If you're reading this article, there's a good chance you already know what a mechanic's lien is. But just in case, let's cover the basics.
A mechanic's lien is a tool provided by California law that contractors, material suppliers, and some others can use to secure payment against property when they are not paid. In essence, if all legal hoops are navigated properly, the contractor filing the lien can recover money due by forcing a sale of the property. However, the process is quite complicated and is best navigated by an experienced construction lawyer. If the legal requirements are not followed, this valuable remedy may be lost.
Who May Use a Mechanic's Lien, and against Whom?
The California Constitution explicitly recognizes the right of “[m]echanics, persons furnishing materials, artisans, and laborers” to file a lien on property “for the value of . . . labor done and material furnished.”
California law strictly limits who may file a mechanic's lien on a private project: a direct contractor, a subcontractor, a material supplier, an equipment lessor, a laborer, an architect, and a site improvement entity. These terms are defined by law, and only these categories of entities may use the mechanic's lien remedy.
The property that may be made subject to the lien is the improvement itself, such as a building, as well as the “real property on which the work of improvement is situated.” However, the lien may only be placed against the interests of someone who “contracted for the work of improvement” directly or, in limited cases, someone who was properly notified through the California preliminary lien notice process that the work was being completed.
How Does the Mechanic Lien Process Work?
As you might imagine, a remedy that is powerful enough to compel the sale of someone's property may only be pursued after jumping through many legal hoops.
Unless the Contractor has a direct contract with the property owner, the first requirement is the delivery of a preliminary, written 20-day notice. An entity that wishes to preserve its right to pursue a mechanic's lien must deliver a legally compliant notice to specific parties, including the property owner, prime contractor (if a subcontractor is filing the lien), and lender. To be effective, the notice must contain very specific items of information. It must also be “sent within 20 days of first furnishing labor, materials or services.”
The next requirement is the filing and service of the actual lien document. Again, the law is very technical, making the assistance of an experienced attorney vital. In addition to certain information, the lien must include specific statutory language. It must be filed in the county where the project took place and served properly on the property owner within a certain time period.
If the property owner pays the debt, the lien may be released. However, if not, an entity that followed all proper procedures will be able to file a lawsuit against the property owner, requesting that the owner's interest in the property be sold to satisfy the outstanding debt. As with the prior procedures, timing is vital. If the lawsuit is not filed within 90 days of the lien filing date, the lien expires.
When preserving your interest to be paid for services or materials is imperative, choose an experienced construction attorney who knows the law. Rodney R. Moy is an experienced business and construction attorney who can help you navigate complex mechanic's lien laws.