We work on residential projects and are typically hired by a family member of the Property Owner (son, daughter, etc. of property owner). What notice requirements apply to us in this case? Are we still considered the General Contractor?
1 reply
Aug 28, 2019
First, it’s worth noting that mechanics lien rights won’t arise in the underlying project property unless work is authorized by the property owner. Under § 87.015 of the Oregon mechanics lien statute, if the person authorizing the improvement is not the owner of the property, then only that person's interest can be liened. Thus, when hired by someone with no interest in the property, no lien rights would arise.
However, all is not necessarily lost because someone other than the owner signs the contract. If it's clear that the hiring party is authorizing the work on behalf of the owner and with that owner's authorization – usually provided via the contract, itself - then the hiring party would presumably be considered the “owner” for all intents and purposes, and the owner's interest would likely be lienable. So, when contemplating what notice requirements may apply, it’s important to first establish that the owner has, in fact, approved the work being done on their property.
As for which notices are required – that can get pretty muddled when the owner isn’t actually involved in the project. Let’s look at some relevant definitions created in Oregon’s mechanics lien statutes, then at the notice requirements themselves.
Definition of "original contractor", "owner", and "subcontractor"
§ 87.005(7) of Oregon's mechanics lien statute defines an "original contractor" as a contractor who "has a contractual relationship with the owner."
§ 87.005(8) defines an "owner" as "A person who is or claims to be the owner in fee or a lesser estate of the land on which preparation or construction is performed," among others. So, by this definition, a relative of an owner wouldn't be considered an "owner" unless the relative claims to have some interest in the property, themselves.
Finally, § 87.005(11) defines a "subcontractor" as "a contractor who has no direct contractual relationship with the owner."
Based on the above definitions, it would seem like a business hired by someone other than the actual owner of the property would be considered a "subcontractor" if the hiring party wasn't acting as the agent of the owner. But, if the hiring party were designated by the owner of the property to undertake improvements, then the contractor hired might be considered an "original contractor" rather than a "subcontractor".
Subcontractor's preliminary notice requirement
§ 87.021 of the Oregon mechanics lien statute requires that parties hired by someone other than the owner must send a preliminary notice ("Notice of Right to Lien") to the property owner in order to preserve their right to lien. So, when hired by someone other than the owner, this notice should be sent.
Information Notice to Owner
§ 87.093 requires that "original contractors" provide an Information Notice to Owner to property owners on residential property where the work exceeds $2,000. So, this notice is generally required for contractors hired by the owner. But the stakes are high with the Information Notice to Owner. Failure to provide this notice will result in a loss of lien rights for the job and could also have much larger implications. It could even result in the suspension of a contractor's license and serious fines.
So, in a situation where it's not crystal clear whether an Information Notice to Owner should be sent, it's generally a good idea to provide one anyway. Sending additional notice doesn't really hurt anything, but failing to send an Information Notice to Owner could be really damaging.
Bottom line
Notice requirements in the construction industry are complex in standard situations. In situations that are out of the norm, this becomes doubly true. Statutes can't account for every situation, and any time some form of "abnormal" contracting procedure takes place, notice requirements become even harder to navigate.
As mentioned above, when there are multiple notices which might be required, and where there isn't perfect clarity as to how those requirements might apply to you, it might be helpful to send extra notice. And, with the Information Notice to Owner being such a standardized document, it shouldn't be hard to provide that document for every job.
Alternatively, when hired by a relative of the property owner, having the owner agree to the contract themselves or having some documentation showing the relative is entitled to contract on behalf of the owner would go a long way to clarify what requirements are necessary. If a contractor is considered to have been hired by the owner, themselves, they'd clearly be considered an "original contractor" under the Oregon mechanics lien statute.