Nevada Supreme Court Rules on Mechanics Lien Priority

As reported by the Las Vegas Sun on March 3, 2011:
“The Nevada Supreme Court has ruled that a bank has priority in collecting on its deed of trust after two multimillion-dollar, 20-story condominiums defaulted on their loan in Las Vegas.

The court said Corus Bank had a preceding place over a mechanics lien, filed by J.E. Dunn Northwest Inc., that was owed for its pre-construction and construction work for Midbar Condo Development.

In September 2008, Dunn filed a mechanic’s lien for unpaid services. A few weeks later Midbar defaulted on the loan and a dispute arose between Corus Bank and Dunn regarding the priority of deed of trust and the mechanic’s lien.

District Judge Mark Denton issued a pre-trial summary judgment in favor of Corus Bank, which has become Corus Construction Venture. The construction contract was for $140.5 million.

The court, in an opinion written by Justice James Hardesty, said the law clearly requires that work must be visible before a mechanic’s lien can be filed to take priority over the bank’s deed of trust.

An inspector found that no construction activity at Las Vegas Boulevard and Shellbourne Avenue had occurred on the property as of the date Corus Bank recorded its deed of trust, even though the deed was later than the mechanic’s lien.

Hardesty said pre-construction work must be visible before the mechanics lien can take precedent.

The court disagreed with the contractor, who argued that visible work had been done when an architect’s sign had been placed on an adjacent property and power lines were removed.

In his decision, Hardesty wrote the court concluded that ‘commencement of construction’ plainly “requires visibility of on-site work in order for a mechanic’s lien to take a priority position over a deed of trust…”