephan, the scope of this change will be tested as time goes on. Certain questions still remain. For instance, what constitutes a waiver in advance of furnishing labor or materials? Will certain lien waiver forms be considered pre-furnishing? Does a pay if paid clause “diminish” a right to assert a lien or payment bond claim? Frankly, I don’t know the answer, but only time will tell. In the meantime, be sure to consult an experienced Virginia construction lawyer when reviewing or drafting your construction contracts or making a claim for payment.

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