Whether or not an individual party should file a lien can be a pretty loaded question, but it's a question we get all the time. I'll discuss some factors that go into the decision below, but we've got a great article on it too: How To Decide Whether You Should File That Mechanics Lien. Anyway, first let's look at the easy part - the lien deadline. Arizona is a state where the lien filing deadline is based on overall project completion rather than the completion of the claimant's work. In Arizona, if a Notice of Completion has been recorded on the project, a mechanics lien must be recorded within 60 days after the Notice of Completion was recorded. Otherwise, a mechanics lien must be recorded within 120 days of completion of the improvement. As to whether a lien should be filed, that can come down to a number of factors - such as timing, role, project type, and relationships.
The most important consideration, though, may be how much time is left on the clock. If a mechanics lien deadline is far away, filing a mechanics lien might not yet be necessary. Other options for recovery are available, and mechanics liens should really be viewed as a sort of last resort. If there is a lot of time left before the lien deadline, other attempts at recovery might be more appropriate - and cheaper. Plus, if other recovery attempts fail, a mechanics lien will still be an available option.
One of these other options might be simply send a payment demand to the nonpaying party. Such a demand would inform them (and any other recipients) that, if payment is not forthcoming, a mechanics lien or other remedy will be sought if payment is not made.
Another option (or an additional one) might be to send a Notice of Intent to Lien. A Notice of Intent to Lien is not a required document in Arizona, but it is required in a few other states - and it can be especially helpful when a claimant is unpaid but not yet ready to file a lien claim. A Notice of Intent to Lien informs the recipients that the party sending the notice means business. It acts like a final warning shot. If payment is not made, a lien filing is coming. Typically, such a document will notify recipients that a lien will be filed within days or weeks if payment isn't made. Sending the Notice of Intent to every party up the payment chain - including both the general contractor and the owner - makes sure that everyone on the project is aware of the payment dispute. By doing so, pressure can be applied to the nonpaying party by the owner - nobody likes liens, but owners really hate them. When an owner receives such a notice, they will likely want to resolve the issue as quickly as possible so as to avoid a mechanics lien filing.
Threatening a claim under the state's prompt payment laws can also be effective. The penalties for failing to provide prompt payment include interest fees and potentially attorney fees - so the stakes are pretty high for the nonpaying party. Finally, if a lien deadline is closing in, or if other methods of attempted recovery have been unsuccessful, filing a lien is certainly an incredibly strong final option. Mechanics liens are the single most powerful construction remedy out there, and when lien claims are filed, a payment dispute can no longer be ignored by other parties to the project.
The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the helSee More...See More...