The following article is relevant to contractors, subcontractors, laborers, and material and/or equipment suppliers. This article provides basic information regarding a common remedy to obtain payment on delinquent accounts.
A Mechanic's Lien is a way for those who helped improve a piece of privately owned real estate to receive payment from the person benefitting from the improvement. This payment can be received even if the parties who performed the improvement do not have direct contact with the property owner. The ultimate result of a Mechanic's Lien is that the property owner cannot sell or refinance their property without paying the person who made the improvement to their estate. This means that even though it may take a while to receive payment, the property owner must settle their debt with the contractor or materials provider if they plan to refinance or sell their property.
The Mechanic's Lien is a Three Step Process:
1) Pre-Lien Notice
2) Mechanic's Lien
3) Lawsuit to foreclose the Mechanic's Lien
1) PRELIEN NOTICE (20-DAY)
Before placing a lien on someone's property, the moving party (the party who is owed payment) is usually required to inform the property owner that a lien will be placed on their property unless action, such as paying their bill, is taken.
Notice must be served by certified mail, with a return receipt requested within 20 days of the moving party starting their individual improvement work. For example, a building that is undergoing a remodel requires new plumbing. The entire remodel was starting in April, but the plumber actually starts their work on the 5th of May. The plumber must provide notice by the 25h of May if they hope to obtain a Mechanic’s Lien. If the plumber fails to serve notice within the first 20 days, and serves notice on the 30th of May, the plumber would lose Mechanic's Lien rights to the first five days of their labor. Be aware that subcontractors that have a contract with a general contractor must make sure to serve notice to both the general contractor and the property owner within the first 20 days.
There are also specific requirements regarding the contents of the notice. These include: a general description of work, the address for the property receiving improvement, the name of company and/or owner(s), and the initial amount of contract bid. General forms for a Mechanic’s Lien can be found at public law libraries or online.
2) MECHANIC'S LIEN
A Mechanic's Lien must be recorded with the county clerk within 90 calendar days (not 3 calendar months) after completion of the improvement project. If the moving party has not been paid at the end of a project, the moving party should be sure record the Mechanic's Lien with the county clerk. Defining when a job is complete can become a issue that is litigated in court, and often involves what kind of work performed, who the improvement is being done for, what actions the property owner takes, etc. For example, a property owner can file a Notice of Completion that can start the countdown for the statute of limitations of the Mechanic’s Lien to be filed with the country clerk. Additionally, the Notice of Completion can change the number of days to file from 90 to 60 or even 30 days for a general contractor or subcontractor.
3) LAWSUIT TO FORECLOSE THE MECHANIC'S LIEN
After recording the Mechanic's Lien, the moving party will have 90 calendar days to file a lawsuit to foreclose the lien. Unfortunately, a Mechanic's Lien cannot be foreclosed in small claims court, but must be brought as either an unlimited or limited civil case before the Superior Court. If you cannot afford an attorney to represent you, it is advisable to hire one to guide you through this process because the rules of civil procedure and evidence are complex. Should you hire an attorney, they will know to include an action for breach of contract, in addition to the lien foreclosure that includes a demand for attorney's fees (if included in the original contract).
Michael J. Smith, Esq.
20630 Redwood Rd
Castro Valley, CA 94546