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Best Practice for managing Change Orders...

ArizonaLien DeadlinesMechanics LienPreliminary Notice

Our existing process has been to update the primary contract pre-lien with the subsequent change orders. This however does not favor the sub-contractor, as I don’t want the lien dates to be continually reset for relatively small change orders. I would prefer, if the change orders are over $1000, to submit pre-liens on those and let them stand on their own. I have an example of a primary contract order of approximately $150k. The primary job is now complete and I want the lien clock to start, so I will press for final payment within 60-days, on the outside. We may be getting a change order for around $1500, which I would like to treat separately and not reset the clock on the main job. Is this an acceptable approach and fall within the lien rights of sub-contractors?

1 reply

Oct 11, 2017
Your comment regarding the resetting of the lien deadline not favoring the sub-contractor is unclear, in that a subcontractor would generally be benefitted by extending the period in which a lien may be filed, as it cuts down on the potential that the lien deadline has expired and the ability to file an enforceable lien has been cut off.

Notwithstanding the above, Arizona requires liens to be filed no later than 120 days after completion of the project or no later than 60 days after a notice of completion is recorded, if the owner records such notice.

The completion of the project is also defined by Arizona law as: "the earlier of the following events: (a) 30 days after final inspection and written final acceptance by the governmental body that issued the building permit (usually a Certificate of Occupancy); or (b) cessation of labor for 60 consecutive days, except when cessation is due to a strike, shortage of materials or Act of God." A.R.S. § 33-993(C). However, if there is no building permit issued, (or if the issuing entity does not also issue a final acceptance), the project completion date for lien deadline calculation is the last date on which any labor, materials, fixtures or tools were furnished to the property. A.R.S. § 33-993(D).

When there is a change order, the above calculation would need to occur in order to determine whether the deadline has begun to run, or whether the change order "resets the clock." If a certificate of occupancy has issued, the change order doesn't modify the deadline. If not, it may modify the deadline as a later date on which labor or materials were furnished. In any event, it is likely not the case that the change order would be an entirely separate "project" or work of improvement for which new preliminary notice and lien deadlines would apply.
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