Oregon
Construction Lending State Compliance Library
State statute reference
Last updated May 18, 2023
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Oregon Construction Lien Law
Lien Law Overview
In Oregon, the Construction Lien Law imposes a number of statutory legal requirements and forms that parties to a construction loan must follow. Oregon is generally a first-in-time filing jurisdiction, but, as explained in the following sections, circumstances can change the priority. Under Oregon law, in addition to general contractors/laborers/materialmen, architects, landscape architects, land surveyors, and registered engineers who prepare plans, drawings, or specifications for use in the construction of improvements or landscaping have construction lien rights. See ORS 87.010(5), (6).
Public property or property owned by the government is not subject to the Oregon lien law. Both commercial and residential structures may be subjected to a construction lien though the requirements for perfection of lien rights on a residential project are stricter than those for a commercial project. See Or. Rev. Stat. Ann. § 701.305 and Or. Rev. Stat. Ann. § 87.037.
Note that there are no priority differences when it comes to repairs or alterations to existing improvements vs new construction. A construction lien will take priority over a pre-existing mortgage if that loan was for financing those repairs or alterations.
Lien Waivers
Lien Waiver Summary
In Oregon (unlike other states) both contractors and subcontractors can individually waive their lien rights by contract. Meaning, they can use a process other than the traditional lien waiver method, whereas the contractor or subcontractor waive their lien rights prior to performing work through an insturment such as a contract.
Old case law provides that ‘one furnishing labor or material cannot lose his right to a lien except by his contract or by his acts constituting an estoppel (going back on his word).’ Zanello & Son v. Portland Cent. Heating Co., (1914) 70 Or 69, 139 P 572. So, an argument may be able to be made that signing the back of a check with a lien waiver on it is an act intending to waive a lien claim. Although this old case law may provide guidence if language can be inserted into the back of a check in exchange for a lien waiver, its a practice that is not advisable with the introduction of digital deposit that allow checks to be deposited without endorsement, or by parties that are not the claimaint.
Case law also provides that a waiver must be by express agreement (or by neglecting to perfect the lien within the statutory time). See Hughes v. Lansing, (1898) 34 Or 118, 55 P 95, 75 Am St Rep 574. Thus, for avoidance of doubt, a separate lien waiver should be obtained from every person with a right to a lien.
Statutory Form
Not Required
Notary
Not Required
Electronic Signature
Acceptable
Are title companies required by law to manage construction loan disbursements?
No, but title companies are insurance companies that may require -in exchange for insurance coverage – some level of control over how loan proceeds are disbursed. If they do, the lender either must comply with the title company’s demands or risk not having coverage for the loan (or try another title company, but they tend to share best practices by location/region).
Can a mechanics lien have priority over a pre-existing mortgage in Oregon?
In Oregon, construction liens relate back to the date of commencement of construction of the relevant improvements for purposes of establishing priority and usually are senior to previously recorded construction liens. A construction lien remains inchoate at the time that construction begins. When the lien is perfected by filing a Claim of Lien that complies with ORS 87.035, the date of commencement of the improvement is the effective date of the lien. “Commencement of the improvement” is defined as “the first actual preparation or construction upon the site or the first delivery to the site of the materials of such substantial character as to notify interested persons that preparation or construction upon the site has begun. Perfected construction liens generally enjoy equal priority. See ORS 87.025(7), 87.060(6).
It’s important to note that in Oregon, a lien cannot be perfected until after construction is complete, however, a construction lien for repairs or alterations will take priority over a pre-existing mortgage if the loan was for financing those improvements. Perfected construction liens on improvements have priority over liens, mortgages, and other encumbrances that were unrecorded when the construction of the improvements began.
A construction lien for the materials supplied will have priority over a recorded mortgage if the lien claimant gives the lender timely notice of the right to claim a lien. See ORS 87.025.
Notices
Notice of Commencement (or similar like event)
Not applicable.
Preliminary Lien Notifications
Yes, depending on the relationship to the owner and amount, these notices may be required.
- Notice of Right to Lien, and
- Information Notice to Owner
The Notice of Right to Lien is required to be sent by all lien claimants without a direct contract with the owner.
The Information Notice to Owner is required to be given by any contractor employed directly by the owner when the contract is (or becomes) greater than $2000.
Notice of Completion
Yes, If a Notice of Completion is not recorded, both the owner and lender may be subject to arguments about when the improvement was completed, and thus when the 75-day clock began to run. By issuing a completion notice under ORS 87.045, an owner indicates that construction is substantially complete and liens may be filed. All claimants must then file their liens within 75 days after the completion date in the notice.
Note that when work begins, a construction lien becomes available but remains inchoate until the lien is perfected. In order to perfect a construction lien, it must be filed within 75 days after the claimant stops providing labor, equipment, or materials OR 75 days after completion of construction, whichever is first.
Completion of construction occurs when:
- the improvement is substantially completed;
- a completion notice is posted and recorded, or
- the work is abandoned. ORS 87.045(1).
The use of a Notice of Completion is strategic and may shorten the time that a party may file a lien.
When Must it be Filed
When all original contractors employed on the construction of an improvement have substantially performed their contracts, any original contractor, the owner or mortgagee, or an agent of any of them may post and record a completion notice. ORS 87.045(2).
Who is Responsible for Filing?
The owner, owner’s agent, lender, or lender’s agent.
How is it filed/recorded?
It must first be posted -on the same date it is dated- in a conspicuous location on the land or on the improvement. Within five days after posting, the same party who posted the notice of completion must file a copy of such notice with the recording officer in the county where the property is located. The copy must include (or have attached to it) an affidavit signed by the same person who posted the notice that states the date, place, and manner of posting the notice. See ORS 87.045.
Title
Oregon uses ALTA title commitments that allow for the Construction Loan Update Endorsement, which is used when the lender requests endorsements as additional disbursements are made. It gives coverage up to the new outstanding mortgage balance and shows whether any other instruments have been filed and recorded since the last title update. The endorsement also it insures the priority of the insured mortgage over instruments that are not specifically listed in the endorsement.
Contractor Licensing
Contractor Requirement: License required unless less than $1,000 AND work is of a casual, minor, or inconsequential nature.
Subcontractor Requirement: Subs must be licensed.
Contractor Warranties: Express warranty is required on new homes. Protect against defects in materials and workmanship of structure. No specific requirements on what needs to be covered or time period. Typically covers structural defects, major home system failures, and workmanship.
Have Questions?
Reach out if you have any comments or questions about our state resources.
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