Monthly Lien Law Update for May

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Monthly Lien Law Update

Arizona Expands Mechanics’ Lien Rights 10%

Current Arizona law requires subcontractors provide a preliminary notice of right to file lien to the owner, prime contractor, construction lender, and the person you’ve contracted within 20 days of first performing work or providing goods or materials. This preliminary notice must state an estimated value of the work performed on goods to be supplied. This notice law allows subcontractor to lien up to 120% of the amount stated in the preliminary notice. If the value of the work or materials increases, the preliminary notice must be revised or your right to lien is limited to the original amount plus 20%.

The new Arizona law starting December 31, 2019 will now allow a subcontractor to lien up to 130% of the amount in the notice. This change is intended to reduce the number of amendments subcontractors must file when their preliminary notice amount exceeds 120%. Arizona legal experts already see problems, including how the law will be applied on or after the December 31, 2019 start date. Will it apply to work performed prior to that date, even if notice is given after the start date? Are projects started prior to December 31, 2019 completely excluded from the 130% even if the work begins after that date? Time will tell how the law works but it does help Arizona contractor protect more money.

Demolition Halts to Pay Off a Mechanics’ Lien

Elder Corporation, an Iowa demolition company, was hired by Blackbird Investments to demolish an old hospital and clear the land so high-end housing could be built. Half way through the demolition, Elder had not received payment as promised and stopped work, demanding payment from Blackbird before it would restart the demolition. In late 2018, Elder filed a mechanics’ lien against the property to protect its right to payment and filed suit to have the property sold to pay the debt. However, upon filing the mechanics’ lien, Elder discovered Blackbird had mortgaged the property in early 2018, thereby giving the mortgage holder a superior lien right on the property. Elder has petitioned the court to find that its mechanics’ lien is superior to the mortgage because the work was performed prior to the filing of the mortgage and because Blackbird engaged in fraud. The case is currently on hold, pending ongoing arbitration.