A property lien is a legal claim against an item of property. The most common among these is the construction lien, which is filed by a construction contractor or sub-contractor to secure payment. When a lien is filed, the property is used as security for the property owner's debt. If the debt is not paid, the property can be sold and the proceeds used to satisfy the debt. Lien claimants have priority over unsecured creditors in the distribution of sale proceeds.
Items you will need
- Copy of construction contract
- 20-day Preliminary Lien Notice
- Notice of Completion
Send a Preliminary 20-Day Lien Notice to the debtor. This form is supplied by the Arizona state government (see Resources). If you fail to send this notice before recording your lien, you may not be able to enforce the lien. If you are a construction contractor, file this form within 20 days of first performing labor or services on behalf of the property. You don't have to wait until the debt becomes delinquent.
Send a Notice of Completion to the debtor within 120 days of completion of the construction project, if you are a construction contractor or sub-contractor. You must wait for the entire project to be completed before you can send it, even if you are a sub-contractor and your portion has already been completed. Completion is defined under Arizona law as 30 days after the Final Certificate of Occupancy or other written acceptance is issued by the state government subdivision that issued the building permit, or after 60 consecutive days in which no work is performed on the project.
Record a lien against the debtor within 120 days after completion of the project, and after you have sent the Notice of Completion. You will need to provide a copy of the 20-day Preliminary Lien Notice, a copy of the construction contract, the project completion date, and information about the debt. You may file the lien at the Arizona County Recorder's Office in the county where the property is located.
File a foreclosure lawsuit against the debtor within six months after the lien is recorded, if the debtor fails to to pay the debt as agreed. The lien must be filed in the Arizona Superior Court in the county in which the lien was filed.
Record a Notice of Lis Pendens at the County Recorder's Office where the lien is recorded within five days of commencing the lawsuit. This notice will become part of the public record, and puts any purchaser of the property on notice that the property is subject to a lien.
File a lawsuit against the debtor, seeking enforcement of the lien. If you win, you can force the sale of the property. The proceeds of the sale will be distributed among all creditors. Some creditors, such as other lien holders, may have priority over you.
If you hire a construction contractor who in turn hires a sub-contractor to work on your construction project, and the contractor refuses to pay the sub-contractor, the sub-contractor can place a lien on your property even if you have already paid the contractor.
- FindLaw: What is a Lien?
- Arizona State Legislature: Arizona Revised Statutes / Filing Judgments for Real Property Liens
- Arizona State Legislature: Arizona Revised Statutes / Lien Duration
- Arizona Lien Law: Arizona Mechanic's Lien, Bond, and Stop Notice Law
- The Contractor's Group.com: The Owner Paid Your Customer But Your Customer Won't Pay You...
- Arizona Revised Statutes: Limitation of Action to Foreclose Lien; Attorney Fees
- Jupiterimages/Creatas/Getty Images