10-Dec-2012, Guy W. Bluff, Esq.[1]

15 days after the Arizona Supreme Court issued its Emergency Order #2012-85 modifying Arizona’s Administrative Code relating to Certified Legal Document Preparers, the Court issued a new Order rescinding the same (see Administrative Order 2012-94).

On 21-Nov-2012, Arizona’s Chief Justice amended ACJA §7-208(F) to clarify, among other things, that Legal Document Preparers may not execute lien documents consistent with prior court rule petition decisions.  Subsequent to issuance of Order #2012-85, Arizona’s Certification and Licensing Division advised the Chief Justice that the emergency order as drafted also had the unintentional effect of prohibiting Legal Document Preparers from executing Preliminary 20 Day Notices pursuant to ARS §33-992.01. 

The Chief Justice acknowledged that the amendment was meant to apply only to the execution of Mechanic Liens and that because the wording of the amendment had caused unintended consequences, it was desirable to receive further public comment before adopting the exact wording of any amendment.

Emergency Order #2012-85 was therefore rescinded immediately and retroactively.

Practice Pointer for Attorneys:

For attorneys, it will be important to still carefully review any recorded Mechanic’s Lien to determine whether such document was signed by an appropriate person “with knowledge” as required by ARS § 33-993.



[1]           Guy W. Bluff, Esq. is a trial and business attorney licensed in Arizona, California, and Colorado.  Mr. Bluff is a frequent contributor and author of articles and books relating to Mechanic’s Liens, Preliminary Notices and Bond Claims procedures.  He is the author of the practice manual – Construction Lien Law in Arizona (©, 2005, 2009, 2012).

30-Nov-2012, Guy W. Bluff, Esq.[1]

Effective 21-Nov-2012, the Arizona Supreme Court issued an Emergency Order changing Arizona’s Administrative Code with regard to the execution of legal documents by CLDP’s (Certified Legal Document Preparers). Arizonahas a long history of regulating what it considers to be the “Unauthorized Practice of Law” and this latest Supreme Court Order continues that policy of protecting the public from such practices.

The Supreme Court’s Administrative Order specifically provides that effective 21-Nov-2012, CLDP’s may continue to file, record, and arrange for service of legal forms, but that they are not authorized to sign documents for their customers as they have in the past as an “authorized representative” or “legal agent.”  ACJA §7-201(F)(1)(e) provides

e. File, record, and arrange for service of legal forms and documents for a person or entity in a legal matter when that person or entity is not represented by an attorney.  A certified legal document preparer may not sign any document on behalf of or as an agent or authorized representative of a person or entity.[2]

As of 21-Nov-2012, CLDPs are no longer authorized to sign 20 Day Preliminary Notices[3], Mechanic Liens[4], or other legal documents on their customers’ behalf as they have done in the past.  ALL 20 Day Preliminary Notices mailed out after the effective date of 21-Nov-2012 and ALL Mechanic’s Liens recorded after such date must now be signed by an owner, officer, member or other individual actually employed by the company OR AN ATTORNEY, in order to be legally effective.

This change has a serious and immediate impact upon contractors, subcontractors, materials suppliers, design professionals and others who use lien service companies operated by CLDPs to prepare their 20 Day Preliminary Notices, Mechanic’s Liens and other documents.  Presently, there are more than 50 different lien service companies operating inArizona.  Of those, less than 5 are owned and operated by licensedArizonaattorneys.  All 20 Day Preliminary Notices or Mechanic’s Liens prepared and signed by the non-attorney companies after 21-Nov-2012 are legally defective while those signed by licensed Arizona attorneys (or by an individual employed by the company itself) remain valid.

In order to protect your company from the likely situation of having the 20 Day Preliminary Notice determined to be defective and thus invalidating any subsequently recorded Mechanic’s Lien or Payment Bond claim, it is critical that the company either change their lien service company to one owned and operated by a licensed Arizona attorney, or otherwise change their internal procedures to have all such documents signed by an authorized representative of the company prior to mailing or recording.

To the extent that any 20 Day Preliminary Notices have been mailed out from and after 21-Nov-2012 which were only signed by a CLDP, they need to be amended and re-mailed out.  Any Mechanic’s Lien claims which were only signed by a CLDP and then recorded, need to be re-signed (by a company representative with personal knowledge of the lien claim, see ARS §33-993(A)) and then re-recorded immediately.

Practice Pointer for Attorneys:

For attorneys, it will be important to carefully review the 20 Day Preliminary Notices which may be attached to any recorded Mechanic’s Lien or Bond Claim filed after 21-Nov-2012.  While it is anticipated that most lien service companies will eventually make changes to their forms to include the direct signature of their clients, there will likely be a substantial gap in time before all such companies are in compliance.  A sampling of Mechanic’s Liens recorded just in MaricopaCountyafter the effective date of the order demonstrates that they are still being signed by the lien service companies and not the actual lien claimant.[5]  Clearly such liens will be determined to be defective – potentially subjecting the client to sanctions as provided by ARS §33-420 (A) and (C).



[1]           Guy W. Bluff, Esq. is a trial and business attorney licensed in Arizona, California, and Colorado.  Mr. Bluff is a frequent contributor and author of articles and books relating to Mechanic’s Liens, Preliminary Notices and Bond Claims procedures.  He is the author of the practice manual – Construction Lien Law in Arizona (©, 2005, 2009, 2012).

[2]           The full text of Arizona Supreme Court Administrative Order 2012-85 can be found at: http://www.azcourts.gov/Portals/22/admorder/orders12/2012-85.pdf

[3]           See, ARS §33-992.01(D) which provides that the mandatory form language include the signature and title of the company representative.

[4]           See, ARS §33-993(A), which provides that in order to perfect a Mechanic’s Lien “The notice and claim of lien shall be made under oath by the claimant or someone with knowledge of the facts”.

  • Significant Changes to California’s Mechanics Lien Law and Release and Waiver Forms.

    Guy W. Bluff, Esq. (02-Jun-2012)

    Effective July 1, 2012 all of the existing statutes governing mechanics liens, stop notices and payment bonds inCaliforniawill be repealed and replaced by updated statutes.  The previous statutory provisions were found in California Civil Code § 3082 to 3267.  The new statutory provisions are now located in California Civil Code § 8100-8200 et seq. and §8600 et seq. as relates to payment bonds.

    Under existing law, a “Preliminary 20-Day Notice” must be served by most types of lien and payment bond claimants at the outset of their work, to preserve their lien claim, payment bond, and stop notice rights. If the notice is served “late” it relates back to cover work performed in the 20 days prior to mailing or service.  Under the new law, this notice is now referred to as a “Preliminary Notice.” Certain mandatory language for the Preliminary Notice has also been changed which is significantly different from that found under the prior statutes.  As a result of these statutory changes, it is important that all contractors, subcontractors and material suppliers insure that they begin using the new Preliminary Notice forms beginning July 1st.

    While there are certain statutory safeguards which might allow a lien claimant to assert that the use of an older version form “substantially complied” with the mandatory language, doing so runs the risk having the lien or bond claim deemed defective thereby losing ones rights to payment.  See §8102(b).

    Pursuant to §8104(b), a contractor or subcontractor must also make timely and full payment to laborers.  If the event full payment is not made when due, the contractor or subcontractor must provide written notice to the laborer, any bargaining representative, the owner and lender written notice detailing the name and address of the laborer, the wages due, hours worked, and rates of compensation.  Failure to do so can subject a contractor or subcontractor to discipline by the CSLB.

    The new laws also require mandatory language and content for the four forms of Waiver and Releases.  Conditional Progress §8132; Unconditional Progress §8134; Conditional Final §8136 and Unconditional Final §8138.  Previously, the waiver and release language for all four forms was found in §3262(d).  The new language and format is now found in §8132 to §8138.  Because of these changes, contractors and suppliers should be careful to utilize new statutorily compliant forms for all releases executed on or after July 1st.  New 2012 statutorily compliant Waiver and Release forms can be located through the following link.

    California Waiver and Release Forms

Guy W. Bluff, Esq. 29-Oct-2011

In the case of Fagerlie v. Markham Contracting Co, (1 CA-CV-10-0051, 31-May-2011), Division 1 of the Arizona Court of Appeals held that (1) Markham could claim a lien on the lots for work done at the “instance” of the developer, Estates at Happy Valley, LLC (“EHV”), as the agent of the lot owners; (2) that Markham properly served the preliminary twenty-day notice on EHV as an owner/reputed owner or, alternatively, as an interested party; (3) that the beginning of the time period for recording the lien presents a genuine issue of material fact; (4) that Markham could correct documents filed with the lien within the time period for perfecting it, and that it substantially complied with the recording requirements in doing so; and (5) a lis pendens filed with a lien foreclosure action does not have to be notarized.

The Markham court re-affirmed the basic rule of law applicable to mechanic’s liens. Arizona’s lien statutes are remedial in nature and should be liberally construed to primarily protect laborers and materialmen who enhance the value of another’s property. Performance Funding, L.L.C. v. Ariz. Pipe Trade Trust Funds, 203 Ariz. 21, 24, ¶ 10, 49 P.3d 293, 296 (App.2002). At the same time, the statutory requirements for perfecting a mechanic’s lien must be strictly followed. MLM Constr. Co. v. Pace Corp., 172 Ariz. 226, 229, 836 P.2d 439, 442 (App.1992). These seemingly inconsistent principles are harmonized by requiring that all the statutory steps for perfecting a lien be followed, but permitting substantial compliance with any particular step so long as the purposes of the mechanic’s lien statutes are achieved.

The Markham case is important because it resolved several reoccurring problems for lien claimants and their counsel which trial court judges have troubled with in past years. First – a lien claimant can file supplements and amendments to correct an otherwise initially defective or deficient lien so long as the amendments are recorded within the statutorily mandated time period. Previously, it was not uncommon for property owners and their banks to argue that a defective or deficient lien claim, once filed, constituted a improper instrument, not capable of amendment or supplement, and thus subjected the lien claimant to statutory sanctions under ARS §33-420.

Second, that for purposes of service of the 20 day preliminary notice, the subdivision developer, here EHV, was considered the legal agent of the individual lot owners. In so holding, the court cited to Lewis v. Midway Lumber Inc., 114 Ariz. 426, 431, 561 P.2d 750, 755 (App.1977) (holding service on the owner of record sufficient even if the record owner is not the true owner) and concluded that service of the 20 day notice on EHV was therefore effective to give proper notice to the individual property owners,

Third, and probably the most important aspect of the case is the court’s discussion as to “completion” of the work for purposes of Markham timely recording its lien. ARS §33-993(A) provides the general rule that a lien must be filed within 120 days of “completion” In subsection C(1), completion is defined as 30 days final inspection and written acceptance by the governmental body which issued the building permit. In subsection C(2), completion is defined cessation of labor for a period of sixty consecutive days. When there is no building permit, or if the governmental body does not issue final inspections and written final acceptances, then “completion” for the purposes of subsection A of this section means the last date on which any labor, materials, fixtures or tools were furnished to the property.

These conflicting time periods are probably the single most confusing aspect of Arizona’s mechanic lien laws and are a common source of contention among practitioners. The statutory period could therefore be 60 days (in instances where a Notice of Completion has been recorded, see ARS §33-993(E), 120 days (when there is no building permit), 150 days (when there is a building permit and final inspection), or 180 days (when there has been a work stoppage).

Holding that Markham’s Lien was timely recorded, the court concluded that for purposes of subsection C(2), the ultimate question is not when Markham completed its work, but when the “improvement” was completed. Citing A.R.S. § 33–993(A) and S.K. Drywall, Inc. v. Developers Fin. Group, Inc., 169 Ariz. 345, 349, 819 P.2d 931, 935 (1991).

The last significant issue addressed by the Court was whether the Notice of Lis Pendens, required A.R.S. § 12–1191(A) must be notarized. While it is common practice for attorneys to have such notices notarized (acknowledged), nothing in A.R.S. §§ 33–998 or 12–1191 requires the lis pendens to be notarized. The court held that lack of notarization did not prevent the lis pendens from serving its intended purpose – giving constructive notice to interested parties of litigation that may affect title to the property – and therefore concluded that a lis pendens filed in conjunction with an action to foreclose a mechanic’s lien need not be notarized.


 

In the case of Allstate Utility Construction, LLC v. Towne Bank of Arizona (1 CA-CV-10-0556; 0747, 25-Oct-2011), Division 1 of the Arizona Court of Appeals finally addressed several issues relating to alleged defect with the 20 day preliminary notice accompanying Allstate’s mechanic’s Lien.  The court held that 1) 20 day notices need not contain an original handwritten signature of the claimant, 2) that certain typeface in the notice was not too small; 3) that the “time of day” of mailing the 20 day notice is not required, and 4) that failure of the lien claimant to include a form of acknowledgement with are not material defects invalidating the lien claim.

Allstate Utility contracted to perform work on property owned by ALC Builders.  Within 20 days of first stating work, Allstate served ALC Builders with its preliminary 20 day notice by first class mail.  When Allstate was not timely paid, it recorded and then sued to foreclose its mechanic’s lien for $112K.  Towne Bank held a security interest in the property which, if Allstate’s lien was determined valid, was admittedly junior to the lien of Allstate.

Towne Bank first argued Allstate’s preliminary 20-day notice was defective because it was not properly signed pursuant to ARS § 33-992.01(C) in that it did not contain an “original” signature of the lien claimant but instead was electronically signed by the notice preparation company.  The statutorily mandated 20 day notice form includes lines labeled “Company name” and “Signature,” as well as “Title.”  In Allstate’s case, in the space labeled “signature,” the notice stated, “SIGNATURE AND TITLE ON FILE.”  The Court held that as a matter of law, Allstate’s name, along with the other information and the notation that the claimant’s “signature and title” were “on file,” were sufficient to manifest Allstate’s intention to authenticate the notice.

Towne Bank next argued that the preliminary notice failed to contain statutorily mandated language in the proper font size.  ARS § 33-992.01(D) requires the preliminary 20-day notice to warn the property owner or other recipient that it has only 10 days to correct any inaccuracies in the notice. The statute provides that the warning “be in type at least as large as the largest type otherwise on the document.” ARS § 33-992.01(D). Towne Bank argues Allstate’s notice was invalid because the warning language was not as large as the largest type otherwise on the document.  The Court held that the font size, while small, was not materially different that the size of any other language on the notice and summarily rejected this argument.

Towne Bank’s third argument was that Allstate’s lien is invalid because the copy of the preliminary 20-day notice that Allstate averred it served on ALC Builders lacked a form by which ALC Builders could “acknowledge” receipt of the notice.  In Arizona, a claimant may prove that it served the 20-day notice by recording an acknowledgment of receipt executed by the recipient of the notice.  ARS § 33-992.02(1).  Alternatively, the claimant may prove it served the notice by recording an affidavit of service together with its lien. ARS § 33-992.02(2).  The court held that while the 20 day notice failed to include an “acknowledgment” as provided by statute, this defect was not fatal because Allstate recorded an affidavit of service with its lien – the alternative method of proving delivery.  The court further held that failure to provide an acknowledgment form to the recipient of a preliminary 20-day notice does not invalidate the notice or the subsequent notice and claim of lien.

Towne Bank’s final argument was that the affidavit of service was defective because it did not state the time of day that the notice was mailed to ALC.  The court summarily disposed of this argument as well finding that there is nothing in the statutory language which requires that the precise time of day when the 20 day notice is mailed be noted.

In summary, the Court reaffirmed the long standing rule of law applicable to Arizona Mechanic Liens.  Arizona’s lien statutes generally have two purposes: To protect laborers and materialmen who have provided goods and services, and to protect the right of property owners to notice of lien claims against them. See Kerr-McGee Oil Ind., Inc. v. McCray, 89 Ariz. 307, 311, 361 P.2d 734, 736 (1961); Lewis, 114 Ariz. at 431, 561 P.2d at 755.

 

SW Contractor – 2008 Professional Services Guide

AZ-Lien-Release-1