Construction lien law is critical to understand, because it impacts a contractor’s ability to secure payment and it differs from state to state. Contractors, however, can avoid many of these issues by being informed and prepared. Some of the most common issues in Oregon involve licensing, lienability, notice and documentation.
First, a contractor has to be licensed. Although it may seem straightforward, a contractor’s ability to get paid depends on valid licensing. Contractors must be validly licensed by the Construction Contractors Board (“CCB”) in order to bring a construction lien claim, file a complaint with the CCB, or commence any other action for compensation for work performed. ORS 701.131(1).
Moreover, all licensing requirements must be met at the time of bidding, contracting, and throughout the performance of the work. Note that applying for a license with the CCB is not sufficient—the contractor must actually be licensed during the relevant time period to avoid impairment of its lien rights. Further, several classes of contractors must be licensed by additional entities to preserve their right to a construction lien, including architects, electricians, and plumbers. (For further information, check the Oregon License Directory, available on the State of Oregon’s website at https://apps.oregon.gov/sos/licensedirectory.)
While several exceptions make it possible to avoid the consequence of being barred from bringing an action, these exceptions hinge on the contractor’s ignorance of licensing requirements and are difficult to prove.
Not all buildings are “lienable.” Publicly owned property is not subject to construction liens. However, if the owner creates an interest in the land, such as a leasehold, that interest is lienable. For example, a public port may lease its land to a private entity to build and manage certain terminals. The terminals are subject to a lien, although the underlying land is not. Therefore, when performing work on a publicly owned project, contractors must be cognizant of all interests in the land and should be careful to ascertain whether the public body has created an interest in a private party such that the project, or a portion of the project, is subject to a construction lien.
Lien rights must be protected with proper notice. There are several notice requirements that a contractor may have to comply with or risk sacrificing its lien rights. Most importantly, the notice of right to a lien is paramount to protecting lien rights pursuant to ORS 87.023. Contractors should be particularly wary of this notice because it is required at a time when attorneys are often not involved in the project. To make matters worse, the law does not clearly delineate the appropriate time to send the notice in order to ensure a contractor’s work is lienable.
Maintaining records is critical. After receiving a notice of right to a lien, an owner may demand the contractor provide documentation supporting its claim of lien. The owner may ask for, among other things, a list of materials or equipment or a description of labor or services supplied. The contractor must deliver the requested information within 15 business days from the date the contractor receives the request. Failure to do so will result in loss of attorney fees and costs. Because an owner can request detailed documentation, it is important that contractors stay vigilant in their record keeping.
In sum, these are just a handful of the issues that impact lien rights for contractors in Oregon. Contractors themselves are often in the best position to preserve their payment claims, and by the time an attorney is involved, it may already be too late. A contractor would be well served by understanding the lien laws and using a construction law attorney to help with all aspects of liens.