Governor Signs 4 Major Real Property Bills Into Law

Last week, Governor McDonnell signed into law four (4) significant pieces of legislation affecting real property laws in Virginia:

Mechanics Lien laws (SB 105): Mechanics Lien Agents (MLA's) no longer need to consent to being designated as such. In addition, the law clarifies the requirements for the Notice required to be given to the MLA when a contractor or sub begins to perform labor or adds materials to the project. Notice now just needs to go to the MLA posted on the building permit when the contractor begins work, not, as the law previously required, the MLA noted when the building permit was originally issued. The law also allows building permits to be freely amended to add MLA's later on, bringing the law into conformity with the realities of construction work, where building permit are often pulled without an MLA named, or the MLA is changed at a later time.

Residential Landlord-Tenant Act (HB 407): Several new provisions are beneficial to landlords, but the two most important, in my view, are: 1) clarifying the ability of a landlord to place damage or renter's insurance and then bill the tenant for that premium as part of the rent cost; and 2) allowing the landlord to withhold returning the security deposit until the final utility bills are received, instead of being required to return the deposit or portion thereof to the tenant 45 days after the lease term ends, as the law currently requires.

Exchange Facilitators (HB 417): The "Exchange Facilitators Act." I call this the "Post-LandAmerica Debacle Statute." For the first time, any person or entity who serves as a qualified intermediary in a Section 1031 Deferred Like Kind Exchange will be regulated. Exchange Facilitators will be required to maintain the escrowed funds in separately identified accounts or in a qualified escrow or qualified trust; they will be required to maintain errors and omissions insurance; amounts escrowed with them will be deemed to be held in trust and must be deposited in a financial institution, with interest accruing to the parties or otherwise invested per a written agreement; they will be required to have a cash deposit or letters of credit equal to at least $250,000; they must account for all moneys and property; and they shall not commingle escrowed funds with other accounts nor lend such monies out. Sadly, this law codifies the code of conduct that some of us thought was always expected of qualified intermediaries, but which was violated by LandAmerica Exchange Services which essentially embezzled from their own exchange customers prior to filing bankruptcy. (See prior post on this Blog dated May 15. 2009.)

Expanding "Vested Rights" in Virginia (HB 1250): Virginia's "Vested Rights" Statute establishes when a landowner can know for sure that a decision of government affecting their land will "vest" certain rights in the property which cannot be altered by a subsequent governmental action. This new law expands the definition of a "significant affirmative governmental act" by adding written orders, decisions or determinations of a zoning or other administrative officer to the list. Previously, only the decision of a governing body, such as the Boards of Supervisors, Board of Zoning Appeals, or Planning Commission, could be considered to "vest" rights. Because so many government decisions are delegated to staff such as zoning administrators and planning managers, landowners had not previously been able to rely on the guidance or decisions of these powerful local government officers, whose decisions carry a lot of weight. Now they can. Critics of this legislation say that it is now possible that emails and casual correspondence with landowners may be deemed to be a governmental action. In my opinion, this legislation is very good law.