Protect your property. Protect your work.
Property renovation is a trend that is on the rise in our area. One consideration that homeowners often overlook when hiring a contractor and considering renovation work is the contractor’s right to record a mechanics lien against the homeowner’s property in the event that the homeowner does not pay the contractor. A mechanics lien, in certain circumstances, may be recorded against a homeowner’s property to protect the contractor’s rights and ensure payment for the contractor’s services. If the contractor follows the proper procedures and remains unpaid, the contractor may be able to foreclose and force the sale of the property in order to obtain payment for the contractor’s work. It is not only important for contractors to have a solid understanding of these procedures, but homeowners should know them as well.
In Nevada, NRS Chapter 108 governs mechanics liens. In general, a contractor or supplier is authorized by statute to record a lien if an owner fails to pay when:
- They have provided work or materials valued at $500.00 or more for the repair or improvement of the property;
- They are licensed to perform the work;
- They timely provide a “Notice of Right to Lien” if the contractor does not have a direct contract with the homeowner;
- The contractor provides a “Notice of Intent to Lien” fifteen (15) days before recording his mechanics lien;
- The contractor timely records his mechanics lien (formally called a “Notice of Lien”); and
- The contractor timely file a lawsuit to foreclose the mechanics lien within six (6) months of recording the lien.
The “Notice to Right to Lien,” is commonly referred to as pre-lien notice. A pre-lien notice puts the homeowner on notice that the contractor may have a right to a lien on the property in the event that the contractor is not paid by the homeowner for work performed or materials delivered. Previously, even though contractors did not always deliver this required pre-lien notice, mechanics liens were still routinely enforced based on the Nevada Supreme Court’s rulings that “[t]he failure to serve the pre-lien notice does not invalidate a mechanics’ or materialmen’s lien where the owner received actual notice.” Fondren v. K/L Complex Ltd., 106 Nev. 705, 710, 800 P.2d 719, 721-22 (1990). Mechanics lien statutes are “remedial in character and should be liberally construed, allowing substantial compliance with the statutory requirement as long as the property owner is not prejudiced.” Las Vegas Plywood & Lumber, Inc. v. D&D Enters., 98 Nev. 378, 380, 649 P.2d 1367, 1368 (1982). The case law stated that so long as the homeowner had “actual notice of the potential lien claim,” it was “not prejudiced” by not receiving the pre-lien notice. Board of Trustees of the Vacation Trust Carpenters Local No. 1780 v. Durable Developers, 102 Nev. 401, 410, 724 P.2d 736, 743 (1986). The Supreme Court of Nevada has clarified that “a lien claimant cannot invoke the actual notice exception to NRS 108.245 unless the property owner (1) has actual notice of the construction on his property, and (2) knows the lien claimant’s identity. Iliescu v. Steppan citing Hardy Companies, Inc. v. SNMARK, 126 Nev. 528, 542, 245 P.3d 1149, 1158 (2010).
This decision makes it vital for contractors to follow the appropriate procedures with regard to their mechanics lien rights in Nevada. It is worthwhile for a homeowner to understand that they can condition a partial or full payment on a partial or full lien release. It is also important for homeowners to understand that the contractor has a limited time period in which to record a valid lien.
Before beginning a renovation project, a homeowner should consider meeting with his/her attorney to discuss the terms of the contract with the general contractor, mechanics lien rules and procedures, and other considerations to ensure maximum protection for the homeowner.
As expected, California has its own set of mechanics lien rules that differ in many respects from Nevada. Stay tuned for an upcoming Clarity blog post on California mechanics lien laws.