Below is a link to a webinar I did with SunRay Construction Solutions, LLC on using lien waivers in Arizona. I cover all four of Arizona’s statutory lien waivers and then discuss some general lien waiver do’s and don’ts. As I try to make clear in the webinar, be careful when signing lien waivers!
Arizona Preliminary 20-Day Notices, Mechanics’ Liens, and Bond Claims
It has been a while since my last blog post. But that does not mean that I haven’t been busy! Among other things, I have conducted a series of webinars with the good folks at SunRay Construction, LLC that have subsequently been uploaded to YouTube.
Below is one of the earlier installments in this series of webinars, which generally addresses preliminary twenty day notices, mechanics’ liens, and bond claims in Arizona.
“Give it 130%” – Threshold at which Preliminary 20-day Notices must be updated is increased from 120% to 130% of estimated total cost.
You often hear of people claiming to give 110% effort. Whether someone can truly give more than a 100% effort is a philosophical question that is outside the scope of this blog. Arizona mechanics’ lien laws are, however, something in my wheelhouse. And, as many of you may know, 120% has historically been an important figure with respect to mechanics’ liens. This is because Arizona has long provided, and currently provides, claimants with lien rights of up to 120% of the estimated price stated in their preliminary twenty-day notices. Practically speaking, this means that those looking to preserve their lien rights need not provide additional preliminary notices unless and until the price for the labor and material furnished exceeds 120% of the amount in their original notice. But with the passing of SB 1304 earlier this year, this threshold for providing additional preliminary notices was increased to 130% of estimated total costs, and this increase applies to all projects where lienable activities are “first commenced to be furnished from and after December 31, 2019.” As a result, the effects of this change are right around the corner.
Back to the Future: Little Miller Act Twenty-Day Notices May Once Again Be Sent By First Class Mail With A Certificate of Mailing
In May 2015, I authored a post addressing the Arizona Court of Appeals’ then-recent decision in Cemex Construction Materials South, LLC v. Falcone Bros., Inc., 237 Ariz. 236 (App. 2015). My post can be found here. The Cemex decision will, however, cease being good law next Saturday. The case was legislatively overruled by House Bill 2268, which was signed into law by Governor Ducey on May 12, 2016 and will become effective on August 6, 2016.
As a reminder, Cemex upended the longstanding construction industry practice of mailing preliminary twenty-day notices on Little Miller Act projects via first class mail with a certificate of mailing. This had been done as a cost saving measure because: (1) Arizona’s mechanic’s lien statute requiring twenty-day notices—A.R.S. § 33-992.01—expressly provides in Subsection (F) that the notices may be provided by “first class mail sent with a certificate of mailing;” and (2) the Little Miller Act section requiring 20-day notices in certain instances—A.R.S. § 34-223(A)—incorporated by reference a significant portion of § 33-992.01. Nevertheless, Cemex held that this industry practice did not comply with § 34-223(A). Specifically, the Court found that the mailing provisions of § 33-992.01(F) were excluded from § 34-223(A), such that Little Miller Act 20-day notices were required to “to be served by registered or certified mail,” like Little Miller Act ninety-day post-completion notices.
HB 2268 amends A.R.S. § 34-223(A) to allow Little Miller Act 20-day notices to be served by first class mail with a certificate of mailing, and, in doing so, overrules the Cemex decision. The Bill accomplishes this by simply adding § 33-992.01(F) to the list of § 33-992.01 subsections that are expressly incorporated into § 34-223(A). Accordingly, it is now unequivocally clear that the legislature intends for the mailing requirements for mechanic’s lien 20-day notices to apply equally to Little Miller Act twenty-day notices. Indeed, the “Legislative findings; intent” section of the Bill states that:
The legislature also finds that the construction industry believes the Cemex decision incorrectly applied the legislature’s intent in interpreting this notice requirement. It is the intent of the legislature to clarify that under section 34‑223, Arizona Revised Statutes, as amended by this act, the written preliminary twenty‑day notice may be sent by first class mail with certificate of mailing, certified or registered mail.
In sum, Cemex will cease being good law on August 6, 2016 and would-be Little Miller Act payment bond claimants can resume serving their 20-day notices by first class mail with a certificate of mailing at that time. But until that time, Little Miller Act 20-day notices should continue to be served by registered or certified mail.
It should also be noted that HB 2268 amends A.R.S. § 34-223(A) to allow ninety-day post-completion notices to be sent “by any means that provides written, third-party verification of delivery,” rather than just “registered or certified mail.”
Mail Call: Court Rules that Little Miller Act Twenty-Day Notices Must Be Sent by Registered or Certified Mail
***UPDATE – 7/15/2016***
The Court of Appeals’ decision in in Cemex Construction Materials South, LLC v. Falcone Bros. & Assoc., Inc., 237 Ariz. 236 (App. 2015), which is the subject of this post from May 2015, will cease being good law on August 6, 2016. The case was legislatively overruled by HB 2268, which was signed into law by Governor Ducey on May 12, 2016 and will become effective on August 6, 2016. My post on the effects of HB 2268 and its overruling of the Cemex decision can be found here.