Arizona Mechanics Lien–Preliminary Notice Requirements
As most of us know by now, before recording your Arizona mechanic’s lien, all general contractors, subcontractors, and suppliers must first serve a preliminary 20 day notice. One of the issues is the amount to be inserted in that notice.
Feel free to make an estimate of the amount of your contract to be inserted in the Pre-Lien Notice and you are protected up to 120% of the amount. But if you exceed the amount originally stated, for example, an expansion of your base contract or change orders the beginning of the job, you must file a supplemental Notice. This is the only state that has such a requirement. For example, it is not uncommon to have field change order directives during the course of construction which exceeded that percentage. And if you are an equipment rental company, a customer could initially rent the equipment for a week, and then keep it for an extended period of time with different pricing. Unfortunately, you must re-serve a new Notice if the price goes up more than 20%. That is when you use the Supplemental Preliminary Notice on this site.
For this reason, to be safe, many contractors and suppliers put in an initial amount that is higher than originally bid. So if you have a contract for $10,000, you would put in $20,000 as your estimate. Their reasoning is the statute only prohibits going over the amount by 20%, not under. From a technical and legal standpoint, this would be sufficient, but it causes problems with the company you have a contract with (whether owner or general contractor). who would immediately see the higher amount and question your motivation. They may even think you are trying to improperly charge more. So it is the best to keep the price as originally agreed.
Another issue that may affect your Arizona mechanic’s lien has to do with the construction lender. The statute, Section 33-992.01(B), mandatorily requires that you serve the construction lender. This is defined as any lender, the proceeds of which are used for the actual construction. The problem is, few contractors, subcontractors, or suppliers no clue to deal with as far as the lender. In some cases, the construction lender places a sign at the property, but not always. And unlike California, building permits do not required the listing of the construction lender. But Arizona has a simple way to find out. See the next section.