Mar 21, 2019
By: William Fig, Partner, Sussman Shank
Everyone involved in the construction industry should be generally aware of the technical, statutory quagmire that is Oregon construction lien law, ORS Chapter 87.001, et. seq. The most known requirements are the deadlines for lien notices, the recording of
The first such trap may be sprung early on in the life of a project, well before any problems arise or a lien is filed, and it has serious consequences for material suppliers. Generally speaking, a material supplier needs to send a pre-lien notice to any mortgagees and, unless you contract directly with the owner, to the owner of the land upon which the project is being constructed. On new construction, the lien of a material supplier that properly and timely sends a pre-lien notice to the required parties will have priority over the mortgagee’s (e.g. banks/lenders) existing encumbrance (e.g. Deed of Trust) as to the improvement and the land required for the convenient use and occupation of the improvement. This is commonly referred to as “super priority.”
However, the savvy mortgagee who receives a pre-lien notice may send you a demand for a list of materials and supplies under ORS 87.025(4). This statute provides:
A mortgagee who has received notice of delivery of materials or supplies in accordance with the provisions of subsection (3) of this section, may demand a list of those materials or supplies including a statement of the amount due by reason of delivery thereof. The list of materials or supplies shall be delivered to the mortgagee within 15 days, not including Saturdays, Sundays and other holidays as defined in ORS 187.010, of receipt of
For a material supplier, the importance of its lien’s priority over existing encumbrances cannot be overstated.
Moreover, if a material supplier proceeds to foreclose an inferior lien, it usually must satisfy the superior (and typically significant) encumbrance of the
A second trap for a material supplier lies in the language of ORS 87.057. Subsection (2) of that statute provides:
Where a notice of intent to foreclose a lien has been given as provided by subsection (1) of this section, the sender of the notice upon demand of the owner shall furnish to the owner within five days after the demand a list of the materials and supplies with the charge therefor, or a statement of a contractual basis for the owner’s obligation, for which a claim will be made in the suit to foreclose. Emphasis added.
The kicker is in ORS 87.057(3), which requires a “plaintiff or cross-complainant seeking to foreclose a lien in a suit to foreclose shall plead and prove compliance with subsections (1) and (2) of this section. No costs, disbursements or attorney fees otherwise allowable as provided by ORS 87.060 shall be allowed to any party failing to comply with the provisions of this section.” Emphasis added. While this statute does not affect the priority of
Bill represents mortgage servicers and lenders in prosecuting and defending mortgage foreclosure actions and defending lenders and servicers in “wrongful foreclosure” lawsuits in state and federal courts in both Oregon and Washington. Bill also represents general contractors, subcontractors, and material suppliers in all aspects relating to their businesses. This includes contract review and drafting, preparing construction bond and lien claims, and litigating all types of payment claims in state and federal courts. He also handles administrative claims against contractors’ surety bonds.