In order to execute a mechanics lien on a property, a claimant must follow their state’s lien laws to a T. That being said, some states tend to be more lien-ient than others. In any event, it is always in the best interest of a party asserting a lien claim to take every precaution when filing a lien claim, because when liens are necessary the stakes are often high. A recent Nevada case showed that even when a state is willing to show some leniency in employing its lien laws, the law is only so flexible. Despite a compelling argument that the situation may have fit under the Nevada mechanics lien statute, the Nevada Supreme Court decided not to extend the state’s lien laws to an interesting scenario.
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This case, Iliescu v. Steppan, was decided just this May.
When an architect provided design work for a potential purchaser of the property and the deal fell through, the architect filed a lien on the property. The architect asserted that even though he was hired by a party who did not actually purchase the property, the owner of the property was aware of the architectural work being done and had actually viewed designs and attended presentations- that the owner had actual notice.
Under the Nevada mechanics lien statute, a party performing work must provide a Notice of Right to Lien within 31 days in order to preserve their lien rights. However, Nevada courts have developed precedent establishing that when actual notice of the work being performed is present, failure to provide the pre-lien notice will not be fatal to a lien claim. This actual notice requires (1) actual awareness of the work being performed and (2) that the property owner knows the claimant’s identity. Importantly, Nevada’s mechanics lien laws extend to architectural and engineering work not done on the job site.
The property owner claimed that because there was no pre-lien notice, the lien should not stand. The property owner also asked the court to clarify whether the exception to Nevada’s pre-lien requirement applies to offsite work. Though the architect failed to provide any pre-lien notice, he asserted that his lien claim should stand because the owner had actual notice of the work being performed through the design meetings and presentations attended by the owner prior to the claim. Because off-site architectural work is lienable in Nevada, the architect argued that the actual notice of his off-site work was a valid basis for a Nevada mechanics lien claim.
The district court found for the architect. The court found that actual notice was available to an architect performing off-site work and that this property owner’s actual notice of the work being done was enough to survive the defect of failing to provide a pre-lien notice. However, the Nevada Supreme Court disagreed.
The Nevada Supreme Court found that the actual notice exception only applies when onsite improvement has taken place. Citing prior decisions, the court noted that the actual notice exception has been extended to situations where owners are actually aware of the improvements being incorporated into the property or have actually come upon such an improvement when inspecting the property. The prior cases all tied the exception to presence on the property, calling for more than “mere knowledge of construction” in order to keep the exception from swallowing the rule. The court went on to note that the architectural work had not actually improved the property and that applying the exception would, in fact, swallow the rule. Finally, the court added that the situation was further complicated by the fact that the architect was not even hired by the owner, and that his work was contingent upon the sale of the property. Because the architectural work was done off-site, did not actually improve the property, and was done at the direction of a prospective owner under the contingency that the sale would go through, the court found that extending protection under Nevada mechanics lien law was improper.
Mechanics lien laws are not known for their flexibility. Quite the opposite, even small typographical errors and minute discrepancies have been known to invalidate lien claims. Attempting to further extend an exception to a mechanics lien statute seems like a futile exercise, though this case made a compelling argument.
But the root of this disagreement cuts to the core of mechanics lien law in general. Mechanics liens are available to protect those performing work, performing labor, and/or supplying materials for the improvement of real property. Often times, this includes architects, engineers, and design professionals. Even when a property owner does not directly contract with a subcontractor or supplier, liens are available to ensure that the work is compensated. But in this case, architectural work that did not actually improve the property was done at the direction of someone who ultimately was not even related to the property. This claimant hardly fits the profile of who lien laws were intended to protect.