6.3 Recording the Notice of Lien (90-Day Rule), Priority, Statutory Waivers & 6-Month Foreclosure Suits

Perfecting the Lien: Recording Deadlines (NRS 108.226 and 108.228)

To perfect a lien, the claimant records a notice of lien with the county recorder of the county where the property is located, using the statutory form.

The 90-Day Rule (NRS 108.226(1)(a))

Record within 90 days after the latest of:

1. Completion of the work of improvement (the whole project);
2. The last delivery of material or furnishing of equipment by the claimant; or
3. The last performance of work by the claimant.

On residential projects, serving the 15-day notice of intent to lien extends this deadline by 15 days (NRS 108.226(6)).

The 40-Day Rule After a Notice of Completion (NRS 108.228)

• Recording the Notice: After the work of improvement is complete, the owner may record a notice of completion. It states the date of completion, the owner's name, address and nature of title, a property description and the prime contractor's name, and it is verified.
• Mailing Copies: Within 10 days after recording, the owner must mail a copy by certified mail to each prime contractor and to each potential claimant who gave a notice of right to lien or asked for a copy.
• Effect: If properly recorded and served, the lien deadline becomes 40 days after the notice of completion is recorded (NRS 108.226(1)(b)).
• Failure to Serve: If the owner does not deliver a copy as required, the notice of completion is ineffective as to that prime contractor or claimant, and the 90-day rule applies to it.

Deadline to record a notice of lien
  No notice of completion ............ 90 days after the latest of project completion
                                       or the claimant's last work or delivery
  Valid, served notice of completion . 40 days after the notice of completion is recorded
  Residential + 15-day notice ........ either deadline extended by 15 days

Exam Focus: First ask whether a notice of completion was recorded and mailed within 10 days to this claimant. If not, use the 90-day rule.

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Contents, Verification and Service

Contents (NRS 108.226(2) and (5))

The notice of lien must state:

• The lienable amount after deducting all just credits and offsets. The statutory form lists the original contract amount, additional or changed work, and payments received.
• The name of the owner, if known.
• The name of the person who employed the claimant or to whom it furnished materials or equipment.
• A brief statement of the terms of payment.
• A description of the property sufficient to identify it, with the assessor's parcel number.

Verification

The notice must be verified by the oath of the lien claimant or another person, sworn before a notary. It need not be acknowledged to be recorded. Knowingly making a false statement in or relating to a notice of lien is a gross misdemeanor with a fine of $5,000 to $10,000 (NRS 108.226(4)). It is also a ground for discipline (NRS 624.3016(3)).

Service (NRS 108.227)

• On the Owner: Within 30 days after recording, serve a copy by personal delivery to the owner or its registered agent, or by certified mail, return receipt requested. If no address can be found, post a copy on the property, deliver one to a resident, and mail copies to the addresses of record.
• Multiple Owners: Serving one owner preserves the lien even if another was missed.
• On the Prime Contractor: Each subcontractor must also deliver a copy of each notice of lien to the prime contractor. Failing to do so is a ground for discipline.

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Priority (NRS 108.225) and Ranking (NRS 108.236)

Priority Over Other Encumbrances

Mechanics' liens are preferred to:

1. Any lien, mortgage or other encumbrance that attached after the commencement of construction; and
2. Any lien, mortgage or encumbrance unrecorded at commencement of which the claimant had no notice.

Every mortgage or encumbrance imposed after construction commenced is subordinate to the mechanics' liens, regardless of when the notices of lien are recorded.

Commencement of construction is the date when work performed, or materials or equipment furnished, is visible from a reasonable inspection of the site (NRS 108.22112).

Jan 15  Excavation visibly begins (commencement of construction)
Feb 1   Lender records a $5,000,000 deed of trust
Jun 1   Electrical subcontractor starts work
Nov 1   Electrical subcontractor records a $40,000 lien

Result: the deed of trust attached AFTER commencement, so the
electrical lien is preferred to it (NRS 108.225).

This is why construction lenders inspect sites and obtain title endorsements to confirm no visible work has begun before they record.

Ranking Among Lien Claimants (NRS 108.236)

When several liens are foreclosed together, the court ranks claimants, and sale proceeds are paid in this order:

1. All labor, whether ordered by the owner, the prime contractor or a subcontractor;
2. Material suppliers and lessors of equipment;
3. Other claimants who worked under contract with the prime contractor or a subcontractor; and
4. All other lien claimants.

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Waivers and Releases (NRS 108.2453 and 108.2457)

• No Advance Waivers: Any contract term that attempts to waive or impair the lien rights of a contractor, subcontractor or supplier is void (NRS 108.2457(1)). NRS 108.2453 also voids terms that limit lien rights, require another state's law, require out-of-state dispute resolution, or waive claims for unreasonable delay or disruption.
• Only on Statutory Forms: A waiver is enforceable only if the claimant signs one of the statutory forms and, for a conditional waiver, actually receives the payment. Any oral or written statement purporting to waive lien rights is unenforceable except through a statutory form and only to the extent of payment received.

The Board's homeowner lien form tells owners to insist on an unconditional waiver and release upon final payment from every subcontractor and supplier (NAC 624.693).

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Release Bonds (NRS 108.2413 – 108.2425)

• To Release One Recorded Lien: The principal and a surety record a bond of 1.5 times the lienable amount in the notice of lien (NRS 108.2415(1)).
• To Release All Liens on a Project: A bond of 1.5 times the prime contract amount releases all prospective and existing lien rights for the work of improvement (NRS 108.2415(2)).
• Effect: The lien is released from the property, and the claimant looks to the bond. The surety pays what a court finds was secured by the lien, plus amounts awarded under NRS 108.237, up to the bond's penal sum.

$$\text{Release Bond} = 1.5 \times \text{Lienable Amount}$$

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Frivolous or Excessive Liens (NRS 108.2275)

An owner or other party in interest may ask the district court to order the claimant to show cause why a lien should not be released as frivolous or reduced as excessive:

• The motion needs a notarized affidavit and supporting documents.
• The applicant serves the order within 3 days, and the hearing is held 15 to 30 days after the order.
• If the claimant does not appear, the lien is released with prejudice and the claimant pays the applicant's costs and attorney's fees.
• If the lien is found frivolous and without reasonable cause, it is released and the applicant recovers costs and fees. If it is excessive, it may be reduced, with fees. If the lien is upheld, the claimant recovers its costs and fees.

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Enforcing the Lien (NRS 108.233, 108.237)

The 6-Month Deadline

A lien does not bind the property for more than 6 months after the notice of lien is recorded unless a foreclosure action is commenced in a proper court within that time (NRS 108.233(1)). After 6 months the notice of lien expires and gives no notice of anything.

Extension by Agreement

• The lien claimant and a person in interest may extend the time by a written instrument, acknowledged and recorded within the 6-month period.
• The extension binds only those who sign it.
• It may not run more than 1 year after the notice of lien was recorded, and no second extension is allowed.
• No extension may be given if it would delay the collection of other liens or encumbrances.

Fees, Costs and Interest (NRS 108.237)

• Prevailing Claimant: The court shall award the lienable amount, the cost of preparing and recording the lien, the costs of the proceedings including reasonable attorney's fees, and interest.
• Interest Rate: The contract rate, or if none, prime plus 4%, adjusted each January 1 and July 1.
• Lien Not Upheld: If the lien claim fails, the court may award the owner fees and costs if the lien was pursued without a reasonable basis in law or fact.

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Summary of Lien Deadlines