Mechanics liens against major brands aren’t necessarily common, but they aren’t rare either. We’ve seen liens against Chik-fil-A this year as well as against an the NBA’s Sacramento Kings and even the biggest names in the music industry: Beyoncé and Jay-Z.
When large companies or brands face mechanics liens, it’s bad press. But (unfortunately) mechanics liens on massive projects pop up pretty regularly – coordinating the construction payment chain on such a large scale is often too much for the parties involved to handle. A few days ago, a story of mechanics liens amassing on an high-dollar Oregon project emerged. No, not the Intel liens – we wrote about those a few weeks ago. Now, the Nike Headquarters expansion project is also facing mechanics liens.
Payment Disputes Result in a Nike Mechanics Lien
When payment disputes arise on large projects without a resolution in sight, it’s common for a contractor, sub, or supplier to file a mechanics lien. However, just because liens on these projects are common doesn’t mean that they should be accepted as the status quo. No, through fair payment processes and effective communication, a construction payment utopia is on the horizon. For now, let’s take a look at the Nike situation…
For the full story, Oregon Live has a great article.
While many large projects are proud to laud their massive costs, this Nike expansion is so massive that the company hasn’t even released a dollar figure on it. According to the above-linked Oregon Live article, “The plan now calls for adding six buildings and 1.7 million square feet and approximately 4,000 parking spaces.” Further, the article states that the crown jewel of the project will be a 10 story, 1 million square foot office building, set for completion sometime next year.
For more on the project plans, here’s an article from Architectural Digest.
The two main disputes, at least the ones featured in the article, are with a specialty materials contractor providing work on the parking garages (plural) and with a flooring contractor who provided flooring for the fitness center. We’ve discussed the struggles specialty material suppliers face with lien rights in the past, but this supplier had to put their liens on hold for a different reason – their contract contained an arbitration clause. That dispute is ongoing in arbitration.
As for the flooring company, their dispute has arisen from unrealistic expectations. Due to delays on other areas of the project, the flooring contractor was asked to cut their time to completion in half. To comply with the new work schedule, the flooring co. had to bring on extra labor and had to pay for unanticipated overtime. The company actually finished the project a day ahead of schedule. Rather than be rewarded, much of the work was rejected and progress payments dried up. As a result, the flooring company sued.
Looking to secure Oregon lien rights? We’ve got a fact sheet for that.
How Could These Disputes Have Been Avoided?
The contractor could’ve paid! No, but seriously – utilizing a system of clear communication and transparency (through notices) would have been a start. In Oregon, not everyone is required to send preliminary notice (more clarity on that, here), but it’s a good idea to send preliminary notice on every job.
Ultimately, at least for the flooring contractor, this payment dispute might not have been avoidable – the flurry of change orders and the refusal to accept work done pursuant to plans can’t really be tied back to notices. But, if communication lines were clearer, these problems may have been nipped in the bud.
Foreclosure Is Unlikely
First of all, while mechanics liens on major projects are fairly common, the foreclosure of those liens is pretty rare – and even without the arbitration clause, the foreclosure of this Nike mechanics lien would be downright shocking. After all, what do you think the chances are that the world’s leading athletic wear provider would leave their new HQ in limbo? What’s more, in Oregon, there are special circumstances that can make the foreclosure of a mechanics lien an even more remote possibility.
In Oregon, the foreclosure timeframe can be much longer than other states. Often, a mechanics lien must be foreclosed within a year or less. In Oregon, that initial deadline is 120 days – a relatively short timeframe! However, this deadline can be extended up to 2 years by the terms of the lien. When a lien provides for extended payment, a lien will extend for up to 120 days after the terms provided for in the lien – but it may not be enforced beyond 2 years.