- * Arizona is a FULL PRICE lien state.
- * Arizona has a construction trust fund statute that applies to owner-occupied residential construction, Ariz. Rev. Stat. § 33-1005. The construction trust fund statute applies to monies paid by the owner to the general contractor. Violation of the statute can expose individual corporate officers or directors to personal liability for misappropriation of construction trust funds and such debts may not be dischargeable in bankruptcy. There is no requirement under the statute that the trust funds be held in a separate account.
- * A family trust is deemed residential under AZ law. (Williamson v Pvorbit, 2011)
- * A person whose business requires them to maintain a contractor's license from the Arizona Registrar of Contractors forfeits their lien rights if they do not hold a valid license as required by law. The same is true of persons who furnish professional services but do not possess valid certificates of registration. These licenses and certificates are prerequisites for lien rights.
- * Courts may grant money to cover expenses in a suit to foreclose on a lien to the winning party. This can include attorney's fees, fees to record a lien and other expenses.
Notice Speed Bumps
- * Important Reminder: Claim amounts are required on all statutorily required NTOs.
- Notification is required when contracting directly with the owner on private projects.
- * A late notice will trap unpaid funds provided 20 days prior to serving the notice.
- * Projects commencing on 12/31/19 (SB1304): A lien claimant who, at the onset underestimates the labor and/or material he will furnish to the project is protected only up to 130% of the amount contained in the original Notice. If the claimant’s actual labor and material exceed even that amount, the claimant must file a Preliminary Twenty Day Lien Notice for the overage.
- * Projects commenced prior to 12/31/19: A lien claimant who, at the onset underestimates the labor and/or material he will furnish to the project is protected only up to 120% of the amount contained in the original Notice. If the claimant’s actual labor and material exceed even that amount, the claimant must file a Preliminary Twenty Day Lien Notice for the overage.
Mechanic’s Lien Speed Bumps
- As to residential property, a claimant has no lien rights against the dwelling of an “owner-occupant” unless the claimant has executed a written contract directly with the owner-occupant. For the purpose of this statute, “dwelling” means property designed for either single one-family or single two-family residential purposes, including an apartment or a horizontal property regime or other condominium. An “owner-occupant” means a person who intends to reside in the dwelling at least thirty (30) days during the twelve (12) month period immediately following completion of the residence and who does not intend to sell or lease the property to others.
- The lien filing period in Arizona begins with the completion of the improvement, not the last furnishing of materials to the project.
- The liens for work and labor done or professional services or material furnished are on an equal footing, without reference to the date of recording the notice and claim of lien, and without reference to the time of performing the work and labor or furnishing the professional services or material. The proceeds of any sale, if not sufficient to discharge all liens against the property without reference to the date of recording the notice and claim of lien, shall be prorated over the respective liens.
Stop Notice Speed Bumps
- * A Stop Notice is a notice to the owner or construction lender by anyone entitled to file a mechanic’s lien that the person giving such notice has not received payment. The Stop Notice may be given with or without a bond. A Stop Notice is “bonded” if it is accompanied by a bond in the amount of 125% of the amount stated in the Stop Notice. If the bond and stop notice are sent to a construction lender, the construction lender is required to withhold sufficient funds to answer the Stop Notice. In essence, a Stop Notice is a demand upon the owner or construction lender to “stop payment” to the contractor who has failed to pay the subcontractor or materials supplier, and in the case of a Stop Notice to the lender, a direction not to fund the loan to the owner. Stop notices are not available on public works or residential construction.
- * Upon receipt of an unbonded Stop Notice, the owner must, and the construction lender may, withhold sufficient funds to answer the Stop Notice. Upon receipt of a bonded Stop Notice, the construction lender must withhold funds.
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