Idaho’s Mechanic and Materialmen’s lien statute can be found at Title 45, Chapter 5 of Idaho Code. If a contractor, materialman or covered professional timely files a compliant lien against real property for unpaid labor or materials, the claimant must foreclose on the lien within 6 months of the recordation of the lien in the County records where the project is located. The commencement of the lien foreclosure action begins with the filing of a lawsuit in the County where the project is located. In addition, typically, a Lis Pendens is also recorded in the County records to provide notice to all potential buyers, investors or subsequent lenders of the pending foreclosure.
Because the purpose of the lien statutes in Idaho is to protect contractors, materialmen and covered professionals who contribute to the improvement of the real property, these parties should become knowledgeable regarding how the priorities of competing liens are determined by Idaho courts. Ultimately, the priority of competing liens will be determined by the court. Useful information may be gained in advance of providing construction services or materials to a project or before filing a foreclosure action by obtaining and reviewing a Litigation Guaranty issued by a title company selected by the claimant. The Litigation Guaranty details all ownership interest(s), mortgage(s), deed(s) of trust, and competing and subsequent liens, and provides the claimant with the necessary parties to the foreclosure action.
The Idaho Code provision that addresses the determination of priority is § 45-506. This provision establishes the priority of liens with regard to other claims against the real property at issue. Importantly, it provides that mechanic and materialmen liens have priority over any subsequent mortgage or other encumbrance that attaches to the property after the commencement of work or the furnishing of materials.
In addition, the statute specifies that the liens relate back to the date when the first work or materials were provided to the improvement of the real property. The relation back doctrine makes clear that the lien has priority if and from the time the specific lien claimant began to provide labor or materials to the improvement, and not from the time when the specific lien claimant records the lien. A risk for lenders may be that because Idaho is not a pre-lien state, it may not be obvious in the field precisely what was the date of commencement of labor or materials.
The legislative intent, case law, and judicial interpretation in Idaho consistently provide strong protection to the contractors, professionals, and suppliers who provide improvements to real property. Stakeholders in the construction industry will be in the position to better navigate the legal landscape and appreciate the protections afforded by Idaho’s lien statutes with a full understanding of the statutes, protections, and judicial interpretations.
Idaho Code § 45-506 also presents distinct challenges for lenders. Lenders should implement a careful approach to protect its security interest and priority, including, but not limited to site inspection, due diligence, lien waivers and monitoring of the site. In addition, lenders in Idaho should clearly communicate with their borrowers, through the entire term of the project and gain a full and complete understanding of the relation-back doctrine to protect the lender’s security interest from liens that may relate back to a time preceding the loan.
