Friday, September 09, 2005

California Mechanic's Lien Tips

California contractors and material suppliers have a powerful tool to collect money when a property owner or general contractor fails to fails to pay bills in a timely fashion: a mechanic's lien. Because the law the allows liens to be filed, there are strict procedures to be followed to protect property owners from invalid liens. Here are some tipes to help contractors protect lien rights:

1. A Preliminary 20-Day Notice (Private Work) must be served to all legal parties on a project (Customer, Owner, General Contractor, Lender) within 20 days after first furnishing construction related labor, services, equipment or materials. Each day after the 20th day, you lose a portion of your financial interest in the financial value of construction related labor, services, equipment or materials your company provided for the project. A Preliminary Notice may be given out at a later point in time, but your financial recovery for a Mechanic's Lien, if filed, can only be for the 20 day period prior to the Preliminary Notice being filed.


2. A Notice and Claim of Lien (Mechanic's Lien) can be recorded at any time upon completion of a project. It is recorded at the County Recorders Office in the county where a project you provided construction related labor, services, equipment or materials. If the Owner has recorded a Notice of Completion or a Notice of Cessation, you have 60 days to file a Notice and Claim of Lien (Mechanic's Lien) with the County Recorders Office (General Contractor) and 30 days for all other Subcontractors. If a Notice of Completion or a Notice Of Cessation has not been recorded by the Owner, you have 90 days after completion of the entire project to file a Notice and Claim of Lien (Mechanic's Lien) with the County Recorders Office.

3. A Notice and Claim of Lien (Mechanic’s Lien) cannot be filed for projects that are City, County, State or Federal related, often called public works projects.

4. A party who supplies materials to another supplier does not have Mechanic’s Lien rights in California.

5. The completion of the entire construction project is considered the starting date for the Mechanic’s Lien filing period.

6. An unlicensed contractor can not use the Mechanic’s Lien process in California if the work required a contractor's license. If the value of the contract is $500 or more, including labor and materials, then the work usually requires a license issued by the Contractor's State License Board.

7. A Complaint to Foreclose a Mechanic’s Lien (legal perfection of a Lien) must generally be filed within 90 days unless the lien claimant grants a properly recorded extension of credit to the property owner. The lien's effetive period is extended until 90 days after the credit expires, but o more than one year after the completion of the work of improvement.

8. The Conditional Waiver and Release Upon Progress Payment can be requested by the legal parties on a project who have been served a Preliminary 20-day Notice through a promise to make a partial payment for furnishing construction related labor, services, equipment or materials.

9. The Unconditional Waiver and Release Upon Progress Payment can be requested by the legal parties on a project who have been served a Preliminary 20-day Notice for a received partial payment for furnishing construction related labor, services, equipment or materials.

10. If Mechanic's Lien amount is paid in full, you have an obligation as the party filing a Notice and Claim of Lien (Mechanic's Lien) to issue a Release of Lien that can then be recorded at the County Recorder's Office in the county where the project is you provided construction related labor, services, equipment or materials.

The information provided in this article is general information only and is not intended as legal advice. DO NOT use this information as a substitute for obtaining qualified legal advice or other professional help. Please contact us at (619) 448-2129 or email us for a consultation.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

35 comments:

Anonymous said...

This is all very helpful information, but what is the process for homebuilders to rid themselves of fraudulent liens imposed by contractors? We fired our site supervisor for extremely bad craftsmanship, had paid him what we agreed up to that point and have had to pay others to fix his mistakes. However, he has now maliciously filed a lien for more than double our agreed upon site supervision fee (which was for the completion of the project and he was fired when it was 27% complete- according to the bank). It has been over 90 days since the filing and we now have a hearing to dismiss the lien, but we now hear he can simply drop the lien before the hearing and re-file the original lien and repeat the process for up to a year! It has cost him nothing to hold up our project (our lender has cutoff funds until the lien is dealt with) and we are hemorrhaging carrying costs, loan extension fees and now lawyer fees. If we could get it to court, we can show he has no case, but without him foreclosing, he seems to be free to drag this out as long as he’d like. Can the law really be this stacked against us?

Carl Starrett said...

I would proceed to your upcoming hearing. Besides granting removal of the lien, the court can award you up to $2000 in attorney's fees against this former supervisor. Next time, considering bonding around the lien instead.

You can also consult with your attorney to see if an action for a restraining order against this person to prevent future recordings might be in order and possibly damages. I presume that the the agreed upon amount was part of a settlement contract, so you might have a damages claim for breach of contract.

Unfortnately, the County Recorder's office does not act as arbiter of mechanic's liens.

Anonymous said...

That's interesting that you suggested to bond around the lien. In my situation, I just did that myself. Then I notified the subcontractor via certified mail of this bond. He promptly drove down to the city and recorded a 2nd lien, this time for more money than the first. Of note, it is not an additional. If appears to just be to replace the 1st lien. So I concur with the other person on the blog. The law seems to put the homeowner on the defensive as recording a lien can be done almost arbitrarily.

Carl Starrett said...

I would contact the bonding company to see if they can cover the both liens with the same bond.

Shanna said...

Hi Carl

Could you let me know…..three concerns?

The Project of concern is over $300,000 of interior redesign. The project is considered “Commercial” do to its Condo Status. The Project has been started and will be completed in less than a month. The home owner has yet to pay the final payment.

• As I understand it, an Architect or an Engineer can file a mechanics Lien.
o Can a “Building Designer”?

• In another publication…It states something about the project not being built?
o Mechanics Lien’s can be filed when payment is not received….Built or Not?

• Is a Designer required to file a Preliminary 20-day Notice or form similar?
o It looks like a contractor is required to do this?


• I understand there is a 10 day “Demand for Payment” prior to filing.
o Is there a legal form or does a Business Invoice suffices?
o Are there specific words required?

• Referencing again the published site below. It states, we file a “notice of Lien” first and the 90 days file again a “mechanics lien.
o What forms need to be filed and what time frame?
o Is the initial filing form different than the first filing?
o Is the Owner notified of the filing?

Anonymous said...

Thank you for your informative information about mechanic lien. I had a rather simple question: can a contractor file a mechanic lien without a written contract? What is the procedure that a contractor has to follow with the County Recorder Office to file a mechanic lien (i.e. documents they need to present, etc.)? How do they prove that they were contracted and or did work on a property? I have been searching for this answer for a number of days now, and not even the county office was able to answer it. Please advise.

Anonymous said...

We were a subcontractor to a subcontractor on a project for the City. The person awarded the contract has since refused to pay us for hauling materials. We filed a Mechanic's lien against the City, the contractor, and the subcontractor. The City says that we can't file against the City. IF we remove the City from the lien, does that mean that the entire lien is no good? If the project is a public works project, can we have a lien at all?

Please advise.

Carl Starrett said...

You cannot file a lien on a public works project. Instead, you must serve a document called a stop notice. Please feel free to contact my office is you need further assistance.

Anonymous said...

In regards to release of a mechanics lien; when should you release the lien? Company is requesting release at time of receiving a check. Should the release of the mecahnics lien be put on hold until after the check clears?

Carl Starrett said...

Unless you are receiving a cashier's check, you should provide them a No. 3 release when you accept the check and then provide a No. 4 release and a release of mechanic's in after the check clears.

Anonymous said...

We had a contractor provide poor and incomplete work back in 2003. We paid what we felt was fair with a letter stating the reasons for the partial payment including incomplete work. In a letter dated 4/04 he stated the work has been completed and demanded payment by the end of 4/04 or a lien will be placed. He placed a lien 10 months later in 2/05...well outside the legal deadline. Nothing has been done since then and he still has not removed the lien. He never filed to have the lien taken any further. It is now 2/5 years later with no activity. Can I file to have a judge remove the lien? How do I do that?

Thanks for your help.

Carl Starrett said...

There is an expedited petition process to removed the lien under Section 3144 of the Civil Code. You can call my office at (619) 448-2129 if you need further assistance. I've handled a number of these types of cases.

Anonymous said...

I'm not sure if this is still active.

To perfect a mechanics' lein doesn't the contractor have 90 "business" days as opposed to calandar days?

Thank You

Carl Starrett said...

No, the lien claimant has 90 calendar days to file the lawsuit to perfect the lien.

Anonymous said...

I have recently seen, in two different areas, mention of a new legal "requirement" that a preliminary notice MUST be filed on any work exceeding $400.00.
I haven't been able to substantiate this anywhere, including the CSLB website. Is this, in fact, now a mandatory filing?

Carl Starrett said...

California Civil Code Section 3097(h) has long required subcontractors to service preliminary notices on property owners when the value of the contract.

gary t said...

it seems to me as though an easy way to circumvent the law is to simply stall. i'm not sure why a contractor who has waited 100 days has any less right to payment than one who waited 90. For example an owner could make token payments to string a contractor about beyond the 90 days and then stop paying all together. In my case, a friend came into possession of a house and after a year of dealling with disreputable architects and contractors litterally begged me to help her finish. We were able to get it done and she paid about half of what was owed and was going to pay the other half when the house sold. Of course, the market has tanked and the house hasn't sold and while i doubt the owner ever filed any sort of completion notice, it's probably been 90 days since someone last worked on the house. Now it seems as though my willingness to be flexible and work with the owner means i'll get ripped off. Because I agreed to help, there is one less run down, vermin infested squatter's palace. Hypothetically speaking, let's assume the owner has not filed a completion or stop notice, and further assume that it became apparent a little more work was necessary. If I do that work (say a day's worth) does my 90 days start running then?

Finally, is it still legal for a workman to "take back" his work as long as no power tools are used?

Carl Starrett said...

Gary, the law says what is says. Filing liens in bad faith when you know they the lien period has expired, you could face disciplinary action against your license. Performing punch list items or minor work does not expend the time period to file the lien.

Failing to file a valid lien doesn't mean you waive to sue for payment. If you had a written contract, then you have up to 4 years from the date of the breach to file a lawsuit to collect. You could even place a judgment lien on the property if you win the case.

Finally, you cannot "take back" work that has been installed as a fixture on real property. Your remedy is to sue in court for a judgment.

Anonymous said...

My friend purchased a company in 2004 for $10,000. My friend then incorporated but has always treated the business as a sole proprietorship, kind of like a personal piggy bank. He asked me to work for him as a sub-contractor (I had no license or insurance) and I said I would be happy to help him out since I had experience and aptitude in this field. It became long-term and he asked me several times to be his partner but I was preoccupied with my wife's health at the time. The business has always made as much money as it was worked, but my friend was a poor businessman and liked to spend his time and money on his toys and hobbies and let things go downhill. Soon, the checks to me for completed jobs got later and later and then dried up altogether. He then said he could not pay me if I didn't continue to work for him. Then, when he did pay me, he would pay me less than what I was owed. This last December, I sold one of his assets for him with his permission (last large asset he said he owned outright) and he gave me the money from the sale, bringing his debt to me down to ~$20,000. I offered to continue working for him but only under a signed contract. He indicated he would never consider a written contract. It wasn't long after that he stopped payment on several checks and demanded that I return some assets that, for months, he had been forcing on me in lieu of cash payment. Now the 90 days is coming up on a >$1,000 job I did on November 6th and someone told me the words "mechanic's lien" and I found this site.
Might be important:
1. No written contract ever - barely even a verbal one
2. I always emailed/faxed/hand-delivered my paperwork in a timely manner directly to my friend and had no direct billing contact with customers.
3. I have kept good records, though usually not copies. Lately I began scanning documents before submitting them.
4. The vast majority of payments from him to me lately consisted of personal checks or cash, all of which he said he would call “personal loans”, and were not company checks earmarked to pay a specific job. So he could argue that any specific job was paid, or that all jobs were paid to a certain percent, though obviously he could not say that all jobs simultaneously were paid in full.
5. I always declared every dime of income on my taxes.
6. I'm in northern California.
7. I have since decided to start my own business in the same field. A lot of previous customers have my cell number and some have called me and asked me to do work for them. So far, everyone who has called paid their bill in full long ago but I was never specifically paid in full for those jobs. However, for a few of them, I did receive specific payment for my labor but was not reimbursed for purchases or expenses.

Questions:
1. Do you think I am entitled to file a mechanic’s lien for work done in the last 90 days?
2. Do you think I was an employee or a subcontractor?
3. Am I breaking any laws if I accept his previous clients?

Anonymous said...

Does ( in California) a supplier of costum designed lighting fixtures with a written contract with the owner has to have a California Contractor's license to avail themselves to to Mechanic's Lien law and filing a Lien? Owner has paid 1/2 of the contract but has failed to pay balance on time.

Anonymous said...

I've paid my contractor over $200,000 in labor expense yet the CSLB indicates that he has no employees and pays no workers comp. He has filed a mechanics lien for $24,000 against my building. Can he still be awarded a settlement even thought he does not appear to be legal?

Anonymous said...

I am completely lost with the mechanics lien laws. I have a billing dispute with someone who did site improvements to my property prior to building. He quit working on my job on 10/24 and filed a lien on 5/10. I have been working with his attorney to come to an agreement about what money is owed. I asked for him to provide documentation to support the monies he's claiming to date he has not.
My questions are :
1) IF we can't settle and go to court does that mean my property will be foreclosed as soon as he files and i'm going to lose my almost home?

2) Will he have to prove to the court that the work he is claiming was done? (I have serious reservations that the work he is claiming was done at all and I have proof as to that effect).

3) What happens when we go to court? All that I've read makes me believe that I haveno re-course and i'm going to lose my property.

Thank you,
MP

Kyle said...

If a mechanic's lien is properly filed, and the filing party has to go to court to have it enforced, and is then awarded attorney's fees mandated by statute, what priority do the attorney's fees have in a bankruptcy case in California?

Anonymous said...

Out of the blue, I just received a Mechanic's Lien from a subcontractor who delivered about $1074 of stone to my home but apparently was never paid by the contractor, whom I paid in full 7 mos ago after the job was done.

1) What are my options? After screaming and kicking, will it just be easier to pay him the $1K (effectively doubly paying for this part of the job)?

2) How do I ensure the Lien gets removed?

-Jack

Jonathan C said...

I am a licensed contractor in Kern County CA & until recently was engaged on a time & material based tenant improvement for an existing client of 4 years. The last week of the job, as we were within 8 hours of completion (on a project totaling just over 80k) the client threw my employee off the property and threatened to sue me fr overcharging. He paid us weekly for almost 3 months and still owes us approx. $4500, mostly for labor. I was renting a storage container from the client which was placed on my property since around October last year. Upon his threats, I called to cancel the rental agreement and also wrote them requesting they pick he container up. They have refused to do so, claiming I have moved it to an inaccessible location. The now claim I owe them over 60 days rent and are indicating they will file a lien on our property if I do not pay in full. They were notified after they failed to pick p the container that I would take possession under the civil code for abandoned property shortly after requesting they remove it from the property. Do I have to pay? Are they entitled to file a lien or would it be a slander on the property? Do I have any recourse for damages? The client is a long standing business owner in our small town and is know for threatening any who challenge his decisions with lawsuits. In most cases I have encountered, nobody has ever stood up to him or his family, all of whom are employed in one form or another in the business. I had heard about obtaining a bond to clear a lien as I was the subject of a homeowner who bonded out of my lien when I began contracting a few years ago.

Anonymous said...

Hi Carl, We had a contractor abandoned our hillside foundation project as of 9/30/08. We received a call from a supplier wanting to file the actual lien $18,360 on our property now who sent us a prelim notice on 7/23/08 for steel bar & hardware for $23,000. Most of the $18,360 was for monthly equipment rental fee and also the contractor did not return the rented equipment hence $7400 was charged for the value of the equipments.

1.Can the supplier file the lien for equipment although the prelim only states for steel bar & hardware?

2.What can we do? The contractor has taken more money than work done, and has not return rental equipments, and has filed to dissolve the corp. and filed bankruptcy?

Please advise. Thank you!
-Anne

Anonymous said...

We are a door manufacturer who supplied a builder/developer (who is also an attorney) doors for a new spec home that he was building.

He has an outstanding balance of almost $5,000.00.

Our company does not file 20 day notices giving us the option of liening later if necessary.

This "customer" has not made payment on this balance since our last billing in/about Sept. of last year.

We were recently contacted by him with what I believe to be a "scheme".

He wants us to sign an Unconditional Waiver and release upon Final Payment, and he wants us to sign a Release of Claims.

Also included was a brief letter explaining that he has agreed to allow our Mechanic's lien to be recorded even though it is unenforceable and untimely on the condition we sign the two documents.

It also says that he is trying to facilitate the payment of our lien in some pro-rata fashion from any proceeds avaiable after the close of escrow and that we have agreed to accept our share of whatever sums might remain after the loans and the HOA are paid.

Here's the kicker, he gives us the email address to a woman who will charge us $150 to file and record our lien.

I'm not educated in the legal system in the slightest, but to me, by signing the Unconditional and the Release of Claims means he doesn't owe us anything to begin with, then to pay someone $150 for something that I think we can file ourselves for free or close to nothing is ridiculous!

Please advise!

shalini said...

I had hired a struc. engineer through a friend sometime in March 2007. The struc. engineer is based in canada and we live in california. The friend told us that the work would be done for $2500. He was supposed to complete the work in a week, thats the reason we went all the way to get the work done from canada. But this guy took 4-5 months to complete the work, and when we submitted the plans to city, there were lot of flaws. We were so frustrated with this guy that we hired another local guy and fired him.
We are still under the construction process and this guy now comes up and says that he had a contract with our friend for $3500 and since he did extra work, the total amount is $8500 and since he didnot complete the whole work he will charge us $7000.
We donot know what work he is talking about and how this $7000 figure has come, we have told him that out of $2500, we are ready to pay him $1500, since he didnot complete the work.
But he says he will file a lien on us.
Can he do it? We have no paperwork ever signed with him, but we did use his drawings to submit in city for approval but later withdrew them and hired another engineer to redo the work.
Please advise what should we do??

Anonymous said...

We are a contractor performing work for a company facing financial difficulties. We submitted three progress billings with conditional lien releases which have not been paid. We are now submitting our retention billing for final payment. The question is should the conditional lien release upon final payment be only for the amount of the final retention payment or should it include the unpaid progress payments as well as the final retention?

Anonymous said...

i clean swimming pools for a living.one of my customers had hired me for services,i had sent a contract out to him via email,and soon there after i started servicing his pool in good faith i started the route,a few weeks had gone by,and he didint sign and send contract back,i then sent him a bill,and he sent me to hell stateing he was not going to pay a dime Can i put a lien on his property?

Anonymous said...

I went to file a lien and put "labor and materials" for what the money was owed for. The clerk stated that they do not accept mechanic's liens for "labor and materials".

I live in Orange County, California. What specifically should be put in the spot for "labor and materials" on the lien form? Do I need to be very specific?

ADAM said...

What happens if the contractor drops out of the job and quit....can he place a mechanical lien? Please advise. Thank you
Adam

Anonymous said...

I'm a 1st time homeowner and I am struggling trying to figure out this whole Mechanic's Lien process. It appears that once a Mechanic's Lien is filed that the lien claimant has 90 days to file to foreclose on property unless granted extension but only good for up to 1 yr. Does this mean that all Mechanic's Liens are actually valid for 1 year? or can they re-file new mechanic's liens randomly for same work? When is the actual lien period over for the lien claimant? When can the homeowner request that this lien be released without any further negative action from the lien claimant?

Anonymous said...

We are undergoig construction on our house and have recently fired our contractor for breach of contract. (He did not want to pay his subcontractors and provide us lien releases even though we paid our contractor all payments per contract.). However, the lumber supplier is threatening us with a lien if we don't pay the remaing balance which we have already paid to our GC. I am not disputing whether or not we need to pay the lumber supplier (he supposedly filed a 20 day prelim that we never received which I think our GC intercepted the USPS notice and never let us know.). I want to know how much of the invoices provided by the supplier are we legally responsible for? I have read that we are only responsible for material delivered to our property? Is this correct. I have seen charges such as a skilsaw and framing hammer. Why should us, the owner be responsible for this payment?

Thanks

Anonymous said...

We have fired our contractor i the middle of the project as we saw deficiencies in his work, he didn't follow any building codes. We filed a claim with his bond and filed a complaint to CSLB. He demands payment in full and threatens with a lien.
At this point (gazebo) needs to be demolished and project have to start over with proper materials as the structured integrity is compromised and its not safe. Also he told us there is no need for permits, he lied! What do we do?