In the last edition of Under Construction, we offered a basic introduction to Arizona’s mechanics and materialmen’s liens. This time, we discuss the issues related to timing of such liens. We will review the time requirements related to recording a lien and then separately foreclosing on a lien. This information is important not only for project owners and contractors, but also for lawyers representing such entities who may be able to use the timing as leverage in negotiation, litigation, or arbitration.

Typically, a lien must be recorded within 120 days of “completion.” See Ariz. Rev. Stat. § 33-993. Completion is defined by statute to mean the earliest of “1. Thirty days after final inspection and written final acceptance by the governmental body which issued the building permit for the building, structure or improvement” or “2. Cessation of labor for a period of sixty consecutive days, except when such cessation of labor is due to a strike, shortage of materials or act of God.” Generally, the most common way to determine “completion” is to review the certificate of occupancy issued by the local authority. This means the deadline is 150 days after issuance of such a certificate (30 days + 120 days). However, when there is a payment dispute, it is possible that there was a work stoppage that may trigger the other definition and provide an earlier deadline. It is important to evaluate the deadline to record a lien based on the project’s specific history.

Earlier, we said 120 days is the typical deadline because project owners have another statutory tool to flush out claims. Specifically, owners (or their agents) can record a “notice of completion.” See Ariz. Rev. Stat. § 33-993(E). Doing so limits the time to record from 120 days to 60 days after “completion” of the project. This can be useful for owners who have financed their project and need to assure their lenders that there will be no liens on the project.

Once a lien is recorded, the contractor has six months after recording its lien to file a lawsuit to enforce the lien. See Ariz. Rev. Stat. § 33-998(A). Note that the contractor must also record a notice of pendency of action within five days of filing the action. See Ariz. Rev. Stat. § 12-1191(A). Both of these deadlines are important for contractors because missing one of these deadlines means losing rights to enforce the lien and makes it less likely it will be paid for its work. It is also important for owners because it provides assurance after the deadlines that contractors cannot foreclose on their liens.

As noted in the last article, mechanics and materialmen’s liens are a powerful tool to ensure payment. However, there are many procedural requirements associated with the liens that should be analyzed on a project-by-project basis. The above is meant to introduce the timing issues for contractors and owners working on projects so they keep them in mind when payment dispute inevitably arise.