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How do I respond to a subcontractor's Notice of Right to Lien that will be performing work on a commercial property?

1 week ago

Received a Notice of Right to Lien from a subcontractor that has been hired by the “Customer” the General Contractor to supply material on a commercial property. Possibly supply labor too.

The General Contractor has been hired by the Tenant, the Tenant per the lease has agreed that it shall get the Landlord’s review and approval for all contractors that will be performing to the improvements of the Premises. The Tenant will not allow for any liens to be attached to the premises.

At this time the Tenant has not submitted the contractor’s name that we received the Notice to Lien for approval or for review as the lease states. In addition, the material that the subcontractor has listed in the Notice of Right to Lien is not an item mentioned as an improvement of the space.

I’d like to know besides the posting of a non-responsibility, If I should take this a step further and send a letter in response to this notice to all three parties, (1) Tenant (2) General Contractor (3) the Subcontractor that provided the notice. The notice would state the non-responsibility and the agreed-upon terms of the lease.

Senior Legal Associate Levelset

First, as you may know, receiving a Notice of Right to Lien isn’t a threat and isn’t, itself, a cause for concern. And, there isn’t really a cause for concern just because notice has been received.

To the contrary, receiving a preliminary notice should be helpful for a property owner – it clarifies who all is working on their job, and when it comes time to collect lien waivers, it can essentially form a handy checklist for who to request mechanics lien waivers from. More on the benefits of preliminary notices here: The Top 5 Reasons You Should Love to Receive Preliminary Notices.

But, ultimately, it’s important that all would-be lien claimants understand the effect of the Oregon Notice of Nonresponsibility – so, providing a notice-sender an additional copy of the Notice of Nonresponsibility will help get that message across. More on that below.

Oregon Notice of Nonresponsibility

As you mention above, a landlord must post a Notice of Nonresponsibility if they do not want to be subject to liens for their tenants’ improvements. While other actions may be helpful to prevent lien claims, the Notice of Nonresponsibility will be the strongest tool available for fending off a lien claim.

For a Notice of Nonresponsibility to be effective, it must be posted to a conspicuous place on the property within 3 days of the owner’s knowledge that work is being undertaken there. As you mention in your question, it may also be helpful to make sure that project participants are fully aware of the Notice of Nonresponsiblilty. Providing them a copy of the previously-posted notice and making them aware of the lease terms requiring the tenant to resolve all liens may help there. But, procedurally, it likely wouldn’t have much effect.

Clear and open communication prevents larger issues and disputes, too

Beyond that, it’d certainly be helpful to maintain open and clear communication with a tenant regarding the improvement being undertaken. Putting everything on the table and requesting information about the improvement to the property is well within the rights of the landlord – especially when the lease has terms contemplating the improvement.

But, it’s probably a good idea to ensure that the communications are ensuring a healthy relationship and not creating more tension with the tenant. After all, if there is some issue with the project, the owner will probably want there to be open and clear discussion of the issue rather than the tenant hiding it and hoping it will go away.

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