The Construction Law Center's Mechanic's Lien Attorney can assist you with protecting your investment. Whether you are a general contractor, property owner, homeowner, subcontractor, or material supplier, our Construction Attorney can help secure your rights.
We handle mechanic's lien matters throughout Southern California including: Los Angeles and Orange Counties, Long Beach, Irvine, Santa Ana and other communities.
We record mechanic's liens and file lawsuits to perfect them. We also defend property owners against wrongfully filed liens including a petition for an order to release mechanic's lien.
The following guide is reprinted in large part from the Contractors State License Board's guide on preventing mechanic's liens. The version below has been updated to include California Civil Code sections that took effect on July 1, 2012.
Guide to Mechanic's Liens
When a prime contractor is hired to do construction, he or she typically hires laborers and subcontractors to do some of the work, and purchases materials for the job from materials suppliers. No one would dispute that a property owner should pay for goods or services provided to improve their property. If the contractor - or the subcontractors, workers or suppliers - who provide goods or services to improve your property aren't paid, they can file what is called a mechanic's lien on your property.
What is a Mechanic's Lien?
A mechanic's lien is a "hold" against real property that, if unpaid, allows a foreclosure action, forcing the sale of your property. It is recorded with the County Recorder's office by the unpaid contractor, subcontractor or supplier. It means that any of these unpaid entities can claim a lien against the property until they are paid.
The prime contractor has a direct contractual agreement with the property owner. If the contractor isn't paid, he can sue on the contract and record a mechanic's lien. But subcontractors, workers and suppliers don't have a contract with the property owner. A problem occurs when the property owner pays the prime contractor for all or some of the work, but the prime contractor fails to pay the laborers, subcontractors and materials suppliers that were hired to do portions of the job. If they are not paid, often their only recourse is to file a mechanic's lien on the property.
What happens when a lien is filed against your property?
A lien can result in a range of problems:
- Foreclosure, if the property owner doesn't pay off the lien or cannot afford to do so;
- Double payment for the same job - if the property owner pays the prime contractor - and then has to pay the sub or supplier who wasn't paid by the prime;
- A cloud on the title of the property, which can affect the property owner's ability to borrow against, refinance, or sell the property.
How can you protect yourself?
You can protect yourself from unwarranted liens by carefully selecting your contractor and responsibly managing your construction project.
Investigate your prime contractor before you sign a contract and do the following:
- Hire only licensed contractors and check the contractor's license status on CSLB's website;
- Make sure your contractor hires only licensed subcontractors, and check their licenses, too;
- Check with your local courthouse to see if the prime contractor has a history of litigation;
- Get a list of all subcontractors, laborers, and materials suppliers to be used by your prime contractor;
- Check with suppliers and workers about the payment history of the prime contractor;
Get a written contract and make sure it includes the following:
- A schedule that demonstrates when specific construction activities will start and end, (such as the framing, sheetrock work, or painting) and the projected payments tied to the contract price of these activities;
- Identification of subcontractors who will be performing these construction activities;
- Identification of suppliers who are providing materials necessary for these activities;
The Preliminary Notice
If you receive a Preliminary Notice, don't panic. The preliminary notice isn't a lien; it is a notice that a subcontractor or supplier has provided or will be providing goods and services to improve your property and could file a lien claim if they are not paid.
Don't expect a Preliminary Notice from a prime contractor, however - since they have a direct contract with you, they aren't required to send a Preliminary Notice.
These notices allow you to track who has a potential claim against your property. Subcontractors and suppliers must provide you with this notice in order to maintain their right to file a lien. If they don't provide you with the notice, they lose the right to file a lien.
Watch the timing, however. A subcontractor or supplier can give you the Preliminary Notice before delivering supplies or starting work and up to 20 days after delivering supplies or starting work.
Before you pay your prime contractor, deal with the possibility of a lien. The first step is to keep track of Preliminary Notices and make sure you are aware of who can file a lien against you.
There are a few specific methods you can use to make sure potential lien claimants have been paid:
Joint checks are the simplest method of lien prevention. When the contractor presents a bill for materials or labor, compare it to the schedule of payments in your contract and the Preliminary Notices you've received. Make sure that work was provided as described and then make out the check to both the contractor and the supplier, or the contractor and the subcontractor. Both parties will have to endorse the check, which will ensure that the subcontractors and suppliers get paid.
CONDITIONAL / UNCONDITIONAL RELEASE SYSTEM
The release system is designed to allow property owners to track when potential lien claimants have been paid.
Here's how the lien release system works:
- Before you make a payment, you should first get a signed conditional release from the possible lien claimants.
- You or your contractor can download a copies of these releases from this website or from CSLB's website at www.cslb.ca.gov. The prime contractor is required to get this release for you from the potential lien claimants, if you ask for it.
- After you receive the conditional releases, make the appropriate payment for the work that was done.
- After you pay, the contractor should get you an unconditional release signed by each of the claimants paid for the portion of the work being released. Make sure that the actual claimant signs the unconditional release.
- By law, you may withhold the next payment until you get the unconditional releases for the previous payment.
NOTICE OF COMPLETION
You can reduce the amount of time a contractor, subcontractor or supplier has to record a claim by filing a Notice of Completion with the County Recorder's office after work is completed.
This notice reduces the amount of time a contractor has to record a mechanic's lien from 90 to 60 days, and reduces the time a subcontractor or materials supplier has to record a mechanic's lien from 90 days to 30 days.
There is a lien on your property - now what?
There are a number of reasons a lien might be invalid; for example, the work was not completed or the supplies were not incorporated into the structure. If a lien is placed on your property, you may want to consult an attorney for help in releasing the lien or identifying these issues.
Many lien claims are invalid because the contractor, subcontractor or materials supplier has failed to meet the required time lines for filing the claim. Review the Lien Requirements Checklist in this brochure, to determine if the claimant followed the required time lines.
Lien Requirements Checklist
Check to see if the Preliminary Notice was given to you within the strict time frames.
A subcontractor or materials supplier has until 20 days after beginning work or delivering materials to serve you a Preliminary 20-Day Lien Notice. If the notice is late, the claimant loses lien rights for work done or materials delivered more than 20 days before the notice. Laborers don't need to give you the 20-Day Notice.
Check to see if the potential lien claimant filed the mechanic's lien within the legal time frame.
The potential lien claimant must record the mechanic's lien within 90 days of:
- Completion of work
- When owner began using the improvement, or
- When owner accepted the improvement
If the potential lien claimant fails to record the mechanic's lien within the appropriate time frame, the lien isn't valid. Once a mechanic's lien is recorded, it attaches to your title and must be removed.
As previously mentioned, if you recorded a Notice of Completion, a prime contractor has 60 days to record a lien while a subcontractor or materials supplier has 30 days to record a lien.
Check with the Superior Court to see if the subcontractor or materials supplier filed a timely Lien Foreclosure Action.
A Lien Foreclosure Action is a lawsuit to foreclose the mechanic's lien. The lien claimant must file a Lien Foreclosure Action within 90 days of the date that he or she recorded the mechanic's lien. Often a lien claimant with a valid claim will fail to follow through, making the lien invalid.
If the contractor, subcontractor or materials supplier fails to follow any of these strict time frames, you can petition the Superior Court to remove the lien.
Be aware that, although anyone can record a mechanic's lien, unlicensed contractors cannot foreclose on a mechanic's lien if the work is valued at more than $500.
Why should you remove an invalid lien?
Even when a contractor, subcontractor or materials supplier doesn't act to foreclose on your property, the lien stays on the county records as a "cloud" on your property title until you take action to remove it. An invalid lien can make it difficult or impossible to refinance or sell your property.
Steps to remove an invalid lien
Follow the steps below to begin the process of removing an invalid lien:
- Send the lien claimant a written request in accordance with Civil Code sections 8100 to 8118. Keep a copy of your letter, proof of service, and declaration as proof of your request. You should consider consulting an attorney to make sure that the requirements of the Civil Code are followed.
- Deviations you've identified from the Lien Requirements Checklist.
- A request for the claimant to remove the lien. Remind the claimant that, if the lien isn't removed and you have to get an attorney to remove it, the court can award you reasonable attorneys fees.
- Keep your documentation. You may need to demonstrate to a court that "the lien claimant is unable or unwilling to execute a release of the lien or cannot, with reasonable diligence, be found." (Civil Code Section 8484 (f))
- Send the request to the claimant's last known address. Do your homework to verify that you have the correct last known address.
Sometimes, sending the letter is enough to persuade the lien claimant to release the lien.
Petition to release the property from the lien
If the lien claimant doesn't remove the invalid lien, and the time has expired to record the mechanic's lien and take action to foreclose, you may petition the court for a decree to release the property from the lien. This is a complicated process that may require the services of an attorney. Refer to Sections 8480 to 8488 of the Civil Code for more information.
Civil Code Section 8488(c) provides that if you use an attorney the prevailing party is entitled to reasonable attorneys fees.
Minimize your risks and take steps to protect your property
The mechanic's lien law is complicated and confusing, and there are real risks involved for property owners. Don't risk foreclosure, a cloud on your title, or having to pay twice for the same job. You can take steps to avoid these problems by preparing for the possibility of a lien and employing the safeguards discussed above.