Mechanics lien deadlines are strict, but they can also be confusing. This is especially true when project timelines are shifted by things like change orders. A recent Oregon case showed how important change order format can be.
Since this is update comes from an Oregon case, let’s start with the state’s lien deadline.
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What is Oregon’s mechanics lien deadline?
First, let’s take a look at the Oregon mechanics lien deadline. In Oregon, lien claimants have 75 days from their last furnishing date to file a mechanics lien. Once a construction business completes its work, the clock begins ticking. And, if the 75-day deadline comes and goes without a mechanics lien filed, lien rights are (typically) lost forever.
You can read more about last furnishing dates here: What’s the ‘Date Labor or Materials Last Delivered’ and How Can I Prove It?
How do you determine the last furnishing date?
There’s trouble with a mechanics lien deadline being based on the last date of furnishing – and this is true across state lines. Often, there isn’t a clear cutoff date for when a business finishes their work. It’s common, if not expected, for there to be some callbacks and punch work.
Generally, that will be the last date when substantial work is performed pursuant to the claimant’s contract. Mere punch list or warranty work won’t extend the timeframe for filing a lien.
Change orders are unique, though. Change orders aren’t in the original contract, but they’re more substantial than punch work. The general rule is that change orders will be lienable if they’re properly executed.
Oregon mechanics lien deadline can be “extended” by properly executed change orders
A recent Oregon case, Bethlehem Construction, Inc. v. Portland General Electric Company, showed that change orders can effectively extend the timeframe for filing a mechanics lien. Davis Wright Tremaine LLP also has a great breakdown of the case.
Bethlehem Construction, Inc. v. Portland General Electric Company
We’ll keep the facts simple here. Portland General Electric (“PGE”) hired Abeinsa Abener Teyma General Partnership (“Abeinsa”) to construct a power plant. Abeinsa hired Bethlehem as a supplier on the job. Bethlehem specially fabricated and supplied precast concrete panels for the project, and their contract was for just over $120,000.
Bethlehem performed their contract but went unpaid. At that time, Bethlehem did not file a mechanics lien – and they let 75+ days pass. Meaning, Bethlehem missed it’s deadline to file an Oregon mechanics lien – presumably tossing out the possibility of a lien claim altogether.
After the 75 days passed, Bethlehem was actually brought back on the project. One of the project’s subcontractors had damaged one of Bethlehem’s concrete panels, and Bethlehem was hired to replace it. Importantly, Bethlehem’s extra work was very well documented with an official written change order. After performing the work for the change order, Bethlehem ended up filing a mechanics lien – both for the work done under the original contract and pursuant to the change.
The court determined the change order created a new last furnishing date and a new mechanics lien deadline
When Bethlehem’s lien eventually made it to court, PGE (the property owner) argued that the lien was untimely. They argued that Bethlehem lost the ability to lien after it let the deadline lapse for its original work. PGE also argued that the work done pursuant to the change order was minimal (it was only ~$570 worth of work) so that work shouldn’t be considered when determining the last furnishing date.
The court disagreed. It found that the change order was an extension of the initial contract, and thus, the dates when work was done under the change order sufficed at the project’s last furnishing date.
Change order format will determine whether the mechanics lien deadline will be altered
In this situation, the court determined that the change order was actually an extension of the contract itself. This was due to a number of factors, namely: (1) the format of the change order, and (2) the nature of the work.
The change order clearly indicated it related back to the initial contract
Thiw change order was executed in a very thorough manner. It was:
- Titled “Change Order Request”;
- Referenced their initial contract number; and
- Identified how the change order altered the initial scope of work.
As a result, the court found, it was clear that the new work wasn’t done pursuant to some new agreement – rather, the work was clearly just an extension of the contract previously executed.
Work performed under the change order was not “insubstantial” or “trifling”
The change order was for a relatively small amount – just under $600 – compared to the initial agreement of over $120,000. The court noted the cost of the work, in and of itself, was not enough to determine whether the work was substantial enough to extend the timeframe for filing an Oregon mechanics lien.
Bethlehem’s new work didn’t cost much, but it was crucial to the project. Without a replaced concrete panel, the improvement wouldn’t have been structurally sound. That was good enough for the court – and it found that the work was significant and different from regular old punchwork. Because the work was not deemed “insubstantial” or “trifling”, it was sufficient to establish a new last furnishing date.
Change order format is crucial for all contractors, subs, and suppliers
It’s extremely common for change orders to be done informally and on the fly. Construction can be unpredictable, and changes are necessary on the time – so asking for a written change order might feel overly formal or even like a sign of distrust. But it’s crucial to get change orders in writing. Because Bethlehem used a formal change order process here, their lien rights were raised from the dead and they were able to get paid.
We hear from contractors and subs all the time who say they get asked to perform changes on the fly. And, many of those same contractors report that their customer all of the sudden claims the change orders weren’t authorized or won’t be paid when it comes time to make payment. If the change order wasn’t in writing and didn’t reference the initial contract, obtaining payment for extras could be an uphill battle.
Even when there’s full trust between everyone involved, it’s a good idea to put everything in writing and to do things by the book. When change orders are merely done verbally, there’s too much room for error. The exact scope or specs for the change might not be perfectly clear – and flawed work will lead to defects, delays, and more extras. When change orders put to writing, there will be much more clarity on what needs to be done. Plus, if a dispute does come up, it will be much easier to collect on formal change orders.