The Mechanics Lien on Your Arizona Home: What It Can Do, What It Cannot, and Which Clock Is Running

A mechanics lien is a widely misunderstood document in Arizona construction. Contractors may treat it as a right they can exercise whenever a bill goes unpaid. Owners may treat it as a cloud on title that will follow the house forever. Both views can be costly, because the lien statutes provide for a sequence of short deadlines and specific exclusions, and a lien that misses any of them may be worth nothing.

What a lien is and who can record one

You can find Arizona's mechanics and materialmen's lien statutes at A.R.S. §§ 33-981 to 33-1008. They give a contractor, subcontractor, or supplier who improves real property a lien on that property to secure payment. Notably, a contractor who is required to hold a license and does not hold one has no lien rights at all. The lien is created by statute, perfected by recording, and enforced by a foreclosure action in Superior Court. A judgment may order the property sold. A mechanics lien is also subject to conditions that many claimants and many owners have not reviewed.

The twenty day notice

Under A.R.S. § 33-992.01, everyone except a wage laborer must serve a preliminary twenty day notice as a necessary prerequisite to the validity of any claim of lien. It must go to the owner, the original contractor, the construction lender if there is one, and the party the claimant contracted with, and it must be served within twenty days after the claimant first furnishes labor or materials to the job. A claimant who serves it late may claim a lien only for the work furnished in the twenty days before service and the work furnished after it. A claimant who never serves it has no lien. Owners often receive these notices at the start of a project and set them aside. They should be kept, because the notice is also the owner's first indication that a subcontractor the owner never hired expects to be paid, and the statute puts the owner on a short clock of its own once the notice arrives. Which notices to keep, and what to do when one arrives from a company the owner never hired, is a question to bring to Patrick before anyone is paid.

The recording deadline

A.R.S. § 33-993 requires the lien to be recorded within one hundred twenty days after completion, or within sixty days if the owner has recorded a notice of completion. Completion is a defined term with its own triggers, and it may be earlier than the contractor assumes. The notice of completion is an owner's tool that severely limits a contractor's window to record a lien. The lien itself has required contents. It must be made under oath, and it must state the legal description of the property, the name of the owner or reputed owner and the name of the person who hired the claimant, the terms of the contract or a copy of it if the contract is written, the amount demanded after just credits and offsets, the date of completion, and the date the preliminary twenty day notice was given, with a copy of that notice and the proof of mailing attached. A lien missing any of those is open to challenge.

The six month clock

Under A.R.S. § 33-998, a recorded lien lasts six months. Unless the claimant files a foreclosure action within that period and records a notice of pendency of the action, the lien expires by its own terms. A contractor who records a lien and then negotiates for seven months has technically recorded nothing. The same section allows the court to award reasonable attorney fees to the successful party in any action to enforce a lien, which can make an invalid lien an expensive instrument to have recorded.

The owner-occupant protection

Many homeowners are not aware of and may need the owner-occupant protection under A.R.S. § 33-1002. The statute provides that no mechanics lien may be recorded against the dwelling of a person who was an owner-occupant before the work began, except by a person who contracted directly with the owner-occupant in writing. A subcontractor, a supplier, or a laborer hired by your general contractor generally cannot lien your residence, regardless of what the general contractor failed to pay that subcontractor. Any agreement waiving that protection is void. Whether you qualify as an owner-occupant is defined by the statute in terms of recorded title, residence, and intent, and a lien recorded in violation of the section is a lien that may be removed.

The discharge bond

An owner, a contractor, or a lender who needs to remove a lien from title immediately, whether to close a sale, refinance, or to prevent a cloud on title, may record a surety bond under A.R.S. § 33-1004 in an amount equal to one hundred fifty percent of the lien demand. On recording, the property is discharged of the lien whether or not the claimant is served. The bond then stands in for the property, and the lien claimant has a fixed period of time after receiving notice of the bond to bring the surety and the principal into the case. A claimant who misses that period forfeits the opportunity to collect against the bond. For the party that recorded the bond, the property is free of any cloud from the mechanics lien and the dispute has moved to a piece of paper with a collection ceiling on it. Whether to post a bond or contest a lien instead is a decision to make with Patrick, as each choice starts a different clock.

Both sides of the lien statutes

The lien statutes are symmetrical. Every deadline that binds the contractor is a defense for the owner, and every protection the owner has is a requirement the contractor must meet. Patrick has represented contractors enforcing liens and owners contesting them, and that experience on both sides informs the strategy in each matter.

If a lien has been recorded against your property, or you are a contractor deciding whether to record one, Patrick will review with you the best first step to take. Nackley Law represents Arizona property owners and contractors in mechanics lien matters statewide.