There is very little wiggle room in Arizona’s preliminary notice requirement, as we discussed in the recent post “Everyone Must Send Preliminary Notice in Arizona.” Nevertheless, a recent case from the Arizona Court of Appeals makes it clear that so long as the preliminary notice document is sent, the courts will work through the laws to protect the claimant whenever possible.
The sufficiency of a subcontractor’s preliminary notice was at issue in Wang Electric Inc v. Smoke Tree Resort LLC. Here are some key take-aways from the decision.
Service Upon The Tenant May Equal Service Upon The Property Owner
Well, this isn’t really new law, as we pretty much knew this already. Preliminary notice must be served on the property owner or the owner’s agent, and a mechanics lien can only be filed against a property owner when work is initiated by a tenant if the tenant is an “agent” of the owner. As a result, whenever a mechanics lien is possible, service of preliminary notice upon the tenant is sufficient.
In the Wang Electric case, the property owner alleged the mechanics lien was invalid because the subcontract never served the tenant as the “owner” with preliminary notice. But, of course, once the court found the tenant to be agent of the owner, service upon one was the same as service upon the other.
The only interesting thing about this part of the decision is that this argument usually arises when a tenant is served but the property owner is not, whereas here the owner was served in lieu of the tenant. Six one way half dozen the other says the court, although its a best practice to send it to both…which leads us to new law…
Less Is Not More – Arizona Contractors Can Serve Preliminary Notice on Multiple Parties
This appears to be “new” law in Arizona, but let’s throw it under the common sense category. The property owner challenged a subcontractor’s mechanics lien because it alleged the subcontractor sent too many preliminary notices.
The subcontractor in question sent three preliminary notices to three potential “owners,” the actual owner, the tenant and then some individual agent of the two. The court dismissed this argument:
To the extent Smoke Tree argues the amended notices extinguished the original notice naming Smoke Tree as the owner [*28] and thereby voided the later notice and claim of lien, we reject that argument. Section 33-992.01(B) requires service on the owner to permit it to investigate the claim and promote dialogue among affected parties to resolve payment issues and avoid ‘costly work stoppages, mechanics’ lien foreclosure sales, and double payments by the owner.’ … Aero’s service of the initial notice on Smoke Tree fulfilled that purpose. We are not aware of any authority, and Smoke Tree does not cite any, supporting a conclusion that a Laborer’s amendment to a notice to name other reputed owners, thereby increasing the likelihood the true owner is served, extinguishes prior notices. Construing § 33-992.01(B) liberally to protect Laborers’ interests…we decide a Laborer may ‘cover its bases’ by serving multiple preliminary twenty-day lien notices naming different owners and reputed owners as long as such service is timely.