Building or remodeling real estate often requires the assistance of individuals or companies that provide construction or home improvement services. When completing a project, a developer or homeowner may use a general contractor or other specialists to perform various tasks. Sometimes, parts of the job are subcontracted to others. Typically, these types of specialists are paid an agreed-upon price for materials or to perform their work. If the party who hired them fails to pay, the specialist may be able to pursue recovery by filing a lien called a mechanics and materialman’s or “mechanics lien.” If you plan on having work performed on your property, you will need to know: What is a mechanics and materialman’s lien?
What is a Mechanics and Materialman’s Lien?
A mechanics and materialman’s lien, more commonly called a “mechanics lien,” is a type of lien that can be recorded by an individual or company that is owed payment for the labor or materials they have supplied to construct or improve a property. These liens provide a means for contractors, subcontractors, and other specialists to protect their interests and pursue payment for their work on property improvement projects. California law provides that a recorded mechanics lien has priority over a subsequent lien, mortgage, or deed of trust.
Who Can File a Mechanics Lien?
Applicable law provides that this remedy is available to anyone who has performed labor or furnished materials for “work authorized for a work of improvement.” Claimants may include someone who has performed work or provided materials at the owner’s request or who has been subcontracted for this purpose. Equipment lessors, laborers, and design professionals may also be eligible to record mechanics liens.
What is a “Work of Improvement?”
California law defines work as “[l]abor, service, equipment, or material” but is not limited to labor, skills, services, material, supplies, equipment, appliances, power, and surveying, provided for a work of improvement.”
A “work of improvement” includes:
- The total or partial construction, alteration, repair, demolition, or removal, or additions to a building, wharf, bridge, ditch, flume, aqueduct, well, tunnel, fence, machinery, railroad, or road;
- Seeding, sodding, or planting real property for landscaping purposes; and
- The filling, leveling, or grading of real property.
A “work of improvement” means the work must be part of the entire structure or scheme of improvement as a whole and includes site improvement.
What Can be Recovered with a Mechanics Lien?
A mechanics lien can be for the lesser of two values: 1) an amount that represents the reasonable value of the work provided or 2) the price agreed to by the claimant and the person that contracted for the work. In general, lien recovery is limited to reimbursement for services and materials and does not include consequential damages or attorney’s fees.
How is a Mechanics Lien Recorded?
The Preliminary Notice
- Before a claimant can file a lien, they must first send a preliminary notice or “20-day Preliminary Notice” to the property owner, direct contractor, and construction lender. The purpose of the notice is to let parties who did not contract with the claimant know about the work that was performed and the possibility of a future lien.
- The notice must contain specific information, and the claimant is required to obtain proof of service for all required parties.
- The notice should be filed within 20 days of the first day the claimant supplied materials or labor.
- Laborers do not have to send a preliminary notice. Additionally, a claimant who has a direct contractual relationship with an owner or reputed property owner only has to give preliminary notice to the construction lender.
Recording the Lien
- A claimant has 90 days after completion of the work as a whole to record a mechanic’s lien. However, this limit will be reduced to 60 days for direct contractors and 30 days for other claimants if the owner records a notice of completion or a notice of cessation and the work stops for a specific number of days.
- A claimant must record the lien with the county recorder in the county where the property is located.
- The lien must be served on the owner and all required parties by registered mail or certified mail before it’s recorded.
Enforcing a Mechanics Lien
- Under California law, a claimant has 90 days after the lien is recorded to enforce a mechanics lien. This means the claimant will need to file a foreclosure case.
- After filing a foreclosure action, the claimant will have 20 days to file a lis pendens in the county recorder’s office. The lis pendens will remain on the property’s title record and serves to notify other parties that there is a pending action that could create a cloud on the title.
Removal of a Mechanics Lien
- If an owner wishes to remove the lien while the matter is pending, they have the option of recording a mechanics lien release bond. The owner will have to obtain a surety bond in favor of the lien claimant for “125 percent of the amount of the claim of lien or 125 percent of the amount allocated in the claim of lien to the real property to be released.”
- The collateral provided for the bond will substitute for the property at issue.
- Once the bond is paid, the owner will be able to sell the property free from the lien. However, the owner will still need to participate in the court case or risk forfeiting the bond funds.
Release of a Mechanic’s Lien
- If the lien is paid, the claimant should have the lien removed from the title record. The owner may request that the claimant do this, and if they fail to comply, the owner can petition the court for release of lien. If the claimant fails to take action to cancel or remove the lien within a certain number of days, they could be liable for the owner’s attorney and court fees.
These actions are often time-sensitive and complex. Therefore, it would be in your best interest to work with an experienced California real estate attorney as you navigate issues related to your mechanics lien.
Contact the Law Office of Raffy Boulgourjian
Attorney Raffy Boulgourjian is a California real estate attorney with over twenty years of experience representing clients in residential and commercial real estate matters. He has the knowledge and expertise to protect your real estate interests. Contact Mr. Boulgourjian today to schedule a free legal consultation to discuss your California real estate legal needs.