Failing to Serve the Preliminary Notice, Resulted in a Nevada Architect Losing Lien Rights
Securing mechanic’s lien rights in Nevada begins with service of the preliminary notice. Do lien rights exist if the notice isn’t served? Read on to learn more.
Nevada Preliminary Notice Guidelines
The preliminary notice should be served upon the owner and prime contractor after first furnishing materials or services, but within 31 days from first furnishing materials or services.
There are instances where the preliminary notice may not be required. For example, according to The National Lien Digest©, no notice is required when contracting directly with the owner or when providing only labor. However, that’s not all.
According to Luke Eaton in Actual Notice Exception to Pre-Lien Notice Requirement of Nevada Lien Statute Does Not Apply to Architect’s Offsite Work When No Onsite Work Has Been Performed Even Though Owner Knew That Architect Was Performing Work for the Project, it’s also possible the notice requirement may be waived if the property owner knows about the construction on its property and knows of the claimant.
“NRS 108.245(1) requires a mechanic’s lien claimant, other than one who performs only labor, to deliver a written notice to the owner of the property of the right to lien after they first perform work on or provide material to a project. However, substantial compliance with this requirement is met if the property owner: (1) has actual notice of the construction on the property and (2) knows the lien claimant’s identity.”
Eaton reviews a recent case before the Supreme Court where the architect was unpaid for its services and filed a lien, but failed to serve a preliminary notice. The trial court determined the architect’s lien was valid and the preliminary notice wasn’t required, because the property owners & developers were aware the architect was working on designs. In fact, the parties had viewed the drawings.
Supreme Court Says Notice is Required
Upon appeal, the Supreme Court did not agree. The Supreme Court advised a notice is required when onsite work hasn’t begun, because the lack of onsite work and lack of preliminary notice “poses a substantial risk of prejudice to property owners.”
Per Eaton, the Supreme Court added, “…where no onsite work had begun on property, there has been little or no benefit to the property itself. Further, while an owner who is “disinterested” in the construction of work on the property, may record a notice of non-responsibility to avoid liability for a lien stemming from work that it did not request, such a notice is only effective when the construction on the property was ultimately completed. As such, the risk that a prospective buyer will not pay its architect, for services performed for a project that may be never be constructed, should not be borne by the current property owner.”
The takeaway? Always serve a preliminary notice! As a best practice, even if a notice isn’t required, serve the notice. After all, it’s better to serve a preliminary notice and find out it’s not required, than not to serve a preliminary notice and find out it was required.
It’s a spooky time and I’m not referring to the Halloween season. It’s spooky when a creditor has an unperfected security interest because their UCC filing identified their debtor as “ISC, Inc .” The inadvertent extra space after “Inc” – a typical noise word – was enough to bump one creditor to the unsecured class.
Learn more when you read Double Bubble, Toil & Trouble: When Space & Noise Impact UCC Filings
- 10/19/17: The Credit Research Foundation & NCS present “How to Write a Credit Policy”
- 10/24/17: The Basics of the Lien and Bond Claim Process
- 10/31/17: The Credit Research Foundation and NCS Team Up to Bring You a Free Webinar on “Using Security to Expand Your Credit Boundaries”
- 11/02/17: Securing Mechanic’s Lien Rights in Notice of Commencement States
- 11/07/17: An Advanced Look at the UCC Process
- 11/14/17: An Advanced Look at the Lien & Bond Claim Process
- 11/28/17: Implementing a UCC Program – Overcoming Obstacles
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