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    § 43-11 - A Subcontractor's Weapon

         Among the statutes governing mechanic's liens is a little-known, but very important remedy for the protection of subcontractors, suppliers, and sub-subcontractors who supply labor and materials to a private project in Virginia. This remedy is found in Virginia Code § 43-11, and is a remedy related to, but distinct from a mechanic's lien. A subcontractor, sub-subcontractor, or supplier may proceed under § 43-11 even though he may have waived some or all of his mechanic's lien rights. The mechanic's lien remedy is designed to provide security to contractor by giving the contractor a lien against the owner's property to which labor and materials were supplied. By contrast, § 43-11 makes the owner or general contractor personally liable for the debt due.

         Under § 43-11, a subcontractor may, in certain instances, upon following the proper procedures, make the owner of the project or a remote general contractor personally liable for the payment of his claims after having given notice of those claims to the owner and general contractor. The owner or general contractor may be made personally liable to a subcontractor, supplier, or sub-subcontractor even in the absence of a direct contractual relationship with the owner or general contractor. Thus when the statutory requirements are met, then a subcontractor, supplier, or sub-subcontractor can look for payment from both the contractor with which he has a direct contractual relationship, and he can also look to payment directly from the owner of the project. He can proceed to provide labor or materials on a project by relying on the credit of both the general contractor and the owner of the project.

         While the owner, or the general contractor, if he alone was notified, shall be personally liable to the claimant, the owner is only indebted for the amount which he owes to the general contractor and the general contractor is only liable for the amount which he owes to the subcontractor. This is known as a defense of payment.

         In order to qualify for the protection afforded by § 43-11, a subcontractor or supplier must comply with certain notice requirements. Two notices are required under Virginia law. Although there is very little case law in Virginia on this remedy, in an ancient case, interpreting the prior version of § 43-11, the Virginia Supreme Court made it clear that the § 43-11 remedy involves both notice stages. N.J. Steigleder & Son v. Allen, 113 Va. 686 (1912). The Virginia mechanic's lien statute requirements are strictly construed by courts.

         The statute provides that "any subcontractor or person furnishing labor or material to the general contractor or subcontractor, may give notice in writing to the owner or his agent or the general contractor. The first notice must be sent prior to commencing work or supplying materials to the project, and the claimant must give written notice to the owner or general contractor of the nature and character of his work (contract) and the probable (expected) amount of his claim. The notice should be sent by certified mail.

         Such person must then send a second notice "after the work is done or material furnished and before the expiration of thirty (30) days from the time the building is completed." The second notice must be given to the same parties and must contain "a correct account, verified by affidavit" of the his claim against the general contractor or subcontractor for work done and materials furnished, and of the amount therefore due".

         The 43-11 remedy is a powerful tool for subcontractors, suppliers, and sub-subcontractors on construction projects. The notice system shifts risk to the project owner or general contractor and gives that party the incentive to insure that payment is received by "downstream" or "lower-tier" contractors. In some circumstances business relationships or other economic considerations may counsel against use of this remedy, as a subcontractor may not wish to aggravate or jeopardize his relationship with a general contractor by issuing a 43-11 notice.

         This Alert is provided as service to the construction community in general and is not intended as legal advice in any specific instance. We hope this will be of use to you.

    Copyright 2007 by Cowles, Rinaldi, Judkins & Korjus, Ltd.