12.12.17 Mechanic's Liens

Mechanic’s Lien Coverage Requires Underwriter Approval.

Priority

Can the Construction Loan have initial priority over mechanic's liens?

A construction loan mortgage for improvements to property cannot obtain initial priority over mechanic's liens. M&M liens are generally superior to all prior liens and mortgages as to improvements. ORS 87.025 (2). M&M liens for alteration and repair do not obtain priority over prior recorded mortgages unless the mortgage was given for the purpose of financing the alteration or repair of the improvement. ORS 87.025 (6).

Will initial priority as to future disbursements be retained only if certain procedures are followed?

There is no statute dealing with future advances under a construction loan mortgage.

If priority is lost, can it be regained?

There is no priority for a construction loan mortgage given for improvements to property.

Is there a difference between on-site and off-site work?

On-site and off-site work are treated the same under the statutes. ORS 87.010

Is priority the same for all contractors and subcontractors on the same project?

Perfected lien claimants have equal priority under the statutes. ORS 87.025(7)

Time Limits

What are the time periods for recording lien claims by original contractors and subcontractors?

Every person claiming a lien created under ORS 87.010(1) and (2) must perfect their lien not later than 75 days after the person has made their final contribution to the property in the form of labor, rental equipment, or furnishing materials or 75 days after completion of construction, whichever is earlier. ORS.87.035 (1). Construction lien claimants under the other subsections of ORS 87.010 have until 75 days after completion of construction.

After what period of time can you waive a mechanic's liens if no suit is filed?

A lien created under ORS 87.010 shall be valid for no longer than 120 days after the claim of lien is filed unless suit is brought in a proper court within that time. If an extended payment period is provided by a lien claimant and the terms are stated in the lien claim, the 120 day time period runs from the last day of the extended time period set out in the lien claim. No lien shall be continued in force for a longer time than two years from the time the claim of lien is filed under ORS 87.035 by any agreement to extend payment. ORS 87.055

Removing or Waiving Liens

Is there a statutory procedure for affidavits of completion or notices of completion?

There is a statutory provision for completion notices. ORS 87.045. The statute sets out what the notice should contain and who has the authority to give the notice.

Can a statutory bond terminate the mechanic's liens as an encumbrance on the title?

ORS 87.076 sets out the statutory provisions for providing a bond or deposit of money for the release of a M&M lien claim.

Can the original, general, or subcontractors by contract or waiver agreement subordinate or waive mechanic's liens by general contractor and/or subcontractors?

Yes. Although there is no statutory authority, case law supports that a waiver or subordination agreement that has been expressly agreed to by the contractor and/or subcontractors will effectively bar a later lien claim assertion.

Can a bona fide purchaser or bona fide lender take free of mechanic's liens later filed for earlier work?

There are no statutes giving bona fide purchaser or lenders protection from unfiled lien claims.

Title Company Requirements

What are the customary requirements for issuing Loan Policies on construction loan mortgages?

Coverage is almost never given against M&M liens prior to completion since there are strict Department of Insurance underwriting requirements and substantial surcharges. Underwriter approval is required.

Is it customary to add a "pending disbursement" clause or mechanic's liens exception in the Loan Policy insuring a construction loan mortgage?

Almost always an exception for M&M liens is shown prior to completion. After completion, with appropriate affidavits and other information and additional charges, the exception may be removed.

Also subject to any bulletins relating to mechanic’s liens.

Revised 2-20-19