Preliminary Notice Company, LLC
Preliminary Notice Company, LLC does not have an attorney on staff.
We do not provide legal advice.
THE FOLLOWING INFORMATION IS PROVIDED TO GIVE YOU A GENERAL UNDERSTANDING OF YOUR LIEN RIGHTS AND IS NOT INTENDED TO BE A COMPLETE EXPLANATION OF THE ARIZONA MECHANIC’S LIEN STATUTES. ANY QUESTIONS YOU MIGHT HAVE SHOULD BE ADDRESSED TO YOUR ATTORNEY.
What is a Lien?
Who is Entitled to a Lien?
Any architect, engineer, contractor or material supplier, furnishing labor, professional services, machinery, fixtures, or tools in the construction, alteration, or repair of any building or other structure or improvement is entitled to a lien. This is true whether or not the contractor or material supplier has a contract with the owner, if the labor or materials were furnished at the insistence of a General Contractor, subcontractor, architect, builder, or other person having charge or control of the construction, alteration, or repair either wholly or in part. If they are at the insistence of a materials supplier, then there is not entitlement to a lien.
What, Precisely, is a Lien?
A lien is a cloud on the title of the owner, and can be foreclosed in a lawsuit. This means that the building can be sold by the sheriff and the proceeds used to pay the contractor or materials supplier. This is true even if the owner has already paid a General Contractor or another party for the work, in effect, meaning that the owner may have to pay twice. The Arizona Lien Law is a very firm expression by the Arizona Legislature to protect those who contribute labor or material to enhance the value of the property of another.
ARS 33-981
Suit to Foreclose
Within 6 months of the filing of the lien, a lawsuit must be brought to foreclose on the lien. If a lawsuit is not brought within six months, the lien expires.
Time Within Which to File a Lien
You have 120 days after Final Inspection, or your last day on the project if no Final Inspection is required. Note that the significant date is not when you completed your work, but when the entire structure is completed. Even though 120 days have passed from completion of your work, you can still file a lien if it is within 120 days of the completion of the structure.
If a Notice of Completion is filed with the County Recorder, then the times are shortened to 60 days. The owner must mail by certified mail a copy of the Notice of Completion to everyone who has sent a Preliminary Notice for the project.
Completion of the structure is defined as the earliest of the following:
- Actual completion of the work;
- Occupation or use by the owner (this only applies to completion of a residential project, not a commercial project);
- Written acceptance by the owner or his agent;
- Final inspection and written final acceptance by the governmental body which issued the permit;
- Cessation of labor for a period of 60 consecutive days, unless it is due to a strike, shortage of materials or act of God.
ARS 33-993
Preliminary Twenty Day Notice
General contractors, architects, engineers, subcontractors providing materials, sub-subcontractors, and materials suppliers must serve the Preliminary Twenty Day Notice, or lose their lien rights.
Those who are required to serve the Preliminary Twenty Day Notice must serve it on the owner, original contractor, construction lender and the person with whom the claimant has contracted for the purchase of those items. Service may be by first class, registered or certified mail. If first class mail is used, a certificate of mailing must be obtained from the postal service.
If you are required to serve a Preliminary Twenty Day Notice, do it for all jobs within 20 days of supplying the first labor, professional services, materials, machinery, fixtures or tools are supplied. Notice may be given for additional labor or materials within 20 days of the time they are supplied. However, the notice shall apply only to the additional labor and materials.
Priority
If any work by any subcontractor began prior to the recording of a mortgage or deed of trust, then all lien claimants (including those filed after a mortgage or deed of trust) take priority over the mortgage or deed of trust. If the mortgage or deed of trust was filed before any work at all was done, then it takes priority.
An owner may avoid liens by filing a bond in the amount of the contract. Once a lien is filed, it may be discharged by the filing of a bond in the amount of one-and-one-half times the amount of the claim secured by the lien. In that case, action should be brought against the bonding company. This time limit is 6 months or adding the bonding company as a party within 90 days if there was an action pending at the time the bond was filed. The six months begins to run after the lien claimant is served with the bond, or after he discovers it, but in any case no more than two years after the date the bond was recorded.
Inapplicability of Liens to Owner Occupied Dwellings
Only parties having a written contract directly with the owner may file a lien against an owner occupied dwelling. This includes a dwelling that the owner intends to occupy during its construction or improvements.
Defense by the General Contractor
The owner may withhold payments due the General Contractor in the amount of any liens filed against the owner. If the owner sends the contractor a copy of the lien, or notifies him of the lien, and the contractor disputes the lien, he must notify the owner within 10 days. Otherwise, he shall be considered as assenting to the demand, which can be paid by the owner and deducted from what is owed the General Contractor. The owner can require the contractor to defend any actions brought by others on the liens filed against the owner.
Waiver and Satisfaction
If you sign a waiver before having received funds, your right to a lien is lost. Even if the General Contractor gives you a check which bounces, an owner can claim that he made payment to the General Contractor in reliance on your signature on the lien waiver, and if the General Contractor is no longer solvent, the risk of loss in such a case will fall on you rather than the owner.
If you are asked to sign a waiver for partial release based on partial payment, it should state explicitly in the form that the release applies to a specific dollar amount only, and that you are reserving your right to lien for the remaining amount on the contract.
Satisfaction and Release of Mechanic’s Lien
When you are paid, this form must be filed to release any liens that were previously filed, regardless of whether or not a request to release is made. The release must be provided within 20 days after payment has been made, and there is a penalty of $1,000 plus actual damages for failure to do so.
Payment Bond
The owner of a construction project may avoid having liens filed on his property by requiring his General Contractor to provide a payment bond in the amount of their contract.
Any claimant who would have Lien Rights where a bond is not provided, has the right to file suit against the bond provided on such projects. Any claimant not under direct contract with the General Contractor of a project with a payment bond must mail a Preliminary 20 Day Notice by Certified or Registered mail to the General Contractor only.
Before filing against the bond, the claimant must mail a second notice within 90 days of the claimant’s last day on the project. This notice also is sent only to the General Contractor by certified or registered mail and must state the amount owed, project name or location, and the name of the party to whom the materials were furnished or supplied or, for whom the labor was done or performed.
Arizona Revised Statutes
