Sam Seller and Betty Buyer enter into a contract for the sale of Blackacre (“the Property”). Sam agrees to provide Betty access to the Property and as part of the contract paperwork, Sam and Betty execute the Buyer’s Limited Access to Premises Agreement. Prior to closing, Betty arranges to have contractors see the Property in order to make arrangements for planned work. In order to save time, Betty authorizes one of the contractors to install new carpeting in the home prior to closing. A few days after the carpet is installed, Betty is notified by her lender that she is rejected for her loan and she is unable to secure alternative financing. The real estate transaction does not close, and Betty does not pay the carpeting contractor, who proceeds to file a mechanic’s lien against the Property.
This would certainly be an unfortunate situation. In analyzing this situation, we start with the Buyer’s Limited Access to Premises Agreement. This form states its purpose and says in relevant part, “No work is to be performed on or to Property by any of Buyer’s Representatives unless authorized by the Seller in writing.” Presuming Sam Seller did not authorize the carpet installation, it appears clear that Betty had no right to have the carpeting installed. But she did and the contractor filed a mechanic’s lien. Unfortunately, it appears Sam will have to act.
Here is the relevant provision in the Virginia Mechanic’s Lien Statute:
§ 43-3. (Effective October 1, 2019) Lien for work done and materials furnished; waiver of right to file or enforce lien.
A. All persons performing labor or furnishing materials of the value of $150 or more, including the reasonable rental or use value of equipment, for the construction, removal, repair or improvement of any building or structure permanently annexed to the freehold, and all persons performing any labor or furnishing materials of like value for the construction of any railroad, 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, and upon such railroad and franchises for the work done and materials furnished, 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.
Luckily for Sam, unless the carpeting contractor can argue that the Betty Buyer was the “agent” for the Seller, then the bold language seems to prevent a mechanics lien from attaching. But this is something that would have to be argued by the Seller, which will likely require the hiring of an attorney. So, Sam is still out money in the form of attorney’s fees and perhaps court costs, not to mention plenty of frustration.
In looking back at the Buyer’s Limited Access to Premises Agreement, under provision number one, it states in relevant part, “Buyer agrees to release, indemnify, and hold Seller harmless from any claim, loss, fees (including all attorney’s fees incurred by Seller or claimed against Seller), damages for bodily injury, or personal property damage occurring to Buyer or any other person having access to Property as a result of this Agreement.” Thus, in the end, Sam Seller should be made whole and enjoy re-listing the property with no mechanic’s lien and perhaps, new carpeting!