Collection Options for Arizona Contractors

Arizona contractors have several statutory remedies to ensure they are able to collect funds for the work they have performed. Mechanics’ liens, stop notices, and Arizona’s prompt payment laws can all be used to enforce collections.

Arizona Mechanics’ Liens

A contractor must serve a preliminary 20-day notice on the owner (A.R.S. § 33-992.01), original contractor, and/or construction lender in order to claim a lien for services performed and materials supplied. If the notice is not served within 20 days after beginning work, it will only reach back to work performed in the previous 20 days. The notice may need to be supplemented as additional work is performed.

Within 120 days after the project’s completion, and if the contractor has not been paid, the contractor must record a Notice and Claim of Lien with the county recorders’ office. If a Notice of Completion is filed by the owner, then the contractor has only 60 days to record the Notice and Claim of Lien. The lien will expire in six months, so any foreclosure action on the lien must be brought within that time period.

Arizona Stop Notice

If contractors are not paid, they can also serve a “stop notice.” Arizona’s stop notice law allows contractors, subcontractors and suppliers to demand that the owner or construction lender immediately withhold amounts out of the undisbursed construction funds to satisfy the claim. A stop notice provides a back up to your mechanics’ lien by putting a hold on the construction funds, but you must also serve a 20-day lien notice.  Note that stop notices may be served on owner-occupied dwellings.

A suit to enforce the stop notice can be filed within ten days after serving the notice (A.R.S § 33-1063). The deadline to enforce the stop notice is within three months after the deadline for recording liens.

Arizona Prompt Payment

Arizona’s prompt payment statutes give the contractor, subcontractor, and supplier the right to stop work if the owner or general contractor does not make progress payments on time. Under A.R.S. § 11-29.01, an owner must make progress payments and approve work in a timely fashion, or give written notice specifying the reason that work will not be approved.

A contractor can suspend performance of the work if payments are not made promptly, provided that the contractor provides seven days written notice. A contractor who stops work under this section will not be considered to be in breach of the construction contract.

Chernoff Law handles real estate litigation matters throughout Arizona. Contact us by calling 480-719-7307 to discuss your real estate matters.

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