Better Roads Digital Magazine
Issue link: https://read.dmtmag.com/i/376195
Better Roads September 2014 25 owners filed for bankruptcy. Both owners' schedules of creditors holding secured claims included a "[f] irst [m]ortgage" to U.S. Bank, and both lien claimants' judgment liens. The owners and U.S. Bank entered into a forbearance agreement and created a disclosure state- ment and plan of reorganization with the bankruptcy court. The lien claimants objected to the owners' disclo- sure statement and plan of reorganization, and filed a complaint with the bankruptcy court to determine the priority of liens. The bankruptcy court requested the Nevada Supreme Court clarify several questions of law relating to the priority of the mechanic's liens under Nevada law, including the visible commencement of construction test relating to grading work. The Nevada Supreme Court reviewed Nevada law regarding mechanic's liens, including the priority of mechanic's liens over trust deeds. The court confirmed that if construction commenced on a "work of im- provement" before a deed of trust is recorded, then a mechanic's lien will take priority over the deed of trust regardless of when the notice of lien is recorded. Further, the court confirmed that in Nevada, all mechanic's liens "relate back" to the date overall construction is com- menced. Therefore, the lien claim- ants would be entitled to priority over the deed of trust if visible con- struction of the work of improve- ment commenced before the deed of trust was recorded on Nov. 29, 2006. In addition, the court concluded that grading can be an integral part of the "entire structure or scheme of improvement as a whole" and part of the actual onsite construc- tion. If it is, grading may be ad- equate to establish commencement of construction as long as it is vis- ible from a reasonable inspection of the site so that lenders are provided notice that lienable work has commenced. The court further ruled that although the dates of contracts and permits are not relevant with respect to the visible com- mencement of construction test, they might assist in de- termining the scope of the work of improvement. Thus, if a contract excludes certain work, then that work might not be part of the "work of improvement." The Byrd Underground matter underscores the impor- tance of understanding mechanic's lien rights in the jurisdiction where work is being performed. Mechanic's liens are creatures of statute, technical in nature, and unforgiving if deadlines or procedural requirements are not met. When properly utilized, they are a power- ful sword in a contractor's arsenal to enforce its right to payment. Here, Byrd's claim was allowed to proceed based on Nevada's visible commencement of construc- tion test. In a different jurisdiction, however, Byrd might have found itself out of luck. 7H[W,1)2WRRUYLVLWZZZEHWWHUURDGVFRPLQIR Still Using Paper Time Cards in 2014? Cut foremen entry time in half with HeavyJob Mobile Apps and... Reduce payroll processing by as much as 90% <ŶŽǁŝĨũŽďƐĂƌĞƉƌŽĮƚĂďůĞǁŝƚŚƐĂŵĞͲĚĂLJ ĨĞĞĚďĂĐŬĂŐĂŝŶƐƚďƵĚŐĞƚ tŽƌŬŽŋŝŶĞĨŽƌƌĞŵŽƚĞũŽďƐǁŝƚŚŶŽŝŶƚĞƌŶĞƚ dƌĂŝŶĨŽƌĞŵĞŶƋƵŝĐŬůLJǁŝƚŚĞĂƐLJͲƚŽͲƵƐĞƟŵĞĐĂƌĚ /ŶƚĞŐƌĂƚĞǁŝƚŚŽǀĞƌϯϱĂĐĐŽƵŶƟŶŐƐLJƐƚĞŵƐ >ŽǁƌŝƐŬͶ^ŽŌǁĂƌĞĐŽŵĞƐǁŝƚŚĂϭϮͲŵŽŶƚŚ ŵŽŶĞLJďĂĐŬŐƵĂƌĂŶƚĞĞ͊ 800-683-3196 for the Construction Industry Innovative Software at www.HCSS.com/Better-Roads SIGN UP FOR DAILY WEBINARS