Mechanics' Liens and Prompt Payment

Introduction

Lien Law has 3 items on the outline. The bulletin does not say which area prompt payment falls under, so this chapter teaches both. These are deadline questions: learn who must give which notice, when, and to whom, and count days on paper. Lien and notice deadlines exist so that an owner can find out who is owed money while there is still time to pay or withhold. Practice questions 84–90 test the 31-day look-back, three recording deadlines, the residential 15-day notice, the suit deadline, the release bond and the prime-to-sub payment date.

Key numbers

Part A — Who has a lien, and for how much

A lien claimant who furnishes work, materials or equipment for a work of improvement has a lien on the property, the improvements, and any construction disbursement account (NRS 108.222(1)). The amount is the unpaid balance of the agreed price, or if no price was agreed (including extra or changed work), the fair market value of the work, with a reasonable allowance for overhead and profit. A contractor or professional who must be licensed has a lien only if licensed to do the work (NRS 108.222(2)).

Lien rights are protected from contract tricks. Any contract term that tries to waive or limit lien rights, to make the contract subject to another state's law, or to require dispute resolution outside Nevada is void (NRS 108.2453). A waiver counts only if it uses one of the four statutory forms: conditional or unconditional waiver and release, each upon progress payment or upon final payment. A conditional waiver takes effect only when the claimant is actually paid (NRS 108.2457).

Part B — Notices before the lien

Notice of right to lien (NRS 108.245). Every claimant except a laborer must deliver a notice of right to lien to the owner, in person or by certified mail, at any time after first furnishing work or materials. Prime contractors and anyone who contracts directly with the owner or sells directly to the owner do not give this notice. A subcontractor or supplier who gives it must also send a copy to the prime contractor for information; failing to do so is a ground for Board discipline but does not invalidate the notice to the owner. The notice is not itself a lien and need not be verified. Without it, no lien for materials, equipment or non-labor services may be perfected or enforced.

The timing rule is the one the exam tests: a claimant who gives the notice has lien rights for what it furnished in the 31 days before the notice was given and for everything furnished after, until completion (NRS 108.245(6)). The notice is not void if given late; the claimant simply loses lien rights for work and materials furnished more than 31 days before it. To count back, subtract in two steps: April 10 minus 10 days is March 31, and 21 more days is March 10.

Residential 15-day notice of intent to lien (NRS 108.226(6)). On construction, alteration or repair of single-family or multifamily residences, every claimant except laborers must serve a 15-day notice of intent to lien, with substantially the information in a notice of lien, on both the owner and the reputed prime contractor, by personal delivery or certified mail, before recording the lien. Serving it extends the recording deadline by 15 days. This requirement does not apply to nonresidential projects.

Part C — Recording, serving and enforcing the lien

Recording deadline (NRS 108.226(1)). The claimant records a notice of lien with the county recorder in the county where the property is located:

• within 90 days after the latest of (1) completion of the work of improvement, (2) the claimant's last delivery of material or equipment, or (3) the claimant's last work; or
• within 40 days after the owner records a valid notice of completion that was recorded and served as required.

The notice of lien states the lienable amount after credits and offsets, the owner's name if known, who employed the claimant, the payment terms, and a property description, and it must be verified under oath (NRS 108.226(2)–(3)). Knowingly making a false statement in a lien is a gross misdemeanor with a fine of $5,000 to $10,000 (NRS 108.226(4)).

Service (NRS 108.227). A copy of the recorded lien must be served on the owner within 30 days after recording, by personal delivery, certified mail return receipt requested, or posting and mailing if the owner cannot be found. A subcontractor must also deliver a copy of each lien to the prime contractor.

Enforcement (NRS 108.233). The lien expires 6 months after recording unless a lawsuit to enforce it is filed within that time, or a written, recorded extension is signed within that time by the claimant and the property owner. An extension binds only those who sign it and cannot run more than 1 year from the date the lien was recorded. A prevailing lien claimant recovers the lienable amount, the cost of preparing and recording the lien, interest and reasonable attorney's fees (NRS 108.237).

Part D — The owner's tools

Notice of completion (NRS 108.228). After completion the owner may record a notice of completion stating the completion date, owner, property and prime contractor. Within 10 days after recording, the owner must mail a copy by certified mail to each prime contractor and to each claimant who requested it or served a notice of right to lien. If the owner does not, the notice is ineffective against those persons, and their 90-day period continues to apply. "Completion" means occupation or use, or acceptance, by the owner together with a stop to all work, or 30 consecutive days with no work if a notice of completion is timely recorded and served (NRS 108.22116).

Notice of nonresponsibility (NRS 108.234). An owner who did not order the work, such as a landlord whose tenant is remodeling, can protect its interest by recording a notice of nonresponsibility within 3 days after learning of the work (for a lessor, within 3 days after the lease takes effect or by signing, whichever is first), and serving it on the lessee and the prime contractor within 10 days. The prime contractor must post it on the site within 3 days of receiving it.

Lien release bond (NRS 108.2413–108.2415). A recorded lien can be released by recording a surety bond of 1.5 times the lienable amount in the lien. All prospective and existing liens on a job can be released with a bond of 1.5 times the prime contract amount.

The contractor's duty. If a supplier or sub the contractor hired records a lien and the contractor has been paid, the contractor must get the lien released within 75 days after recording or face discipline (NRS 624.3012(4)).

Part E — Prompt payment on private projects (NRS 624.606–624.630)

Nevada's prompt-payment statute governs private projects between owners, prime contractors and lower-tier subs. The owner-to-prime rules (NRS 624.609 to 624.622) do not apply to an agreement between a prime contractor and a natural person who owns a single-family residence for work on that home while the owner lives in it, or to a public body's contract for a public work (NRS 624.622(4)). The sub-payment rules in NRS 624.624 to 624.630 carry no such exception.

Owner to prime contractor.

• Pay by the date in the written schedule, or if there is none or the agreement is oral, within 21 days after the prime submits a payment request (NRS 624.609(1)).
• Retention may not exceed 5 percent of each payment (NRS 624.609(2)(a)(1)).
• To withhold anything beyond retention, the owner must give a written notice of withholding on or before the payment due date, identifying the amount, the reasons with a reference to the contract provision or code, signed by the owner's agent (NRS 624.609(3)).
• After the work is occupied, used or available for use (with a notice of availability or a certificate of occupancy), the unpaid balance is due within 30 days (NRS 624.620(1)). After a notice of correction, the owner has 10 days to pay or object (NRS 624.620(4)).

Higher-tier to lower-tier subcontractor (NRS 624.624).

• With a written payment schedule: pay by the due date or within 10 days after receiving payment for the sub's work, whichever is earlier.
• With no schedule or an oral deal: within 30 days after the sub's request or within 10 days after receiving payment, whichever is earlier.
• Retention is capped at 5 percent, with the same written withholding notice, copied to the owner and higher-tier contractors.
• Pay-if-paid limit: even if the subcontract says the sub gets paid only when the contractor is paid, the sub may stop work if not paid within 45 days after the 25th day of the month in which it submitted its request (NRS 624.626(1)(b)).

Stopping work and terminating (NRS 624.610; 624.626). If payment is late, a withholding notice is missing or disputed in good faith, or a change-order request goes unanswered for 30 days, the contractor or sub may stop work after 10 days' written notice. After stopping for nonpayment, it may terminate on 15 days' written notice, but must resume if paid before the termination date. An unanswered change order is deemed approved: the price and time increase by the amounts requested. On a proper termination the contractor recovers the cost of work, overhead and profit earned, the balance of the profit it would have earned, interest and collection costs. Contract terms that waive these rights are void (NRS 624.622(2); 624.628(3)).

Interest (NRS 624.630). Late money bears interest at the higher of the contract rate or the prime rate at Nevada's largest bank plus 4 percent.

Retention example. A prime submits a $64,000 progress payment request on a private commercial job. The most the owner may keep as retention is 5% × $64,000 = $3,200, so the owner pays $64,000 − $3,200 = $60,800, unless it has served a proper notice of withholding for other amounts. A 10% holdback would be $6,400 and is not allowed under this statute.

Notices under these sections must be delivered personally (with a notarized proof of delivery), by fax plus regular mail, by certified mail, or as the agreement provides (NRS 624.622(3); 624.628(4)).

Worked scenario

Valley Tile, a sub, first delivers tile to a Reno office building on March 1 and keeps working through July 15. It sends its notice of right to lien by certified mail on April 10. The building is completed August 20. The owner records no notice of completion. Valley Tile is owed $38,000.

• Lien coverage: the notice protects materials furnished from March 10 (31 days before April 10) onward. Tile delivered March 1 through March 9 is not covered.
• Recording deadline: 90 days after the latest of completion (Aug 20) and Valley's last work (July 15). Completion is later, so count 90 days from August 20: 11 days remain in August, 30 in September and 31 in October, which is 72; 18 more days reach November 18.
• No 15-day notice of intent is needed; the project is nonresidential.
• Service: a copy must reach the owner within 30 days after recording.
• Enforcement: file suit within 6 months after recording.
• If the owner wants the lien off title, it can record a release bond of 1.5 × $38,000 = $57,000.

Had the owner recorded and properly mailed a notice of completion on September 1, Valley's deadline would have been 40 days later: 29 days remain in September, and 11 more reach October 11.