How Long Is The Lien Effective?
Once a mechanic’s lien has been recorded in the office of the county recorder, it will remain effective for six months. In order to prevent the lien from expiring, the lien claimant must file a lawsuit to foreclose the lien before that deadline expires. In addition to filing the lawsuit, the lien claimant must record an additional document in the office of the county recorder, known as a “Notice of Pendency of Action” or “Lis Pendens.” This document becomes a public record to let everyone know that there is a pending lawsuit that may affect the title to that real estate. If a lien claimant doesn’t file a lien foreclosure lawsuit within six months after the mechanic’s lien is recoded, the lien will expire and the contractor or supplier will lose all of its lien rights. Similarly, if the Notice of Pendency of Action/Lis Pendens is not recorded in a timely manner, the lien rights will also be nullified.
Will My Arizona Lien Have Priority Over Pre-Existing Mortgages Or Construction Loans?
Under Arizona law, the default position is that recorded documents (such as mechanics liens, mortgages, deeds of trust, etc.) will have priority based on the order in which they were recorded. For example, a mortgage recorded in 2013 will have priority over a home equity loan recorded in 2014. This is generally known as “first-in-time” priority. However, under Arizona’s lien statutes, there are a couple exceptions to this default rule. First, a mechanic’s lien typically will be recorded only after a contractor has been working on a project for a while—often a period of several months. However, the mechanic’s lien, whenever it is recorded, will be given priority based on the date that the contractor first started working on the project, even though the lien wasn’t recorded until several months later. A second exception is that construction loans are given a ten-day grace period to have priority over mechanic’s liens. In other words, if a construction loan is recorded within the ten-day period after work started on the project, then that construction loan will have priority over any mechanic’s liens. As a practical matter, almost every bank or construction lender will require documents to be signed by the project owner and contractor that state that all mechanic’s liens will be subordinate to the construction loan.
What Is A Stop Notice?
Unlike a mechanic’s lien, a stop notice is not a claim against underlying land but is instead a claim against the construction funds, which gives the contractor or supplier the right to put a hold on the construction loan or other designated project funds based on their claim of not having been paid.
In What Types Of Projects Can A Stop Notice Be Served?
A stop notice can be served only on private projects. Public projects (i.e., those financed by the government) are almost always required to be covered by a payment bond. Those bonds will be the mechanism to ensure payment to those providing labor and materials to the project, and mechanic’s lien and stop notices will not be available.
Who Can Serve A Stop Notice?
A stop notice can be issued by anyone who would have the right to assert a mechanic’s lien claim. That means anyone who is providing labor, materials, or equipment to the project who either has a direct contract with the owner of the project, is a subcontractor to that prime contractor, or who is a supplier or sub-subcontractor to a subcontractor, is protected by stop notice laws. All those people have a right to serve a stop notice but if you go lower than that, such as a supplier to a subcontractor, they do not have a right to do a stop notice or a mechanic’s lien.
Do I Need To Serve A Preliminary Notice In Order To Serve A Stopped Payment?
A Preliminary Twenty-Day Lien Notice is required to pursue a stop notice claim. As with a mechanic’s lien, the Preliminary Twenty-Day Lien Notice should be sent to relevant parties within twenty days of when the claimant first provided labor, materials, or equipment to the project. However, even if they miss that deadline, if they send the Preliminary Twenty-Day Lien Notice as soon as possible, then they will have stop notice rights (or lien or bond rights) for any work that was done within twenty days before that preliminary 20 day lien notice was sent, and going forward in the project from there.
For more information on Filing A Mechanic’s Lien In Arizona, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (480) 378-0466 today.
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