Can a Contractor Get a Mechanics Lien if We Don't Have a Written Contract?

Full Question:

An neighbor did some work on my home which was done improperely and I refused to pay him as much as he requested. He filed a lien on my home. How is that possible in AZ. He does not have judgement or a contract with me nor did he file a 20 day notice What do I do and how do I get this lien removed from my home
04/17/2011   |   Category: Contractors ยป Construction...   |   State: Arizona   |   #24656


The answer will depend in part on whether an lien waivers were obtained. If none of the agreed terms were in writing, but is still possible to have an oral contract. However, verbal contracts present evidentiary issues and often are a matter of one person’s word against the other’s. The Pre-Lien Notice must be served no later than 20 days after the claimant has first furnished labor, services, materials, machinery, fixtures, or tools to the project. If you forget, you can always serve the Pre-Lien Notice late, but you get a Mechanic’s Lien only for the labor and materials furnished for the 20 days immediately before sending out the Pre-Lien Notice and for labor and materials furnished thereafter. If you are unable to file a mechanics lien due to failure to properly serve a Pre-Lien Notice, it may still be possible to use contract remedies. If a judgment is won in a breach of contract action, and the judgment remains unpaid, it is possible to file a judgment lien on the defendant's property.

During the entire work of construction, the owner may obtain lien releases or waivers of lien from each subcontractor and material supplier. Without these waivers or releases the real estate is subject to liens of all the subcontractors, even if the general contractor, though paid in full, fails to pay the subcontractors. Lien claimants who are contractors or subcontractors are protected under this legal doctrine because all their materials and labor are "buried" in the real estate, having become part of it. Unlike mortgage liens, however, the liens of these claimants cannot force a foreclosure. People having a home built can require contractors and subcontractors to provide lien releases or waivers as part of a written project contract. The contract can mandate a lien release be issued before the contractor receives payment for services, in which case it is called a lien waiver. If payments are made to a general contractor in stages for work performed by subcontractors, the homeowner can obtain lien releases from the various subcontractors as their part of the project is completed. Sometimes, construction loan documents drafted by a bank may indicate that the bank will obtain lien releases, but the bank may do this solely for its own benefit. Therefore, the property owner's requiring lien releases should be clearly stated and independent of any agreement made by or with the bank.


Although the terms lien waiver and lien release seem to be interchangeable, a release demonstrates completion and payment, so as to prove any claim has been satisfied, while a waiver demonstrates a relinquishment of a known right. Waivers are typically obtained prior to commencement of any work, whereas releases are subsequently obtained. Waivers of lien must be in writing, give a sufficient description of the real estate, and be signed by the one with authority to file or claim a lien. No payment needs to be made in advance if the subcontractor agrees to release the land from the lien and rely only on the credit of the owner or general contractor for payment of the debt.


A lien waiver is not a general release of claims; it only waives lien rights. A person signing a lien waiver may still have a claim (or multiple claims) against the person with whom it contracted. Therefore, owners may want their contractor to execute a waiver and release of all claims through the date of each pay application in addition to executing a lien waiver.


You are giving up the right to later file a lien only for the amount of the payment. The lien waiver will not necessarily prevent claims for contested change orders, retention, or breach of contract damages (for example — delay damages, impeded productivity, and other consequential damages).


-Interim Lien Waiver. This is used for progress draws or a partial payment. It waives lien rights through a certain date (and not future unpaid bills) and only to the extent of the payment. Many general contractors and owners require these forms to be signed by the person receiving payment before a check is issued.


-An Unconditional Lien Waiver is used after final payment and means just that: fully and finally releases all future lien rights with no later recourse to file a mechanic's lien. It should be signed only if you are assured you have been paid and are satisfied with the amount received.


-A conditional lien waiver is one that you use when submitting a progress invoice on a project, whether it's the first progress payment or the last. It is conditioned upon receipt of payment, and therefore will typically use the words "upon receipt". An unconditional lien waiver is used when payment has been received and cleared the account. Such a lien waiver will typically state that payment has been received.


When a lien waiver takes effect, the right to file a mechanic lien is given up. However, the lien waiver doesn't prevent a contractor from other remedies, such as a claim for breach of contract, etc.


Please see the following AZ statutes:


33-1008. Waiver of lien


A. An owner or contractor by any term of their contract, or otherwise,
may not waive or impair the claims or liens of other persons whether with
or without notice except by their written consent or as prescribed by
section 33-1003. Any term of the contract to that effect shall be void.
Any written consent given by any claimant pursuant to this section is
unenforceable unless the claimant executes and delivers a waiver and
release. This waiver and release is effective to release the property for
the benefit of the owner, the construction lender, the contractor and the
surety on a payment bond from claims and liens only if the waiver and
release follows substantially one of the forms set forth in this section
and is signed by the claimant or his authorized agent, and, in the case
of a conditional release, if there is evidence of payment to the
claimant. Evidence of payment may be by the claimant's endorsement on a
single or joint payee check that has been paid by the bank on which it
was drawn or by written acknowledgment of payment given by the claimant.


B. No oral or written statement purporting to waive, release or otherwise
adversely affect a claim is enforceable or creates any estoppel or
impairment of a claim unless it is pursuant to a waiver and release
prescribed by this section or the claimant had actually received payment in
full for the claim.


C. This section does not affect the enforceability of either an accord
and satisfaction regarding a bona fide dispute or any agreement made in
settlement of an action pending in any court provided the accord and
satisfaction or agreement and settlement make specific reference to the
mechanic's lien or bond claims.


D. The waiver and release given by any claimant is unenforceable unless
it follows substantially the following forms in the following


1. Where the claimant is required to execute a waiver and release in
exchange for or in order to induce the payment of a progress payment and
the claimant is not in fact paid in exchange for the waiver and release or
a single payee check or joint payee check is given in exchange for the
waiver and release, the waiver and release shall follow substantially the
following form: