CONTRACTOR LAW UPDATES

Mechanic’s Liens for Contactors.

This article addresses Nevada Law. Nevada Law allows contractors to file mechanic’s liens to ensure payment, however filing and perfecting a valid lien requires following the statutory requirements to the tee. One misstep and there is a high probability that the lien will be invalid and unenforceable.

If a contractor is not contracting directly with the owner, they must deliver a “Notice of Right to Lien” to the owner and general contractor by certified mail. Doing so preserves their lien rights with respect to work and materials supplied within 31 days of the notice date, as well as after the notice date.

If the improvement involves a residential dwelling, a “Notice of Intent to Lien” must be served on the owner at least 15 days before filing a “Notice of Lien”. If payment remains due, the contractor can record a “Notice of Lien” with the county recorder’s office within 90 days after: the work has been completed, the last delivery of materials by the lien claimant, or the last performance of work by the lien claimant. The contractor must then serve the owner and the general contractor with the lien within 30 days of recording.

Now, the lien has been perfected, is valid for a period of six months and must be foreclosed upon within that time. If the owner decides to dispute the foreclosure, the contractor is now in full-blown litigation, which will require significant time and resources. Therefore, contractors should be vigilant of the mechanic’s lien process, its requirements, and approach it as they would in any other litigation.

Omar Nagy, Esq. MOBO Law, LLP Las Vegas, Nevada

Entity Choice for Contractors.

Contracting as a properly organized and maintained LLC or Corporation can result in significant liability protection and tax benefits in comparison to operating as a partnership or sole proprietorship.

LLCs and Corporations can protect their owners from liability in two ways. The first is that the owners of LLCs and Corporations can contract on behalf of the LLC or Corporation rather than on behalf of themselves individually. As a result, only the company’s assets are liable for the contract’s obligations, and importantly, the business owners’ individual assets are not. The second is that LLCs and Corporations also protect their owners from liability generated by people, such as employees, subcontractors, and third parties that are alleged to be acting on behalf of the business. For example, if an employee creates liability while driving on behalf of an LLC or Corporation, then the LLC or Corporation is liable for the damages in addition to the driver, but the owner of the business is not personally liable. On the other hand, if an employee creates liability while driving on behalf of a sole proprietorship or partnership, then the owners of the business are personally liable, in addition to the business and driver.

LLCs and Corporations can also provide tax benefits. For example, LLCs and Corporations can elect to be treated as an S Corporation, which allows some owners’ distributions to avoid some employer-paid payroll tax.

Note, Corporations are the most logical choice for contractors that operate in California due to increased bond requirements imposed on LLCs by the CSLB.

As a result, so long as the applicable formalities are observed, contracting as an LLC or corporation can help protect owners from liabilities generated by the business while providing appreciable tax benefits.

Audren Tawaji, Esq. MOBO Law, LLP Truckee, California

This Editorial is for general information and does not constitute legal advice or representation. If you are in need of legal services based on information in this Editorial, contact your attorney or MOBO LAW, LLP and know that the passage of time may bar your rights so time may be of the essence.