By Brent Carpenter, AttorneyThis article originally appeared in the June 22, 2018 edition of the Daily Journal of Commerce Oregon.
For many contractors that shifted to public projects as a steady source of work during the Great Recession, it has been years since they recorded mechanics liens. While private work is lucrative and diversity between public and private work is a desirable goal, the world of private construction contract disputes is rife with pitfalls for the contractor who is rusty on how claims on private projects work.
Indeed, failure to follow the procedure set forth in Oregon’s lien statutes, Oregon Revised Statutes (“ORS”) Chapter 87, can lead to loss of attorney fees or even invalidation of the lien itself. While a detailed examination of all of the potential pitfalls in ORS Chapter 87 is beyond the scope of this article, there is one subtle pitfall which is easily overlooked by the unwary contractor—failure to respond within the statutory deadline to requests from the owner to the contractor for information regarding the lien.
Oregon law contemplates two circumstances when failure to respond to an owner’s request for information may negatively affect lien rights. First, ORS 87.027 provides that an owner who receives a notice of right to lien may send the contractor who provided the notice a written demand for: (1) a list of materials or equipment; (2) a description of the labor or services supplied; or (3) “a statement of the contractual basis for supplying the materials, equipment, services or labor, including the percentage of the contract completed, and the charge therefor to the date of the demand.” The contractor must provide, via certified or registered mail, the information described above within 15 days, not including weekends and holidays, of receipt of the demand. Failure to respond to the demand within 15 days results in the contractor losing its right to recover its attorney fees and costs pursuant to ORS 87.060(5).
Second, under ORS 87.057, at the owner’s request, the contractor must provide: (1) a list of materials and supplies and charges for them; or (2) “a statement of the contractual basis for the owner’s obligation.” While this demand by the owner is made at a different time in the lien process (i.e., after notice of intent to foreclose is sent), the key distinction from ORS 87.027 is the time to respond. The consequence for failure to respond within five days, as opposed to 15 days under ORS 87.027, is loss of entitlement to attorney fees and costs in the lien foreclosure action. Further, the time to respond includes weekends and holidays. This critical distinction may result in as little as one or two business days to respond.
Savvy owners use these deadlines to their advantage by sending requests for information late on the Friday before three-day holiday weekends. When the contractor returns to the office on Tuesday, it has to scramble to meet the deadline or lose important rights. Owners may also send a seemingly innocuous letter requesting backup without explicitly citing the applicable statute. When the unwary contractor fails to timely respond because it does not recognize that it is actually a request made pursuant to ORS 87.027 or 87.057, important rights are lost. As a construction litigator, I have seen these tactics in practice many times. As a contractor, do not fall victim to this gamesmanship.
Failure to identify and respond to statutory requests for information can seriously impact a contractor’s lien foreclosure claim, particularly when a contractor’s entitlement to attorney fees rests solely on the lien statutes. While the statutory requirements necessary to record and perfect a lien contain many pitfalls, the statutory requirements do not end there. Contractors should carefully scrutinize any communications from the owner to determine whether a duty to respond is triggered.