The contents of this blog post are not, nor are intended to be legal advise. You should consult an attorney for individual advice regarding your own situation.
Here’s a recent experience from a Tucson, Arizona homeowner. The homeowner added a new 600 sq. ft. kitchen to his property through a general contractor. During the project a subcontractor poured the concrete foundation for the addition and failed to pay the cement company for the concrete and the cement truck delivery. The cement company then filed a preliminary 20 day lien notice on the homeowner’s property. The concrete subcontractor eventually paid the cement company and the lien notice expired with no further action. The event ended well for the homeowner.
Had a few more things gone wrong, the story may not have had a happy ending. This includes the subcontractor not paying the cement company or a financial dispute between the contractor and the homeowner. If Mechanics lien is recorded in Arizona, the owner cannot sell the property, banks will not lend against the property, and the lien holder may pursue legal action to foreclose on the property.
So could the cement company filed for foreclosure on the homeowners property because a subcontractor did not pay? Most likely not. Arizona law has protection for the homeowner in this case. But in a worst case scenario, the homeowner would have a lot of inconvenience and perhaps additional legal fees as a result. A good article on the subject is on the Lynch Law Firm website. So when faced with a home improvement project that uses a contractor, the homeowner has some remedies at his/her disposal to minimize lien risk, especially in this down economy.
- For a major remodeling project, consult with a lawyer. Having a lawyer on your side will minimize risk and put the contractor on notice not to try any “funny stuff”.
- Have a schedule of payment for work milestones. Pay on time. After each payment is released have the contractor sign a conditional waiver and release for the work done to date. To find the form, do a web search for “Arizona conditional waiver and release”.
- After the project is completed and the final payment is made, have the contractor sign and unconditional waiver and release. To find the form, do a web search for “Arizona unconditional waiver and release”.
- Check the contractors credit. If the contractor is behind in his payments to subcontractors, this could meant trouble for you.
- In the story above, the cement company would not be able to obtain a mechanics lien against the owners property because of the “Owner Occupied Dwelling” protection of Arizona law. According to Arizona law: “subcontractors or material suppliers who enter a contract with another contractor, but not the homeowner, cannot place a Mechanic’s Lien upon this property.” (referenced from the Lynch Law Firm) This however did not stop the cement company from filing a 20 day notice causing anguish for the homeowner and several hours worth of extra phone calls.
Being prepared and knowing your leagal rights and remedies can go a long way towards reducing your risk of lien filing during a remodeling project in Arizona.