The mechanics lien is a powerful legal tool that provides a security interest in the property itself. If the property owner fails to pay the amount owed, the lien gives the claimant the right to enforce the lien through a foreclosure process, whereby the property may be sold to satisfy the debt.
A mechanics lien in California is a legal claim placed on a property by contractors, subcontractors, or suppliers who have provided labor, materials, or services for the construction or improvement of that property but have not been fully paid for their work. It is a way for these parties to secure their right to payment by attaching a lien to the property.
Also known as a pre-lien notice or a preliminary 20-day notice, is a document that must be sent by certain contractors, subcontractors, and suppliers to preserve their right to file a mechanics lien if they are not paid for their work on a construction project.
The requirement to send a preliminary notice applies to subcontractors, material suppliers, equipment lessors, and laborers who do not have a direct contract with the property owner. General contractors, however, are not required to send a preliminary notice as they have a direct contractual relationship with the owner.
The preliminary notice should be sent within specific timeframes, depending on your role in the project. Failure to provide the preliminary notice may result in losing the right to file a lien. The notice should generally be sent within 20 days of first furnishing labor, services, equipment, or materials to the project. However, if the notice is sent after this initial 20-day period, it will only cover work performed or materials supplied from the date of the notice forward.
To enforce a mechanics lien, you need to file a Mechanics Lien with the county recorder’s office in the county where the property is located. The lien must include specific information, such as the property owner’s name, a description of the work performed or materials supplied, the amount owed, and the name of the party responsible for payment.
Once your work on the project is completed, the clock starts ticking for filing a mechanics lien. In California, direct contractors must file a lien the earlier of either (1) 90 days after completion of the work or (2) 60 days after owner records a notice of completion or cessation. Non-Direct Contractors must file a lien upon completion of work before the earlier of (1) 90 days after completion or (2) 30 days after the owner records a notice of completion or cessation.
Once the mechanics lien is filed, a copy of the lien must be served on the property owner and other relevant parties. Proper service can be done through certified mail with a return receipt requested or by personal delivery. Although anyone can record a mechanics lien, unlicensed contractors cannot foreclose on a mechanics lien if the work is valued at more than $500.
If the property owner does not respond to the mechanics lien or fails to pay the amount owed, you may need to file a lawsuit to enforce the lien. However, a lawsuit to foreclose on the Mechanics Lien must be filed within 90 days after recording the Mechanics Lien, otherwise the lien expires and is unenforceable.
If successful in the lawsuit, the court may grant a judgment in your favor, allowing you to enforce the lien through a foreclosure sale. Foreclosure allows you to recover the amount owed from the proceeds of the sale of the property.
A lien release or lien waiver, is a document used to release or waive a previously filed mechanic’s lien on a property. This document signifies that the claimant no longer asserts a legal claim against the property due to full or partial payment or for any other reason specified in the release.
- Voluntary Release: A mechanic’s lien release is typically voluntary and is often provided by the party who filed the lien, such as a contractor, subcontractor, or supplier, upon receiving payment for the amount owed or reaching a settlement.
- Conditional Release: A conditional release is used when the claimant has received partial payment but wants to retain the right to file a lien for any remaining unpaid amount. This type of release is often used when a progress payment is made before the project is complete. If the full payment is received and the conditions outlined in the release are met, the conditional release becomes effective and acts as a full release of the lien rights.
Unconditional Release: An unconditional release is used when the claimant has received full payment for the amount owed and intends to waive their right to file a mechanic’s lien. This type of release is typically used when the payment is made in full, and there are no outstanding amounts.
Failing to send a preliminary notice within the required timeframe can potentially result in losing the right to file a mechanics lien in California. Sending the preliminary notice is crucial for preserving your lien rights.
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Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax, or other professional services. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.