I’m a subcontractor in Arizona and I haven’t been paid on a commercial job. Should I file a lien?
May 11, 2018
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.