Given how powerful the remedies are under mechanics lien laws, strict compliance with the requirements is usually necessary. Particularly when it comes to the notice requirements. Some states have held that “substantial compliance” is enough.
Other states aren’t so lenient — Nevada is one of those states. This was highlighted in a recent Nevada Supreme Court decision which held that substantial compliance with the notice requirements isn’t enough — actual receipt is required to properly perfect a mechanics lien claim.
Nevada mechanics lien notice requirements
Under Nevada’s mechanics lien laws, there are three potential notices that residential property owners must receive: a Notice of Right to Lien, a 15-day Notice of Intent to Lien, and a Notice of Lien after the claim has been recorded. Failure to comply with any of these notice requirements can prove fatal to a claimant’s lien rights.
But satisfying the notice requirements in Nevada isn’t always as straightforward as it seems — see “Nevada Mechanics Lien Fails Despite Actual Notice.”
The statute covering the Notice of Right to Lien can be found under NRS §108.245(1); which states:
“Except as otherwise provided in subsection 5, every lien claimant, other than one who performs only labor, who claims the benefit of NRS 108.221 to 108.246, inclusive, shall, at any time after the first delivery of material or performance of work or services under a contract, deliver in person or by certified mail to the owner of the property a notice of right to lien…”
This notice is typically sent within 31 days of first furnishing labor and/or materials to the project. It can be sent late, but will only cover the value of labor and/or materials provided in the 31 days preceding the notice. In any case, this notice must be served by certified mail in order to file a valid lien claim. And, according to the NV Supreme Court, “service” means actual receipt of the notice.
Read more: For a deep dive on notices, read Nevada Preliminary Notice Guide | All You Need to Know
A Notice of Lien Rights was sent — but never received by the property owner
The case in question is Reed v. Soligent Distribution, LLC.
- Owner(s): Don & Betty Reed (“Reeds”)
- Attorney: Barney C. Ales, Ltd.
- Subcontractor: Soligent Distribution, LLC (“Soligent”)
District court holds that sub “substantially complied” with the notice requirements
Soligent sought to foreclose their mechanics lien claim against residential property owned by the Reeds. In response, the Reeds filed a motion to release the claim due to the failure of Soligent to deliver the Notice of Right to Lien as required by NRS §108.245.
In an interesting wrinkle, the notice was sent by certified mail, with return receipt requested to Betty Reed at the property address. However, the Reeds’ forwarding request with the postal service had expired before the notice was sent. Therefore, the notice was never forwarded to the Reed’s mailing address, and was returned to Soligent as “undelivered.”
However, the district court held that Soligent had substantially complied with the notice requirements, and denied the motion. Soligent was awarded attorney fees and court costs for defending the motion. The Reeds appealed.
Supreme Court declares actual receipt of notice is necessary
On appeal, the Reeds argued that the notice was never received, because it was sent to the wrong address. Therefore, the lien claim could not be properly perfected.
On the other hand, Soligent contended that they complied with all of the notice requirements by sending the notice by certified mail to the property address. Furthermore, there is no statutory requirement that required any further steps to assure that the notice is received.
The court disagreed by citing previous case law:
“This court has held that “substantial compliance with the technical requirements of the lien statutes is sufficient to create a lien on the property where… the owner of the property receives actual notice of the potential lien claim and is not prejudiced… With regard to providing statutory pre-lien notice, “substantial compliance requires actual notice to the [property] owner” so that the owner is “reasonably made award of the identity of the third party seeking to record and enforce a lien “if the owner has not had direct contact with that third party.”
In accordance with this line of reasoning, the court reversed the district court’s decision denying the release of the lien.
The Reeds were unaware of Soligent’s participation on the project prior to receiving the 15-Day Notice of Intent to Lien. Furthermore, when Soligent had the notice returned as undeliverable, it was Soligent’s responsibility to take additional measures to ensure the notice was received. Thus, the district court decision denying the release of the claim was reversed.
Familiarize yourself with your state’s notice requirements
This is a particularly unfortunate turn of events for Soligent. A little more due diligence could have made the difference between perfecting and losing their lien rights. It appears from the case that when it came time to send the Notice of Intent to Lien, they did take additional steps to ascertain the proper mailing address.
But this is a classic, too little too late scenario.
If claimants want to benefit from mechanics lien protection, they need to ensure that they have all the correct contact information of the parties who are required to receive notice. Not only that, but claimants need to familiarize themselves with the specific requirements of their state. Complying with the black-letter law of the statute sometimes isn’t enough, as this case proves.
Read more: Learn about how and when lien notices must be served in your state with Mailing Construction Notices: Is notice served when mailed or received?