December 2005 - Lien Law Protects Contractors if Used Correctly
By Mandi Harding, FCA Executive Director

When it came to mechanic’s lien law, “the 2005 legislative session proved to be an advantageous one to subcontractors and material suppliers, who definitely came out on the sweet end of this rose,” attorney Leon Mead told attendees at the Framing Contractors Association’s most recent quarterly luncheon. Mead, managing partner of Mead Pezzillo LLP, entertained and educated framers on contractors least favorite “L-word” – liens.

“There is a lot to discuss regarding the Nevada Mechanic’s Lien Law and I have been tasked with extracting and condensing highlights from my six-hour seminar into a 40 minute presentation,” Mead joked.

Under the private work prompt pay act – the “Anti-Venetian” statute – Mead dubbed it, the legislature made great strides in the manner in which of change order requests are viewed.

Mead explained that if within 30 days of receiving a change order request the owner or higher-tiered contractor fails to issue the change order or provide written notice that the COR is either unreasonable or requires additional time or information to be processed, then the COR becomes part of the contract.

The COR may then be billed against the owner or higher-tiered contractor along with price increases and time extensions stipulated in the COR. The owner or higher-tiered contractor also must pay the lower-tiered subcontractor for the completed COR work in the next pay request.

Mead outlined the ramifications for the owner or higher-tiered contractor if they do not make a payment when due, give written notice of withholding or object to COR within 30 days. In this situation, the lower-tiered contractor may stop work simply to provide a notice by issuing a statement of intent to stop 10 days prior to stopping. If the COR still is unpaid after 15 more days, the contract is subject to termination, and that right to terminate work is reciprocal.

“The one thing I emphasize to my clients is to have a written contract for work. I am not so naive to believe that this is how it is always done in the real world, but don’t start work without a written contract because even a general contract falls under this Nevada Revised Statute and can protect you,” Mead implored.

Mead explained that the “no release without payment” clause is notification that the subcontractor will not release lien law rights without payment. The “no unknown claim waiver” provides that the contractor cannot waive lien rights.

“It is unenforceable even if it is in your contract,” said Mead.

Mead discussed the peculiarities associated with the process of a notice of intent to lien in residential construction and he clarified that the rules governing residential construction do not apply to commercial construction.

A residential lien claimant must serve notice of intent to lien before recording a mechanics lien and must serve 15 days prior to lien recordation. The intent to lien must be personally delivered or sent via certified mail and automatically extends the time to record the lien by 15 days. Finally, the residential lien claimant may not record or foreclose the lien on the residence unless the notice is sent.

Mead said a lien should include a statement of the contract amount, amount of additional or changed work, amount of payments received and amount of lien after all just credits and offsets. Along with the statement of amount, a claim of lien must include the name of the owner or reputed owner, name of contractor with whom the subcontractor has contracted, a concise statement of the payment terms of contract and a description of the property including the assessor’s parcel number. Mead said the lien also should have be notarized.

“Under the lien claim, your unsigned change orders are now lienable, but you have to notorize your liens, guys,” Mean implored. “But how much is lienable? If the parties agreed, by contract or otherwise, upon a specific price or method for determining a specific price for some or all of the work, material and equipment furnished or to be furnished by or through the lien claimant, the unpaid balance of the price agreed upon for such work, materials or equipment, whether performed, furnished or to be performed or furnished at the instance of the owner and his agent. The key here is work, materials or equipment to be performed.

 “But if you didn’t have a contract, here’s what the statue states, the parties did not agree, by contract or otherwise, upon a specific price or method for determining a specific price for some or all of the work, material and equipment furnished or to be furnished by or through the lien claimant, including without limitation any additional or changed work, material or equipment, an amount equal to the fair market value of such work, material or equipment, as the case may be, including a reasonable allowance for overhead and profit, whether performed, furnished or to be performed or furnished at the instance of the owner or at the instance of his agent.,” said Mead. “And the question becomes what is the fair market value of your work?”

For more information on the Nevada Mechanic’s Lien Law or to attend one of Leon Mead’s upcoming sessions, call 233-4225.