The Nevada Supreme Court Develops Two Prong Test for Determining Lien Priority

In Nevada, as in many other states, mechanic’s lien filed by contractors, subcontractors and suppliers attach to the real property when “work is commenced.” This date is important because all mechanic’s liens filed against the property have priority over any mortgage, deed of trust, or other encumbrance which is recorded after that date.

Recently, the Nevada Supreme Court addressed when “work commences” or when mechanic’s lien attach in Byrd Underground LLC v. Anguar, LLC, 130 Nev. Adv. Rep. 62, 333 P.3d 273 (2014) and an unpublished decision Las Vegas Paving Corp. v. RBC Real Estate Fin. Inc., 2015 Nev. Unpub. LEXIS 1124 (Sept. 2015).

In these two opinions the Nevada Supreme Court established a two-step procedure for determining “when” the “work of improvement” commences. The Court stated that the scope of “the work of improvement” must first be determined from the facts admitted into evidence. The Court determined that the scope of the “work of improvement” must be established first because the “commencement of preparatory work” does not constitute “commencement of the work” and does not set the priority date for the mechanic’s liens. Once the scope of the “work of improvement” is defined then it can be determined when the “commencement of work” was first apparent by a reasonable inspection.

These recent Nevada decision may have added uncertainty to the establishment of priority but such uncertainty can only benefit contractor’s and subcontractors when questions arise as to when the work commenced and their liens attached.