A Mechanics Lien is often the best way of receiving payment on a job when a contractor or material supplier remains unpaid for their work. When a Mechanics Lien becomes necessary, it is critical that the right steps are taken to ensure that your lien is both accurate and valid.
Understanding what a lien is and what the appropriate actions are to properly file one are a must for anyone providing time or resources to a work of improvement in the state of California.
What is a Mechanics Lien?
Simply put, a Mechanics Lien is a legal claim made against a property for which a contractor, material supplier, equipment lessor, design professional, or laborer has provided services but has not been fully paid. If a lien remains unpaid, it allows the claimant (person or company who filed the lien) to pursue foreclosure action against the property.
Mechanics liens are recorded with the County Recorder’s Office in the county where the work took place. From the date of filing, a claimant has 90 days to receive payment for their claim, otherwise they may proceed to foreclose on the property.
Who Can File a Mechanics Lien?
A lien can be filed by any licensed contractor, material supplier, equipment lessor, design professional, or laborer who has provided services to a work of improvement.
A claimant must be finished with their work before recording a lien.
In most cases, a properly served California 20-Day Preliminary Notice is required to be able to file a valid lien against the property. If a preliminary notice was not properly served, any lien filed against the property will be invalid.
One exception to this would be if a contractor is working directly for the owner. If work is being done directly for the owner, a preliminary notice is not necessary to file a lien. However, if you are working directly for the owner and their is a lender financing the project, then a preliminary notice must be sent to the lender in order to file a mechanics lien.
When a preliminary notice is required on a job, it is crucial that it is properly served in order to retain lien rights.
What Are the Requirements for Filing a Lien?
General Contractors
If working directly for the owner, a contractor may file a lien without serving a 20-Day Preliminary Notice. If there is a lender on the job, a preliminary notice must be sent in order to file a lien.
The deadline for a general/direct contractor to file a lien is within 90 days from the overall completion of the project.
If a Notice of Completion or Cessation has been filed, this timeline goes down to 60 days from the filing of the notice (Civil Code §8414).
Liens must be enforced (begin foreclosure action on the property) within 90 days of recording, otherwise the lien will expire.
Subcontractors/Suppliers
Any sub-tier contractor, material supplier, equipment rental supplier, etc. not working directly for the owner must serve a preliminary notice to retain lien rights.
The deadline for a subcontractor/supplier to file a lien is within 90 days from the overall completion of the project.
If a Notice of Completion or Cessation has been filed, this timeline goes down to 30 days from the filing of the notice (Civil Code §8414).
Liens must be enforced (begin foreclosure action on the property) within 90 days of recording, otherwise the lien will expire.
Conclusion
If you have not been paid for your work or contribution to a construction project in California, a Mechanics Lien may be the next step in order to receive payment.
It is of utmost importance to serve a preliminary notice for the project when it is required, otherwise your Mechanics Lien will likely be invalid.
Also be sure to serve your preliminary notice within the first 20 days of providing work or materials to a job. This will ensure that your lien can include the full scope of work provided.
If your notice was served more than 20 days after beginning work, the amount that you can claim on the lien will only include the 20 days before the date of serving your prelim notice and afterward. (i.e. if you did not serve your notice until day 40, your lien can only include work performed from day 21 onward.)
Remember to serve your preliminary notice when required and send it early, and keep a careful watch on any deadlines for filing your Mechanics Lien and enforcing the lien after it has been recorded.