Lawyer Monthly Magazine - February 2019 Edition

54 Professional Excellence www. lawyer-monthly .com FEB 2019 CONSTRUCTION Michael Dulberg’s goal is simple: deliver quality legal services to his clients with candor and integrity. Serving as the client’s advocate and adviser, Michael tells his clients what they need to hear and not simply what they want to hear. Listed in The Best Lawyers in America for Construction Law and Litigation in the 2014 - 2019 editions, Michael shares his knowledge on construction law. Touching on statutes that protect contractors, and the importance of a well- crafted contract, Michael reveals ways in which contractors can be saved from litigation. Building Bridges and Protecting Contractors and their Lien Rights State. My frame of reference is Arizona. Here, the first step is serving a Preliminary Twenty Day Notice. The content of the Preliminary Notice, who gets served and what constitutes proper service, are defined by statute. The purpose of the Preliminary Notice is to inform the Owner about who is working on his property and therefore, who potentially has lien rights so the Owner can take steps to assure payment to those potential claimants. Failure to properly serve the Preliminary Notice may preclude assertion of lien rights. Assuming a timely Preliminary Notice was served, and payment is due, the lien must be recorded with the County Recorder in the County where the project is located within 120 days after completion. Completion, for lien purposes, is statutorily defined. After recordation, the Owner must be served with a copy of the lien within a reasonable time. The lien must include: legal description; Owner or reputed Owner; name of contracting party; copy of written contract or summarized terms of oral contract; amount of demand; date of completion; date when Preliminary Notice was served and attach the required proof of service of the Preliminary Notice. Finally, a lawsuit to foreclose the lien must be filed within 6 months after recordation or the lien is unenforceable. In addition, within five days after as a predicate for withholding payment, and establish fixed time periods when payment is due and provides remedies when the statutory requirements are not satisfied. Arizona’s Purchaser Dwelling Act requires residential purchasers to provide notice of claims as a prerequisite for subsequent litigation and gives contractors the right to inspect and repair purported deficiencies before any lawsuit can be filed. Can you share the importance of contractors protecting their lien rights? What can they protect themselves from? A lien provides a statutory security interest against real property that can protect those who improve the value of others’ real property from the risk of non-payment. The lien can be judicially foreclosed and if the foreclosure action is successful, the lien can theoretically be satisfied from the forced sale of the property. Liens don’t guarantee payment, but they’re important because they improve the odds of getting paid, thereby adding another weapon to the contractor’s legal arsenal. Should every contractor file for a lien? No. Liens are an encumbrance against the property and therefore should only be recorded when payment is in dispute and there is a balance due. There is reason to proceed cautiously because the Owner has a statutory remedy if a groundless lien is recorded. It is imperative that every contractor serve a Preliminary Twenty Day Notice, because in Arizona, the Preliminary Notice is a prerequisite for the later assertion of a lien claim. Can you share the requirements and procedure for filing for a lien? Again, specific requirements and procedures for filing liens may vary from State to What are common statutes that protect contractors, that they are unaware about? Typically, contractors have only a vague understanding of the statutory provisions protecting them but lack specific knowledge regarding the details. Many jurisdictions have similar statutory schemes, but specific statutory requirements vary from State to State, so it’s important to consult with experienced local construction lawyers. From my experience in Arizona, the three most important statutory protections for contractors are theMechanics’ Lien laws, the Prompt Pay Act, and the Purchaser Dwelling Act. Lien laws allowcontractors to obtain a security interest in the Owner’s real property to assure payment. Prompt Pay laws regulate the payment application process and the timing of Owner review and approval, including deadlines for written objections