|
Understanding
Your Rights: Generals and Subs
Working on Multi-Building Residential
Projects in Arizona
Michael
J. Holden
Originally published June 2003
For
contractors and subcontractors working on multi-building residential
projects, the deadline to record liens is now triggered by the
completion of each separate building rather than the entire project.
This rule applies even if the work is being performed under a single
contract between the owner and general contractor or a single
subcontract between the general and the sub.
1998
Lien Law Amendments. This rule was enacted as part of the 1998
Arizona lien law revisions. The applicable statute now provides:
"[A] work of improvement … for residential occupancy [consisting]
of more than one separate building without regard to whether the
buildings are constructed pursuant to separate contracts or a single
contract" are separate projects for lien purposes and "the
time within which to perfect a lien … commences to run on completion
of each separate building." A.R.S. §33-993(B).
Arizona's
title companies lobbied for this change in response to a 1991 Arizona
Supreme Court decision, S.K. Drywall, Inc. v. Developers Financial
Group, Inc., 169 Ariz. 345, 819 P.2d 931 (1991). The S.K. Drywall
court held that a subcontractor could record a single lien for an
11-building condominium project triggered by completion of the last
building. The Arizona Supreme Court explained where the construction of
a multi-building project constitutes a "single project," a
single lien may be filed and is timely filed within the statutory period
dating from "completion" of the last structure.
The
problem for the title industry was that units in the early-completed
buildings of a multi-building project could be sold months or even years
before "completion" of the final building. As a result, it was
extremely difficult for title companies issuing title insurance policies
to early buyers to assure that the property was not exposed to future
lien claims.
The
1998 lien law revisions legislatively overruled the decision in S.K
Drywall by eliminating any uncertainty regarding liens on
multi-building residential projects-the lien time now starts to run upon
completion of each building.
Rule
Only Applies to Residential Projects. However, this only applies on
multi-building residential projects; it does not apply on commercial
projects.
The
term "residential" is not defined in the lien statutes. The
dictionary definition of residence is as follows:
"1.
the act or fact of dwelling in a place for some time; the act or fact of
living or regularly staying at or in some place for the discharge of a
duty or the enjoyment of a benefit; 2. the place where one actually
lives as distinguished from one's domicile or a place of temporary
sojourn; DOMICILE; the place where a corporation is actually or
officially established; the status of a legal resident; or 3. building
used as a home; DWELLING; housing or a unit of housing provided for
students."
It is
likely Arizona courts will employ the "dwelling" or "the
place where one actually lives" definition for
"residential" in construing the statute. Therefore, this law
applies to multi-building projects involving apartments, condominiums,
townhouses, subdivisions and other dwellings.
Practical
Advice. The practical consequence of this change is that
subcontractors and suppliers must treat each building on a
multi-building residential project as a separate project for lien
purposes. — Michael J. Holden
|
