OWNER BUILT | TP OF THE MONTH

June

Preliminary Liens

During the coarse of building your new home you will receive what is called a Preliminary Twenty (20) Day Notice. This is an ordinary procedure and should not be a major concern. In the following tip I will explain this notice along with its purpose.

Arizona law gives a person who supplies labor, materials or equipment for construction, alteration or repair of buildings or improvements to real estate a right to obtain a lien on the property for the value of their work and/or materials. Liens provide a remedy above and beyond the right to file a lawsuit for monetary damages. In order to have a valid and enforceable lien, the contractor must meet certain eligibility requirements and follow carefully the procedures required by law to enforce the lien.

A lien can be obtained if the labor or the materials are furnished at the request of the owner, subcontractor, or other person having control over the construction, repair or alteration or part of it. Therefore, even if the owner has paid a contractor, subcontractor or other person in control of the project for the labor and materials, if the one who furnished it was not paid, he can still claim a lien against the property.

No lien will be valid unless the contractor has mailed a Preliminary Twenty (20) Day Notice. This is usually the stumbling block for most contractors, because by the time they perceive that there may be a problem getting paid, it is to late to do the Twenty (20) Day Notice, and without it no lien can be perfected for any labor, materials, etc. that was supplied more than 20 days prior to the service of the Twenty (20) Day Notice.

To have lien rights the contractor, subcontractor or supplier must mail the Twenty (20) Day Notice to each if the following 1) Owner, 2) General contractor 3) Person with whom he contracted for work and 4) Construction lender. The notice must be mailed within 20 days of the first day that the contractor works on the project.

The purpose of the letter is to let the owner, general contractor and construction lender know who is supplying labor, materials or equipment on the project, and to give them an opportunity to monitor payments so that everything gets paid for. Typical problems arise when a contractor is paid and does not in turn pay his subcontractors or suppliers. Supplying the notice gives an opportunity to the owners, lenders and even general contractors to protect themselves by getting lien releases and/or issuing joint checks.

The Preliminary Twenty (20) Notice basically protects the subcontractors and suppliers in the event the owner or builder does not pay them. The notice is a safety net and does not have any value once the bills are paid or if improperly filed.

* The information contained in this “tips” section is to be used as a general guide only. When making decisions about your project a professional should be consulted using the specific information that is unique to your project.