Idaho Land Law

A Blog Discussing Current Issues of Land Use, Real Estate, and Construction Law in the State of Idaho.

Filtering by Tag: Mechanic's Liens

New Mechanic's Lien Decision from the Idaho Supreme Court

The Idaho Supreme Court recently issued another mechanic's lien decision in  a case styled ACI Northwest Inc. v. Monument Heights, LLC – Docket No. 41269 [January 21, 2015].  A link to the full decision is here:  http://www.isc.idaho.gov/opinions/41269.pdf

@Depositphotos-nenovbrothers.jpg

@Depositphotos-nenovbrothers.jpg

In a case arising out of Kootenai County, where ACI Northwest Inc. (ACI) sought judicial foreclosure of its two mechanic’s liens on property encumbered by two deeds of trust. The district court determined that ACI’s liens were lost and unenforceable against the property because ACI failed to name or join the trustees in its action within the six-month statute of limitations in Idaho Code section 45-510. Thus, the district court granted summary judgment to Monument Heights LLC, Dan Jacobson, Sage Holdings LLC, Steven Lazar, the Mitchell A. Martin and Karen C. Martin Family Trust dated August 9, 2005, Devon Chapman, HLT Real Estate LLC, Anthony St. Louis, Andrea Stevens, and Lilly Properties Inc. ACI appealed to the Idaho Supreme Court. 

The Idaho Supreme Court reaffirmed its holding in ParkWest Homes, LLC v. Barnson (ParkWest II), 154 Idaho 678, 302 P.3d 18 (2013), that an action to enforce a mechanic’s lien on property encumbered by a deed of trust must name the trustee, who hold legal title to the property, within the statutory time limitation in Idaho Code section 45-510. Failure to name the trustee within the prescribed time limitation results in the mechanic’s lien being lost against legal title, the trustee’s interest in the property. This Court determined that the district court properly applied ParkWest II and therefore affirmed the district court’s decision.

The lesson for those with potential mechanic's lien claims is to make sure you name or join the trustee to your cause of action within the six-month deadline.  Failure to do so will result in a loss of mechanic's lien rights.


Mechanic’s Liens in Idaho – How long before I lose my right to lien a project?

@depositphotos-Macor

@depositphotos-Macor

There are a few things you should know as a contractor, sub-contractor, or a material supplier doing work in Idaho. Probably the most important is that contractors are required to register in Idaho prior to doing work. Failure to register is a misdemeanor that may result in a fine but more importantly an unregistered contractor loses its rights to pursue legal remedies. I cover this topic in a blog post on Idaho’s Contractor Registration Act.  

The second most important topic is the deadline to file a mechanic’s lien. In Idaho, a mechanic’s lien must be filed within ninety (90) days after the completion of labor or services, or the furnishing of materials for project. This is a statutory deadline and failure to timely file results in a loss of your mechanic’s lien rights. Now that doesn’t mean you are without recourse, you could always sue for breach of contract but the ability to go after the underlying real property for payment… is waived. 

You must include the following in any Idaho mechanic’s lien claim:

(a) A statement of the claimant’s demand, after deducting all just credits and offsets;

(b) The name of the owner, or reputed owner, if known;

(c) The name of the person by whom he was employed or to whom he furnished the materials; and

(d) A description of the property to be charged with the lien, sufficient for identification.

In addition, a mechanic’s lien claim must also be verified by the oath of the claimant, his agent or attorney.  And a true and correct copy of the lien must be served on the owner of the property either by delivering a copy personally or by mailing a copy by certified mail to the owner at his last known address. The delivery or mailing of the lien claim must be made no later than five (5) business days following filing the lien.

As a practical tip, I prefer that the owner is served by a process server.  My reasoning for paying a little extra for personal service is that I can include the process server’s affidavit in the action (lawsuit) to enforce the mechanic’s lien.  Remember that you must file your mechanic’s lien lawsuit within six (6) months after the mechanic’s lien is filed.

Mechanic’s liens are an integral part of any contractor, sub-contractor, or material suppliers’ business payment strategy. As part of that business strategy, my suggestion is to calendar seventy (70) days after the last date labor or materials were supplied to a project and if payment is not received by that deadline, then begin preparing your mechanic’s lien. Calendaring these dates will ensure you do not miss the ninety (90) day deadline to file your mechanic’s lien and will also give your attorney time to help you with the process. 

Mechanic’s Liens, Contract Claims, and Attorney’s Fees for the Defense?

Construction site.jpg

The Idaho Supreme Court recently provided some additional guidance on the recovery of attorney’s fees for the defense of contract claims.

In Intermountain Real Properties, LLC v. Draw, LLC, the Supreme Court examined a subject near to the hearts of Idaho Land Law blog readers… the validity of an Idaho mechanic’s lien.  Look for a future post on the mechanic’s lien portion of this case but for today I want to discuss the Supreme Court’s view of recovering attorney’s fees under I.C. § 12-120(3) for the successful defense of a contract or an open account claim.

By way of background, Idaho Code section 12-120(3) states:

In any civil action to recover on an open account, account stated, note, bill, negotiable instrument, guaranty, or contract relating to the purchase or sale of goods, wares, merchandise, or services and in any commercial transaction unless otherwise provided by law, the prevailing party shall be allowed a reasonable attorney’s fee to be set by the court, to be taxed and collected as costs.

In this case, TMC Contractors, Inc. (“TMC”) filed a Complaint for Collection and Petition to Foreclose Materialman’s Lien against Draw and various other defendants.  After filing its Petition, TMC assigned its lien to Intermountain Real Properties, LLC (“Intermountain”) and Intermountain proceeded with claims for breach of contract, open account, unjust enrichment, and lien foreclosure.  The district court ruled against Intermountain on all counts and awarded attorney’s fees to Draw under I.C. § 12-120(3).  Intermountain appealed.   

The Supreme Court upheld the district court on all counts and stated that I.C. § 12–120(3) will apply when a party alleges the existence of a contractual relationship or open account.  In other words, when a plaintiff alleges a commercial contract exists and the defendant successfully defends by showing that the commercial contract never existed, the court awards the defendant attorney fees.  That is pretty strong medicine for any plaintiff and the potential risk associated with making a breach of contract or open account claim should be considered before filing any petition on those counts in Idaho.

 

No Contractor Registration = No Payment for Idaho Contractors

Residential House Under Construction .jpg

Like many states, contracting in Idaho is regulated activity.  Without the proper registration, contractors are subject to monetary penalties and loss of legal rights for work they may have performed. Under Idaho’s Contractor’s Registration Act (“Act”), any person acting as a contractor without a current registration is guilty of a misdemeanor and may be punished by a fine up to $1,000 or by imprisonment in the county jail up to six months, or both.

For me, the $1,000 fine or six months in jail is plenty of incentive to properly register in the state before conducting work on a project. Yet, there are other penalties under the Act that should get the attention of any contractor contemplating working in Idaho. Chiefly, that a contractor cannot sue for payment or enforce a mechanic’s lien if they are not properly registered with the state. The loss of these two rights could mean that you will not be paid for your work on the project. 

Business Tip: Make sure the correct name of the company performing the work is registered.

As a contractor you will want to make sure the correct name of the company is registered with the Idaho Contractors Board.  Double check the following:

  • Does the registered name have the correct corporate entity designation such as Inc. or LLC?
  • Is the name spelled correctly and does it match the company name on your standard contract?

These seem like simple issues but the Idaho Supreme Court in Stonebrook Construction LLC v. Chase Home Finance, LLC, 152 Idaho 927 (Idaho 2012), has provided some guidance on how strictly courts will interpret the Idaho’s contractor registration requirement.  The takeaway from Stonebrook is that something as simple as failing to have the correct corporate designation may be fatal to your mechanic’s lien claim and your ability to pursue a collection action in Idaho.

  

On the Clock! How Long Do I have to file a Mechanic’s Lien Claim in Idaho?

This is the reoccurring question for those of us in the construction industry, “How long do I have to file a mechanic’s lien?”  In Idaho, the answer is simple… 90 days from the last day of supplying labor or material to the project.  Now, the hard part is figuring out exactly when the last day of work was performed on the project.    

Depositphotos_18719145_xs.jpg

For the purposes of determining the last day supplying labor, the general rule in Idaho is that the 90-day time limit starts when the job is substantially complete. Now, some of you may ask, “Can I send someone out to the job-site to complete minor items and extend my lien rights?”  Say clean up the job-site, perform a last minute walk-through, or change some light-bulbs?  In Idaho, this 90-day time limit cannot be extended by providing trivial labor or minor materials that are not necessary to complete the terms of the contract.

We all know that 90 days in the construction world is a short time to decide whether or not to file a mechanic’s lien claim. Typically, there are long lasting business relationships to consider.  Filing a mechanic’s lien claim may put your business at odds with the developer or the general contractor and practically eliminate you from consideration for future work. These all issues that should be considered before rushing out to file a mechanic’s lien claim.

There are few ways to address the sticky situation. One possible solution is to wait until the very last moment to file your lien claim.  Now, I didn't say wait until the last minute to prepare it. Instead have it prepared and ready to file if you don’t receive payment within 75 to 80 days. That should give you plenty of time to record the lien claim with the County Recorder where the property is located.

Remember, the goal is to preserve your business relationships and collect payment. Sometimes a simple phone call without mentioning anything about mechanic’s liens or lawyers will be enough to prompt payment from your customers.  Of course if the carrot approach does not work, then there is always the alternative…


Subscribe to The Blog - Idaho Land Law by Email