When construction professionals find themselves involved in a payment dispute, their best course of action is to file a mechanics lien. A mechanics lien is almost always effective in prompting property owners to pay up, making it the most powerful tool construction parties can use to recover payment from delinquent clients.
Once a mechanics lien works successfully in getting you paid, you must then have it canceled or released. This guide will explain what you need to record a valid mechanics lien release in Arizona.
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- When to file an Arizona mechanics lien release
- Why do you have to release an Arizona mechanics lien?
- What happens if you fail to release an Arizona mechanics lien?
- How to release an Arizona mechanics lien
- Best practices when canceling or releasing an Arizona mechanics lien
When to file an Arizona mechanics lien release
An Arizona mechanics lien must be released within 20 days after the payment claim is satisfied. This means that every construction party who files a mechanics lien and successfully gets paid must file a separate document to cancel their Arizona mechanics lien.
Note that an Arizona mechanics lien release form is recorded after an existing mechanics lien has already been filed. It is a document that a lien claimant files when a payment claim has been made and when the payment claim has been subsequently settled. An Arizona mechanics lien release is different from a mechanics lien waiver, which is served before a mechanics lien gets recorded.
Another important detail to remember is that you must release an Arizona mechanics lien unless you have verified that the payment has been cleared in the bank. A cheque may bounce and a credit card transaction may get rejected, so make sure that the payment has been approved before you file your Arizona mechanics lien release.
Why do you have to release an Arizona mechanics lien?
One of the many reasons why a mechanics lien is very powerful is that it can encumber a property. This means that once a mechanics lien is filed, the property’s market value is affected since potential buyers and investors will be able to see that a payment claim was made against it. These potential financiers will most likely not invest in a property with an ongoing payment dispute.
When a property owner or another higher-tier party has settled the payment dispute, you must file a separate document that clears out your mechanics lien. Such a document, known as the Arizona mechanics lien release, clarifies with potential investors that the previously filed payment claim has already been settled.
Once you receive payment, you will most likely receive a request from the paying party to have your mechanics lien released. Arizona state laws also mandate you to cancel a mechanics lien within 20 days of receiving payment, that’s why you absolutely have to cancel a mechanics lien once you have been paid.
What happens if you fail to release an Arizona mechanics lien?
Failing to file an Arizona mechanics lien release within 20 days after the mechanics lien claim is satisfied may cost you more money. Since releasing a mechanics lien is a statutory requirement, you could be compelled to pay penalties and fines for not following Arizona’s mechanics lien rules.
How to release an Arizona mechanics lien
1. Prepare the Arizona mechanics lien release form
The Arizona mechanics lien release form must contain the following information:
- the recorder’s file number for the original mechanics lien you filed
- the date you filed the original mechanics lien
- the name of the party who owed you the payment
- your name and address
- a general statement expressing that you are releasing the mechanics lien as it has already been satisfied
Most of the information that you need for your Arizona mechanics lien form can be found in the original mechanics lien that you previously recorded. When copying the details, make sure that you write down the correct information. Minor spelling errors can cause confusion and may even invalidate your mechanics lien release.
2. Record the Arizona mechanics lien release
An Arizona mechanics lien release is recorded in the same way that you filed your original Arizona mechanics lien release. This means that you can either visit the recorder’s office or mail your document with the appropriate filing fees. Be prepared to shoulder the costs for recording your Arizona mechanics lien release.
Another important requirement to remember is that the Arizona mechanics lien release must be filed in the same recorder’s office where the original mechanics lien was recorded. Note that you only have 20 days within the date of payment satisfaction to release your Arizona mechanics lien.
Always keep the 20-day deadline in mind, as failing to meet this deadline could subject you to penalties and fines. Once you have verified that payment is on hand, you must go ahead and release your mechanics lien.
It is best practice to have a template for your Arizona mechanics lien release. Make sure that the template has all the important information, and always double-check the accuracy of the details that you write on your Arizona mechanics lien release form. Even if you have a template and you have filed an Arizona mechanics lien release before, you can never be too complacent, especially when it comes to filling out lien-related forms.
Best practices when canceling or releasing an Arizona mechanics lien
1. Release the mechanics lien promptly
Note that you have a 20-day period after receiving payment to cancel or release your Arizona mechanics lien. It is best practice to not wait until the 20th day to file your Arizona mechanics lien release. Once you receive payment and you verify that it has been cleared in the bank, you should go right away and record your Arizona mechanics lien release form.
2. Make sure that payment has been cleared before filing your Arizona mechanics lien release
You should never release a mechanics lien unless you are 100% that payment is in the bank and is ready for your disposal. Construction parties sometimes make the mistake of canceling a mechanics lien too soon. Even if you have been told that payment has been deposited, whether, through a cheque or a credit card transaction, you must always verify that the money has been cleared before you file a mechanics lien release.
3. Verify the accuracy of the information on your Arizona mechanics lien release form
The details that you write on your Arizona mechanics lien release form are primarily based on the information written in your original Arizona mechanics lien. You must pay attention to the details when writing them. Copying the mechanics lien reference number is a simple task, but is it always a good idea to make sure that all numbers match and that there are no spelling or formatting errors on your Arizona mechanics lien release form.