A mechanic’s lien is a remedial mechanism by which a contractor or subcontractor on a private work project can guarantee payment for services and work provided. The reasoning behind this is that since the contractor or subcontractor provided services which increased the value of the private property, they should have an enforcement tool toward guaranteeing payment for those improvements. Take, for example, a not-uncommon scenario in today’s economy: a general contractor contracts with a roofer but fails to pay and files bankruptcy. A valid mechanic’s lien held by the roofer will likely require the homeowner to pay the roofer for his or her services even though the homeowner may have paid the general contractor in full.
The law provides this remedy to a very broad spectrum of claimants, essentially any person or business entity who at the request of a private owner, or his agent, has furnished labor, material, leased equipment or furnished any special skills and/or services to a project for improving real property may be entitled to record a lien against that property. (See Civil Code §3110.)
Step 1: Preserve Your Right To A Mechanic’s Lien By Recording And Serving A Preliminary Notice
Pursuant to Civil Code section 3114, before you can enforce a mechanic’s lien a preliminary twenty (20) day notice must be served. The notice must be in writing and must contain at least the following information:
(1) A general description of the labor, service, equipment, or materials furnished, or to be furnished, and an estimate of the total price thereof.
(2) The name and address of the person furnishing that labor, service, equipment, or materials.
(3) The name of the person who contracted for purchase of that labor, service, equipment, or materials.
(4) A description of the jobsite sufficient for identification.
(5) A heading, set forth in boldface type, stating “Notice to Property Owner,” and the subsequent statements as spelled out in Civil Code section 3097(c)(5).
Any tradesperson that provides services to a general contractor who in turn is providing services to a private landowner must serve a preliminary notice within twenty (20) days of the time services are first provided on the project. A general contractor and/or a subcontractor with a direct contractural relationship with the owner is not required to provide preliminary notice. Additionally, this preliminary notice must be served upon the owner or reputed owner, the original contractor, or reputed contractor, and to the construction lender within the twenty (20) day time period. A preliminary notice must be served either personally, by registered or certified mail.
Step 2: Record And Serve The Lien
If you are not timely paid during the course of the project or at the end of the job, the recordation of a mechanic’s lien is a powerful remedy. Often, payment follows shortly thereafter. It is important to understand, however, that the lien must recorded within ninety (90) days after the completion or cessation of the work on the project. However, if the owner of the property records either a notice of completion or a notice of cessation, the contractor has only thirty (30) days from the time the notice is recorded to record his mechanic’s lien. The lien should be recorded in the County in which the real property is situated. Pursuant to Civil Code section 3084, the mechanic’s lien must include the following:
(1) A statement of the amount owed, after deducting all just credits and offsets.
(2) The name of the owner or reputed owner, if known.
(3) A general statement of the kind of labor, services, equipment, or materials furnished by the claimant.
(4) The name of the person by whom the claimant was employed or to whom the claimant furnished the labor, services, equipment, or materials.
(5) The location or a description of the site sufficient for identification.
(6) The claimant’s signature and verification that the claims made in the mechanic’s lien are true and accurate.
Frequently, the mere recordation of a mechanic’s lien will motivate payment of any outstanding balance. If not, then the lien must be perfected by filing a lawsuit in the Superior Court.
Step 3: Perfect the Mechanic’s Lien
If the contractor remains unpaid after the recordation of the mechanic’s lien, the claimant must file a lawsuit to foreclose the lien within ninety (90) days from the date the lien was recorded. A lawsuit is commenced by the filing of a complaint in the Superior Court. Failure to meet the filing deadline will result in the loss of your ability to enforce the lien.
While a contractor always retains the ability to proceed with a breach of contract action against the person or entity that actually hired you, (the homeowner or general contractor in most cases) the loss of lien rights through failure to file the preliminary notice or to perfect the lien may mean that you won’t get paid if the primarily responsible party has filed for bankruptcy protection or is otherwise judgment-proof. That is why it is always a good idea to have an attorney draft the paperwork and ensure that the filing deadlines are met. However, to save money, some contractors fill out the forms themselves and simply have the attorney review them before mailing or filing.