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.
SB 1304, which was approved by Governor Ducey on May 7, 2019, substantively amends A.R.S. § 33-992.01 as follows:
G. A person required by this section to give notice to the owner, to an original contractor, to the construction lender, if any, and to the person with whom the claimant has contracted need give only one notice to the owner, to the original contractor, to the construction lender, if any, and to the person with whom the claimant has contracted with respect to all labor, professional services, materials, machinery, fixtures or tools furnished for the building, structure or improvement, unless the actual estimated total price for the labor, professional services, materials, machinery, fixtures or tools furnished or to be furnished exceeds by twenty per cent THIRTY PERCENT or more the total price in any prior original or subsequent preliminary notice or unless the labor, professional services, materials, machinery, fixtures or tools are furnished under contracts with more than one subcontractor, in which case notice requirements shall be met for all additional labor, professional services, materials, machinery, fixtures or tools.
H. If a notice contains a general description required by subsection C of this section of the labor, professional services, materials, machinery, fixtures or tools furnished up to the date of notice, it is not defective because after the date the person giving notice furnishes labor, professional services, materials, machinery, fixtures or tools that are not within the scope of the general description, or exceed by less than twenty per cent THIRTY PERCENT the estimated total price thereof.
Under this new law, a preliminary twenty-day notice that contains a $100,000.00 estimated price: (1) will allow for lien rights of up to $130,000.00; and (2) will not need to be augmented by additional preliminary notices unless and until the price for the labor and material furnished exceeds $130,000.00. This should ultimately reduce the need for lien claimants to supplement their twenty-day notices.
Contractors, subcontractors, and suppliers looking to preserve their mechanics’ lien rights should not, however, automatically assume that the changes to A.R.S. § 33-992.01 will immediately become effective on all of their projects after December 31, 2019. Again, these changes only apply “to construction projects for which labor, professional services, materials, machinery, fixtures or tools are first commenced to be furnished from and after December 31, 2019.” Thus, they will not apply to projects where lienable activities commence before the end of this year and continue into next year. As a result, the safest course of action for potential lien claimants will be to assume that they only have lien rights of up to 120% of the estimated price in their preliminary twenty-day notice and supplement accordingly, at least until there is no doubt that the first lienable activity on a project occurred after December 31, 2019.