Arizona mechanics’ and material men’s lien laws provide protection to parties who supply labor, professional services, materials, machinery, fixtures or tools for the improvement of real property. The primary purpose of the laws are to protect from the dangers of non-payment, those who have provided labor or materials that enhance the value of another’s property. In a nutshell, each person or company enhancing the value of another’s property, such as a construction contractor, has the ability to place a lien on the property to ensure that they receive payment from the property owner. It is important that contractors, subcontractors, and material suppliers understand the process so they can complete all of the necessary steps in order to properly protect themselves and their lien rights. Strict compliance with each step has not always been required by courts and lien statutes are usually liberally construed, however, in some cases strict compliance is absolutely necessary. Generally then, it is unwise to risk your rights through shoddy compliance when it is relatively easy to comply strictly with the law. Setting up and following best practices in your business will help protect your lien rights and your ability to get paid. This article will walk you through the basic lien process so the legal framework can be understood and best practices developed. This article is not intended to be an exhaustive explanation of Arizona lien law and its intricacies; in fact, it certainly should not be a substitute for specific legal advice in the event you encounter lien problems or questions. When in doubt, seek competent legal help before it is too late.
Protected Projects – In Arizona, mechanics’ and materialmen’s liens only apply to private construction projects, not publicly owned projects like schools or roads. People and companies supplying labor or materials to a public construction project do not have lien rights, but instead, are typically protected by project specific payment and performance bonds. There are also limitations involving owner-occupied homes.
Protected People – Generally speaking, every person who provides labor, professional services, materials, machinery, fixtures or tools in the construction, alteration or repair of a building or other structural improvement is entitled to claim a lien. However, there are several fact-specific limitations to that general statement:
- a supplier supplying materials to another supplier probably has no lien rights
- a subcontractor to a subcontractor probably has no lien rights
- unlicensed contractors have no lien rights if a license was required to do the work performed
If you face a scenario involving one of the three limitations, you should consult an attorney immediately to evaluate the specific scenario and the appropriate course of action.
Preliminary 20-Day Notice – In order to properly record a lien, Arizona law requires that all persons (other than those performing actual labor for wages) give the following people/entities a written preliminary 20-day notice regarding your lien rights:
- the owner (or reputed owner)
- the general contractor (or reputed general contractor)
- the construction lender (if any), and
- the person with whom the claimant has contracted
Thus, a supplier to a subcontractor must send a 20-day notice to the subcontractor, the general contractor, the owner, and the construction lender.
The preliminary 20-day notice is a written notice of a potential lien claimant that is given prior to recording a mechanic’s lien. It is not a lien; it is instead simply like saying “I may file a lien on the property later if I don’t get paid. If you pay me according to our contract I will never file a lien.” The notice should follow specific statutory forms and processes.
The notice must be given within 20 days of when you first start work or deliver materials or equipment on the project in order to protect the full amount of your rights and payment. In effect, the notice “reaches back” and protects 20 days before its sending. So, if you start a project on day 1 and mail the notice before day 21 you are protected for all of the work and materials delivered or done. If you gave notice on day 35, the notice reaches back 20 days and protects you from day 15 forward. Your lien rights, and thus the ability to enforce payment for work and materials through lien laws, on days 1 to 14 are lost. Giving this notice is an absolute requirement in order to enforce your lien rights later.
Some contractors and subcontractors are hesitant to send these notices; for fear that they will upset the client or general contractor. This fear, however, is misplaced. As mentioned above, the notice is not a lien. It is not a threat to file a lien. Nor does it convey the message that you don’t trust the client or general contractor. The message it conveys is that you know the law and want to ensure everyone complies with it. That’s it. Every experienced general contractor, subcontractor, and client expects you to give the 20-day preliminary notices. In fact, failure to give such notice may convey a message of its own: that you are unsophisticated and don’t know the basics of the law.
Recording the lien – Recording the lien may become necessary to ensure payment if you are unpaid for too long after the completion of the project. If you have completed the project and have not been paid, recording a lien should be considered promptly. There are strict time requirements that must be complied with in order to maintain your lien rights. Generally the “deadline” to record a lien is 120 days after completion of the project, unless a “Notice of Completion” has been properly recorded by the general contractor or project owner with the county and served upon you. “Completion of the project” means that the entire project is completed, not just a subcontractor’s or supplier’s individual portion. If you have not been paid within 50 days after the completion of the project and a Notice of Completion was recorded, you should consult with an attorney immediately to ensure that you maintain your lien rights and maximize the odds of receiving payment. If you have not been paid within 100 days after the completion of the project and a Notice of Completion was not recorded, you should consult with an attorney to ensure that you maintain your lien rights and maximize the odds of receiving payment.
Arizona Lien Laws are fairly technical, but they are easy to comply with once you know the basics. If you know what projects are protected, who is protected, and the statutory requirements, it should be relatively easy to protect your interests on each and every project you are involved in. If would like to talk about your lien processes, have questions, or haven’t been paid after the completion of a project, please don’t hesitate to contact me at 480-344-4597 or go to davismiles.com to request a consultation.