Three Basic Requirements of Mechanic’s Lien

Verbatim from How to Do a Mechanic’s Lien California by Dave Barnier (construction attorney) and Diane Dennis:

These are the three basic requirements for how to do a mechanic’s lien in California. Do not miss one of these three requirements and you could;
a) Lose your right to lien and
b) Get sued for placing a lien.

Gain the knowledge on how to maintain, preserved and enforce your mechanic’s lien rights for California projects.

Step one: How to do a mechanic’s lien in California

Preserve your lien rights by serving a California 20-day preliminary notice.

The California 20-Day Preliminary Notice form also known as “preliminary notice” preserves a lien claimant’s lien rights on a construction project. This is effective only when the notice is timely served by the lien claimant.

If the lien claimant was hired directly by the property owner, the contract between the claimant and the property owner will serve as the notice. In the absence of a contract, the lien claimant will not have any lien rights.

As a rule, the notice should be served not later than 20 days after the lien claimant first provides service or supplies, or any benefit to the property. This notice preserves lien rights to include not more than 20 days prior to the date the notice is served and through the completion of the contract.

Now when this deadline is not met, the preliminary notice can still be served as soon as possible thereafter. The preliminary notice will still preserve lien rights for all benefits provided starting from the day that fell 20 days prior to the date of service of the preliminary notice.

An important note for contractors:

As per Civil Code Section 3097(h), if the contract price to any subcontractor on a particular work of improvement exceeds four hundred dollars ($400), the failure of that contractor, licensed under Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, to give the preliminary notice provided for in this section, constitutes grounds for disciplinary action by the Registrar of Contractors.

Step two: How to do a mechanic’s lien in California

The timely recording of your mechanics lien maintains lien rights

As a procedure, a mechanic’s lien can only be recorded after the completion of all work has been done under a contract. This means the contractor/supplier/laborer has provided the entire scope of work or has been excused and relieved from the remaining work due to a breach of the contract. For non-payment due to breach of contract, care should be taken before recording a lien based upon an argument that this party has breached the contract.

A 90 day period is given to record the mechanic’s lien against any individual property, after the completion of its work of improvement.

The work of improvement is typically defined as all work related and done under the prime contract. A subcontractor who finishes early in the project may not have to record a lien until after the prime contractor has completed his work.

However, the earliest date a mechanics lien can be recorded is the day on which the subcontractor completes his/her own scope of work. The latest date is a day, or 30, 60 or 90 days after the entire work of improvement is completed. For multiple property improvements, calculate deadline based on the completion of work on each individual property.

Now in cases where the property owner or its agent records a valid notice of completion within 10 days after actual completion of the work, the 90 day deadline is shortened to 30 days for subcontractors and suppliers. For prime contractors, it would be 60 days from this date.

All mechanics lien are recorded with the County Recorder’s Office of the County in which the improved property is located.

Step three: How to do a mechanic’s lien in California

The foreclosure lawsuit on the mechanic’s lien

A mechanic’s lien becomes null and void unless a foreclosure lawsuit is filed within 90 days after the date on which the lien is recorded. A lien foreclosure lawsuit cannot be filed in small claims court.

All claimant parties shall be named in the lien foreclosure lawsuit. Although at the time of filing, only known claimant parties shall be included. It could include; service providers, contractors, suppliers, subcontractors who have recorded mechanics liens, and others such as mortgages, court judgment liens and many more.

Lien foreclosure lawsuits are tricky due to technicalities and an attorney should be retained to file the lawsuit. An attorney shall be given at least 14 days to prepare and file a lien foreclosure lawsuit.

The lien becomes null and void if the 90 day period expires without filing a foreclosure lawsuit. But a new lien may be recorded provided if the new lien would be timely.

The new lien must be recorded within 90 days from the date of completion of the work of improvement. Within 90 days if the owner or owner’s agent does not record a valid notice of completion within 10 days after the date of actual completion of the work of improvement. This period includes the shortened 30 day period for subcontractors and the shortened 60 day period for prime contractors.

Disclaimer: This article is presented in general based upon California law. All the analysis and information in the article is solely intended to educate the reader on a general perspective position. Do not rely on this article to analyze any specific situation that affects you business. Retain an attorney and obtain professional advice on these three basic requirements.