This document gives a brief description of some central aspects of mechanic’s lien law. It is not meant to serve as a comprehensive overview of the numerous statutory and common law concerns and intricacies surrounding mechanic’s liens in Nevada and does not constitute legal advice.
1. What is a Mechanic’s Lien?
Generally, a lien is a legal interest or right that a creditor has in another’s property lasting usually until the debt that it secures is satisfied. A “construction lien” is a statutory lien in favor of contractors, materialmen, and others to secure payment of labor rendered and services provided. A “construction lien” is also known as a “mechanic’s lien,” “materialman’s lien,” “subcontractor’s lien” and various other names. The Nevada statutory scheme, Chapter 108, refers to these liens as “mechanic’s liens” and sets forth the scope and requirements for perfection.
The principle underlying mechanic’s liens in Nevada and every state is that those who have their lands improved should pay for the labor rendered and the materials delivered. All 50 states have adopted mechanic’s lien laws. An attorney is not required to prepare mechanic’s liens, they can be prepared in-house or by an outside service.
2. Who is entitled to a Mechanic’s Lien in Nevada?
Any person who provides work, material or equipment with a value of $500 or more which is used in the construction, alteration or repair of any improvement, property or work of improvement is entitled to a mechanic’s lien. The statute sets forth specifically that the following individuals are entitled to mechanic’s liens:
• Artisans • Builders • Contractors • Laborers • Lessors or renters of equipment • Materialmen • Miners • Subcontractors • Architects • Engineers • Land Surveyors • Geologists • Any claimant who provides work, material or equipment.
*Per NRS 108.222(2) if a license is required to perform the work, the contractor or professional will only have the lien if licensed to perform the work.
3. What Property Is Subject to a Mechanic’s Lien?
Mechanic’s liens attach to “the property, any improvements for which the work, materials and equipment were furnished . . . and any construction disbursement account.” NRS 108.222(1).
NRS 108.22172 states that “property” means:
• The land and all buildings
• Improvements and fixtures on the land and
• A convenient space on and about the land
• Development, enhancement or addition to property.
4. What is the amount that a claimant is entitled to?
If the parties entered into a contract for a specific price the lienable amount is the unpaid balance of the agreed price. NRS 108.222(1)(a).
If the parties did not agree to a specific price, then the lienable amount is the fair market value of the work, material or services that were provided. NRS 108.222(1)(b).
5. What priority does the claimant qualify for?
The following is the statutory priority of the various types of Mechanic’s Liens:
1. Labor claims.
2. Material suppliers and lessors or equipment.
3. Other lien claimants who performed under a contract with the prime contractor or any subcontractor.
4. All other lien claimants.
6. What is perfection and how can a claimant perfect its Mechanic’s Lien?
In order to prefect a mechanic’s lien, which is required in order to bring a complaint, claimants must take specific statutory steps.
Step 1 Service of a Pre-Lien Notice.
The first notice required to perfect a lien is the Notice of Right to Lien. All potential lien claimants must deliver a Notice of Right to Lien. Under NRS 108.245(1), the lien claimant may provide the Notice of Right to Lien “at any time after the first delivery of material or performance of work or services under his contract”. The Notice of Right to Lien should be recorded promptly. The purpose of the Notice of Right to Lien is to put the owner of the property on notice that the lien claimant may at a future date record a lien in accordance with applicable law.
The Notice of Right to Lien does not create a lien or encumbrance on the property but is required under statute to later record a lien. NRS 108.245(B). The Notice of Right to Lien must be delivered in person or by certified mail to the owner of the property. NRS 108.245(1).
Exceptions for Notice include:
• Those providing labor only are not required to provide a Notice of Right to Lien.
• The Prime Contractor who contracts directly with the owner is not required to give the Notice of Right to Lien.
Residential Projects: The 15 day Notice called a Notice of Intent to Lien is a statutory prerequisite to filing the Notice of Lien. The 15 day notice of lien does not have to be recorded but does have to be served by personal delivery or certified mail to an owner and prime contractor. NRS 108.226(6). The notice may extend the time to record a Notice of Lien for residential projects only.
Step 2 Recording and Service of a Notice of Lien.
The language and form of the Notice of Lien is set forth under NRS 108.226(5). This document is what people are referring to when they use the phrase “mechanic’s lien.” Contained in the notice is:
• The amount of the original contract
• The total amount of all additional or charged work, materials and equipment
• The total amount of all payments received to date
• The amount of the lien, after deducting all just credits and offsets;
• The name of the owner of the property
• The name of the person by whom the lien claimant was employed or to whom the lien claimant furnished or agreed to furnish work, materials or equipment;
• A brief statement of the terms of payment of the lien claimant’s contract; and
• A description of the property to be charged with the lien.
The Notice of Lien must be verified by the oath of the lien claimant. The timing of the recording is set forth in NRS 108.226(1). It must be recorded within ninety (90) days after the date on which the latest of the following occurs:
• The completion of the work of improvement;
• The last delivery of material or furnishing of equipment by the lien claimant for the work of improvement; or
• The last performance of work by the lien claimant for the work of improvement.
• Or the time to record is shortened 40 days by a recorded and delivered Notice of Completion. NRS 108.226.
Service of the Notice: The lien must be “served” upon the owner of the property within thirty (30) days after recording the Notice of Lien by delivering a copy to the owner personally; or if the owner is absent from his residence or place of business by mailing a copy by certified mail with a return receipt to the owner at his residence, usual place of business, or to his resident agent.
Step 3 A lawsuit is commenced to enforce the lien.
Construction Liens are effective for a period of 6 months from the date the Notice of Lien is recorded. NRS 108.233(1). The lien will not be effective beyond six months unless:
• A lawsuit has been commenced to enforce the lien; or
• A tolling agreement is in place (not to exceed six months)
7. How does a claimant foreclose on a mechanic’s lien?
A lien claimant must wait 30 days from recordation of the Notice of Lien to initiate a foreclosure action. NRS 108.244. An action to foreclose the lien may not be brought any later than six months after the lien was recorded unless the time was properly extended by a tolling agreement.
a. These documents are required to foreclose the lien:
1. The Complaint -Must be filed in a court of competent jurisdiction and should probably include additional contract and equitable based causes of action such as breach of contract, unjust enrichment, and others depending on the parties.
2. The Notice of Pendency of the Action (lis pendens) – Must be filed with the court and recorded with the Recorder where the property is located to provide constructive notice to the work of an alleged claim or interest in the property.
3. The Notice of Foreclosure – Published once a week for 3 consecutive weeks in newspaper in the County where the property is located. (Nevada Legal News). Also must be delivered in person or certified mail to all other lien claimant who had liens recorded against the subject property at the time the Complaint was filed.
b. The Statement of Facts Constituting Lien
Other lien claimants may join the foreclosure action by filing and serving a Statement of Facts Constituting Lien. This document looks similar to a complaint and lays out the legal and factual basis for a claimant’s lien. This is required a reasonable amount of time after the publication is received by other claimants. The other lien claimants should also file and publish a pendency of action to put all interests on notice. This process provides for the consolidation of claims into one action in the court for purposes of a foreclosure.
8. Who is entitled to Attorneys’ Fees and Costs?
The Court shall award the prevailing lien claimant the amount of their lien, their costs for preparing and recording the Notice of Lien including attorneys’ fees and costs. Also, the Court shall calculate and award interest pursuant to the contract rate or, if there is no contract, the legal rate. NRS 108.237.
9. How to Discharge a Mechanic’s Lien.
If the claimant receives payment or decides for other reasons to release its notice of lien, the Discharge or Release of Lien must be recorded with the County Recorder no later than 10 days after the lien has been satisfied or discharged. NRS 108.2437. It is recommended that the discharge is served to the owner and sent by certified mail.