“Lien” Management

Hail, Lien Caesar!

The mechanic’s lien can be traced as far back as the Roman Empire. Under Roman civil law, architects, suppliers and laborers had preference over all other creditors. This protection ensured there caesar-augustuswould be no delay in building the Roman Empire.

“Modern day” mechanic’s lien law statutes were created by legislators to protect builders against the property owner. Parties that supply labor, materials, professional services, fixtures or tools for the improvement of real property may assert a lien claim against an owner’s property, provided they follow the necessary steps. Mechanic’s liens differ from state to state. For example, in  Arizona, a mechanic’s lien is a statutory lien recorded at the county where the work was performed, and evidences interest in the real property and improvements upon which construction work is performed.

Lien 101

Think of the mechanic’s lien as a pre-judgment remedy, which allows subcontractors, material suppliers and certain professionals to assert a claim against an owner’s property, when there may not be contract privity.*

*The term (privity) is particularly important in the law of contracts, which requires that there be “privity” if one party to a contract can enforce the contract by a lawsuit against the other party. Thus, a tenant of a buyer of real property cannot sue the former owner (seller) of the property for failure to make repairs guaranteed by the land sales contract between seller and buyer since the tenant was not “in privity” with the seller. http://dictionary.law.com/Default.aspx?selected=1617

Who May Lien?

Referring again to Arizona’s legislature, ARS 33-981(A), the following may file a mechanic’s lien:

Every person who labors or furnishes professional services, materials, machinery, fixtures or tools in the construction, alteration or repair of any building, or other structure or improvement whatever, shall have a lien on such building, structure or improvement for the work or labor done or professional services, materials, machinery, fixtures or tools furnished, whether the work was done or articles furnished at the instance of the owner of the building, structure or improvement, or his agent.

Anyone who furnishes labor or materials to someone other than the owner or its agency is not entitled to a mechanic’s lien. This may prohibit claimants who are not in privity with either the owner, prime contractor, subcontractor or architect. A material supplier in contract with a subcontractor may file a lien. However, a material supplier to a second tier subcontractor might have difficulty. The statutes do not clearly define this situation.

If you are required to be licensed by the Arizona Registrar of Contractors you must hold a valid license to have lien rights. An owner may not have to pay if the contractor does not hold a valid license. The Arizona courts are very strict with the licensing laws.

How Subcontractor Management Liens Work in Sage 300 CRE

You may be surprised to learn how many Fortune 500 companies still manage subcontractor compliance by logging conditional and unconditional waivers (including progress and final waivers) and amounts in Excel or even Word. But they don’t have to!

Sage 300 CRE is the only construction software with standard Subcontractor Compliance Management module that logs all the all 20-day preliminary notices (pre-liens), creates and logs all progress waivers for direct and sub-tier subcontractors, as well as creates and logs final waivers.

While that may sound like a simple statement, the ramifications are GINORMOUS for the accounting and project management divisions. Besides the obvious risk management benefits, the savings in man-hours in labor and time management are bottom-line rocket boosters!

If you have questions about liens or subcontractor compliance management, email Tony Merry or call 480-423-8300. Ask about MyAssistant, which will create automated alerts and send notifications when liens are outstanding.