A.R.S. 33-992: When a Mechanics Lien Outranks a Later Loan

When more than one claim hits a property, the order they get paid is everything. A.R.S. 33-992 decides where a mechanics lien stands in that line. The rule is "relation back": the lien dates not from when it was recorded but from when work first started or materials were first delivered to the site. That early date lets a lien jump ahead of mortgages and other claims that came later. It is why lenders care so much about who broke ground first, and why a construction loan has a special ten day rule.

The relation-back rule

A mechanics lien is treated as if it existed the day the first shovel hit the dirt or the first lumber was dropped off, even though the actual lien gets recorded months later. The statute gives it preference accordingly:

The liens provided for in this article... are preferred to all liens, mortgages or other encumbrances upon the property attaching subsequent to the time the labor was commenced or the materials were commenced to be furnished.

So priority is set by physical work, not paperwork. If grading started on January 5 and a lender records a mortgage on January 20, the lien for that grading work outranks the mortgage, because the lien relates back to January 5. This is the opposite of the normal "first to record wins" rule for real estate, and it catches lenders and buyers off guard.

The construction lender exception and why it matters

There is one big carve-out. A construction lender can keep first priority if it records its deed of trust within ten days of when labor or materials commenced. Liens for professional services like design work also do not gain priority until actual on-site construction or delivery begins.

For example, on a Fountain Hills construction-to-permanent loan , the lender wants its deed of trust recorded before any visible work starts, or within that ten day window, so its loan stays ahead of every mechanics lien on the job. If a subcontractor later records a lien, it still relates back to when work began, but the timely-recorded construction loan beats it. This is why lenders inspect the lot for "commencement" before closing and why starting work early, even clearing brush, can scramble loan priority.

What this means for you

For a homeowner, priority decides who gets paid if the project collapses and the property is sold. Your construction lender almost always sits first because of the ten day rule. Mechanics liens from your contractor and subs line up behind the lender but ahead of anything recorded after work started. Understanding this helps you see why your lender requires lien waivers and inspections before each draw: it is protecting its first-place spot.

How this connects to the rest of the lien law

This priority rule applies to the lien right created by A.R.S. 33-981 and works with the perfecting steps in A.R.S. 33-993 and the foreclosure deadline in A.R.S. 33-998 . If your home qualifies for the owner-occupied dwelling exemption , priority becomes moot for the subs it blocks, since they have no lien to rank. To see how the lender's draw timing connects to all this, read our breakdown of the construction loan draw schedule .

Full text and source

Read the priority rule and the construction lender exception on the legislature's site: View A.R.S. 33-992 on azleg.gov .

Priority fights turn on the exact date work began and the date the loan recorded, so if money is at stake in a payoff, pin down both dates with the title company and your lender before assuming who stands first.