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Obvious Gap in Oregon Lien Laws for Architects?

Obvious Gap in Oregon Lien Laws for Architects?

Oregon’s lien statutes appear to have a gap in protection for architects who provide services at the request of someone other than the owner.  Because non-owners frequently hire architects, this issue should make all parties extra cautious about the nature of their contractual relationships.

Like most states, Oregon protects payment rights for contractors, material suppliers, architects, and equipment rental services by allowing them to place property liens in the event of non-payment.  Architects and engineers have lien rights if they are hired “at the request of the owner or an agent of the owner.”  ORS 87.010(5).  This covers most architects and engineers, because they are typically hired by owners directly, preparing plans and structural drawings sufficient to complete the intended improvement according to the owner’s criteria.

However, there are least two common situations where the architect is not hired directly by the property owner:

1.   Commercial Tenant Improvements:  The first situation is in commercial leasing, where architects are frequently hired by tenants to design interior space improvements.  In such a situation, the design work is performed at the request of a tenant who is the “owner” of a leasehold interest only, rather than the landlord who owns the property as a whole.

2.   Design-Build Systems:  The second situation is in the design-build context.  Many projects include smaller or unique systems not detailed in the plans, but instead are labeled “design-build,” meaning the installing subcontractor must provide those details.  Design-build systems can include fire sprinklers, elevators, roof ventilation, and heating or air conditioning systems.  The selected subcontractor must then hire an architect or mechanical engineer to provide the design work.  Although the design-build subcontractor would have lien rights in this situation, the architect should prefer to have separate lien rights rather than rely exclusively on the subcontractor’s lien.

Oregon law may have a gap in its lien rights for architects and engineers in these situations.  Under ORS 87.010(5), lien rights exist for architects and engineers hired “at the request of the owner or an agent of the owner.”  This leaves open the question of whether a commercial tenant or design-build subcontractor can be considered an “agent” of the property owner.

Traditionally, an ”agent” is a person who agrees to act on behalf of the principal, who can be controlled by the principal, and who has the authority to speak for the principal or sign documents for the principal.  Common examples include attorneys, real estate brokers, and insurance agents.  However, commercial tenants and design-build subcontractors cannot truly be considered “agents” of property owners, because they cannot speak on behalf owners and are not subject to owners’ direct control.

But, perhaps the Oregon legislature did not mean the word “agent” to have such a restrictive meaning.  Other portions of Oregon lien law refer to a “construction agent,” which means a person “having charge of construction or preparation.”  ORS 87.005(3).  Typically that means a construction manager or general contractor, but arguably could include a design-build subcontractor, at least as to the specific design-build component of the work.

Thus, if the legislature had chosen language giving lien rights to architects who provide design work at the request of a “construction agent” of the owner, this might not be an issue.  Instead, the legislature chose the narrow term “agent” rather than the more expansive term “construction agent.”  Given Oregon’s history of strictly construing the rules regarding who is entitled to a lien, this leaves us wondering whether Oregon law has a pretty obvious gap in lien protection for architects and engineers.

For the sake of caution, both owners and designers should endeavor to make sure their contracts are clear about who has authority to act as “agent” of the owner or even “construction agent” of the owner.  Good contracts can help avoid bad surprises.

Note: I authored this post for while I was employed at Ball Janik.

Daniel T. Goldstein

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