The Oregon Court of Appeals recently issued a decision confirming the pre-lien notice requirements necessary to perfect a lien in Oregon. The case, known as Multi/Tech Engineering Services, Inc. v. Innovative Design & Construction, LLC, 274 Or App 389 (2015), discussed whether a lien recorded by Multi/Tech for engineering services could be foreclosed where Multi/Tech may have failed to provide the project owner a notice of right to lien.
The case involved the development and construction of a commercial project in Salem owned by Adler Commercial Properties (ACP). The project owner retained the services of Innovative and Gene Pfeifer to assist in the development of the project, who in turn hired Multi/Tech to provide various engineering services. Following Innovative’s and Pfeifer’s failure to pay Multi/Tech’s final invoice, Multi/Tech recorded a lien identifying ACP (and other related entities) as the project owners and Innovative and Pfeifer as the lien debtors. Thereafter, the trial court granted a judgment of lien foreclosure to Multi/Tech. ACP, among others, appealed asserting that Multi/Tech failed to properly perfect its lien.
The Court of Appeals confirmed that under ORS 87.010(5) professionals providing engineering services, such as Multi/Tech, were generally authorized to lien the project for which such services were supplied. The Court went on further, however, to emphasize that “[i]n order to perfect one of the construction liens authorized by ORS 87.010, including a lien under ORS 87.010(5), a person who is entitled to a lien ordinarily must provide the owner of the property subject to the lien with notice of the person’s right to a lien.” Citing ORS 87.021(3)(a), the Court cautioned that “[f]ailure to provide the notice – when notice is required – means that the lien is not perfected and is not valid.”
In examining the issue of whether Multi/Tech provided the notice of right to lien required under ORS 87.021, the Court of Appeals held that “a sample fill-in-the-blank form for a ‘Notice of Right to Lien’” provided by Multi/Tech to Innovative was insufficient to comply with ORS 87.021 where there was no evidence in the record that such blank form had been filled out or transmitted to ACP.
The Court then examined whether Multi/Tech fell within the exception to the notice requirement for certain persons working on “commercial improvements.” In reviewing the exception set forth in ORS 87.021(3)(b), the Court confirmed that “[a] person who performs labor upon a commercial improvement or provides labor and material for a commercial improvement or who rents equipment used in the construction of a commercial improvement need not give the notice” that would otherwise be required. Relying on the Supreme Court of Oregon’s decision in Teeny v. Haertl Constructors, Inc., 314 Or 688 (1992), the Court emphasized that the “exception only applies to persons who perform labor or provide materials at the site of the commercial improvement.” The Court further explained that the “exception does not apply to persons whose work in connection with the commercial improvement is off site, even if that off-site work requires incidental contacts with the site.”
Upon finding that Multi/Tech’s lien was for engineering services that were provided primarily off-site, the Court of Appeals held that Multi/Tech did not fit within the exclusion set forth in ORS 87.021(3)(b). In reaching this conclusion, the Court emphasized that even though “Multi/Tech’s employees had contact with the job site in the course of providing those engineering services, those contacts consisted of (1) clearing away some vegetation and digging small holes, (2) taking measurements of the property, (3) conducting ‘field exploration work,’ and (4) taking a soil sample,” such contact was incidental. Relying again on Teeny, the Court held that based on the evidence before it “Multi/Tech was not excused from providing the notice required by ORS 87.021(1).”
As a result, the Court of Appeals ultimately concluded that Multi/Tech failed to perfect its lien by failing to provide the project owner the required pre-lien notice, thereby warranting reversal of the trial court’s judgment of lien foreclosure to Multi/Tech and reopening the question as to what party was entitled to recover attorney fees under ORS 87.060(5).