AZ Preliminary 20-Day Notice: Did You Serve the Lender?

By Jared M. Scarbrough

The prudent contractor, subcontractor, materialman, and supplier—especially in this economy—is ensuring that it files its Preliminary 20-Day Notice on every applicable job in the event that it has trouble getting paid for its work. But are you properly serving all of the necessary parties? Arizona Revised Statutes §33-992.01 requires that a claimant serve the Preliminary 20-Day Notice upon the owner, general contractor, contractor with which the claimant contracted, and the construction lender. In a case that is currently pending appeal, a Maricopa County Superior Court judge ruled that pursuant to A.R.S. §33.992.01, the subcontractors on a traditional residential construction project had an affirmative duty to discover the identity of and actually serve the construction lender.

A.R.S. §33-992.01(B) and (E) state that a subcontractor that wants to file a lien on a project must “as a necessary prerequisite to the validity of any claim of lien, serve the owner or reputed owner, the original contractor or reputed contractor, the construction lender, if any, or reputed construction lender, if any, and the person with whom the claimant has contracted for the purchase of those items with a written preliminary twenty day notice . . . by mailing the notice by first class mail sent with a certificate of mailing, registered or certified mail, postage prepaid in all cases, addressed to the person to whom notice is to be given at the person's residence or business address. Service is complete at the time of the deposit of notice in the mail.”

Of course, the subcontractors argued that they requested the lender’s information under A.R.S. §33.992.01(I), and that the owner and general contractor failed to respond within ten days. The judge, however, ruled that the lender’s information was readily available to the subcontractor on the Maricopa County Recorder’s website, and that the lender would have been prejudiced by the owner’s failure to provide the lender’s information to the subcontractors, and thus, granted the lender’s motion for summary judgment.

As mentioned, this case is pending appeal, but it is a clear signal that the prudent contractor, subcontractor, materialman, and supplier must be even more conscientious with their preliminary lien notices and ensure that it performs its due diligence to discover the identity of the construction lender and properly mail the preliminary notice to the lender using the specific means set forth in the statute to protect its lien rights down the road.

For more information contact Jared M. Scarbrough at jscarbrough@holmwright.com or (480) 477-8589.