Your tenant owes you three months rent. You want to collect, but you know that the moment you file a lawsuit your tenant is going to load everything he owns onto a truck bound for Upper-Slobbovia. What can you do? Virginia law may have the solution to your problem: the “landlord’s lien.” This under-utilized remedy offers landlords an opportunity to protect their interests and recover amounts owed without giving the tenant a chance to secret away assets located at the premises.
The Virginia Code gives landlords a lien on all of the tenant’s property located on the leased premises. Furthermore, the landlord’s claim takes precedence over almost all other claims against the tenant’s property.
How good is it?
The landlord’s lien is not just a right to assert a claim but is a lien which exists from the moment the tenancy begins and continues until thirty (30) days after the tenant’s property is removed. The landlord’s lien is superior to any other liens created after the tenancy has begun. This makes the landlord’s lien a very powerful tool. The landlord’s lien is even superior to secured liens, including recorded UCC “purchase-money” security interests, so long as the competing liens arose after the tenancy began. Even if the tenant enters bankruptcy, the landlord’s lien is superior to that of other secured creditors.
The landlord’s lien allows a landlord who is owed rent to attach or even seize the tenant’s property to the extent necessary to satisfy unpaid rent. A tenant’s property removed from the premises in anticipation of default will be subject to attachment or seizure up to thirty (30) days following the time of its removal.
How To Use It
Virginia Code Section 55-231 provides for the landlord’s lien in every tenancy. Therefore no particular action is required to create the lien. However, in practice this lien is not very valuable unless it is enforced by some action. This enforcement usually takes the form of an action in “distress” which allows a landlord to attach or seize the tenant’s goods.
If as landlord wishes to assert his lien through a distress action, he must first file a sworn petition which sets out the amount of rent due, identifies the debtor, and demonstrates the justification for the attachment or seizure. These justifications are defined by statute and cover a fairly broad range of circumstances. Most importantly, the landlord must allege that the tenant intends to flee from the Commanwealth, or conceal himself from his creditors. Distress is also allowed to prevent the tenant from selling or assigning his property to another party in order to evade his landlord.
If the judge approves the petition, a warrant of distress will be issued. The landlord must choose whether to merely attach the property or to levy and seize the property. In an attachment (also called a “levy”) the property on the premises remains in the possession of the tenant, but it remains legally within the custody of the court. The tenant will be unable to sell, move, destroy, or dispose of the property without suffering legal penalties. In a seizure, the sheriff will actually take possession of the tenant’s property.
The landlord must post a bond equal to the value of the tenant’s property, if the property is to be attached but remain at the tenant’s premises. However, if a bond equal to twice the property’s value is posted, the sheriff will seize the property and allow it to be removed by the landlord.
What are its limits?
The landlord’s lien can only be asserted against property on the premises at the time of default or within the previous thirty days. Any property removed from the premises prior to that time is not subject to the lien, even if the property was purposefully removed to avoid seizure. Also, the lien cannot be asserted for an amount greater than six months rent (or twelve months rent on agricultural property). Additionally, the lien is not applicable to retail merchandise. Any landlord who leases to a retail merchant waives his lien upon the shifting stock of retail goods. However, the landlord still has a lien on equipment and other property owned by the retail tenant.
If the property is seized, the tenant can regain possession after posting a bond equal to the value of the property. Most significantly, every tenant is entitled to a hearing within ten (10) days after the attachment or seizure at which he may recover his property if he can show a valid defense to the distress petition and an inability to pay for a bond to secure the property.
Use It In The Right Case
Despite its limitations, the landlord’s lien remains one of the most effective tools for recovering rent from a defaulting tenant. Seizure of property may be the landlord’s only hope of recovering money. After the sheriff arrives, you can be assured that the tenant will finally listen to your demands for rental payments. The tenant’s other creditors who thought they had superior security interests will want to make a deal. Finally, the landlord can negotiate from a position of strength.