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?

No: A.S. 34.35.060(c) provides a lien in favor of an individual performing labor upon a building or other improvement in its original construction, or a trustee of an employee benefit trust for those individuals, has priority over a prior recorded encumbrance upon the land on which the improvement is constructed.

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

No, as there is no priority to be had as against mechanic liens, pursuant to AS 34.35.060(c).

If priority is lost, can it be regained?

No.

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

The statute does not appear to make a distinction.

Time Limits

What are the time limits for recording lien claims?

Lien claims must be recorded within 90 days of the completion of the work by the claimant (as opposed to the completion of the project as a whole), except that if a notice of completion has been recorded by the owner pursuant to AS 34.35.071 the claims of lien must be recoded within 15 days. Because the various off-record notification steps by the owner recording the notice of completion, we do not normally rely on the time limit so established. See AS 334.35.071.

If no suit is filed, when can you waive mechanic's lien issues?

Suit must be filed within 6 months of recording of the lien claim, unless the time period has been extended for an additional six months. (AS 34.35.080) Accordingly, you may waive the mechanic's lien issues if more than one year has passed since the recoding of the lien.

Removing or Waiving Liens

Is there a statutory procedure for notices of completion?

Yes. See AS 34.35.071. We do not normally rely upon Notices of Completion.

Can a statutory bond terminate mechanic's liens as clouds against the title?

Yes, if the bond meets the requirements of AS 34.35.072, the liens are transferred from the title to the bond.

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

There is no statutory reference for waiver of mechanic's liens by general contractor or subcontractors. Can a bona fide purchaser or lender take free of mechanic's liens later filed for earlier work?

Only if the lien period has apparently run, an action to foreclose has been instituted, but no notice of lis pendens or pending litigation has been recorded. AS 34.35.080, AS 9.45.940.

Title Company Requirements

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

Customarily we do not insure priority of construction loan mortgages or deeds of trust.

Is it customary to add a pending disbursement clause in the Loan Policy insuring a construction loan mortgage?

No. It is customary to retain an exception for mechanic's liens.