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Mechanics
Liens
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While recording a mechanics lien
is a straightforward and easy process, the laws for
enforcing mechanics liens are complicated and often
confusing. If the lien has any possibility of being
challenged, you are wise to seek the assistance of a
competent attorney that understands mechanics liens
before you even think about forclosing on the lien.
This could save you a significant amount of money in
the long run.
By the nature of the mechanics' lien, the property owner
runs the risk of having his property sold to pay the
lien, so his motivation will be to fight the lien at
all costs. In order to get back what you are owed using
a mechanics lien, be prepared for a challenging and
technical legal battle.
If you would like to discuss your rights regarding mechanics
liens, please contact our offices. We will be glad to
evaluate your situation and recommend a cost effective
solution.
What
is a mechanics lien? (from State
of California website) A mechanic's lien is a "hold"
against your property that, if unpaid, allows a foreclosure
action, forcing the sale of your home. It is recorded
with the County Recorder's office by the unpaid contractor,
subcontractor or supplier. It means that any of these
unpaid entities can claim a lien against the property
until they are paid.
The prime contractor has a direct contractual agreement
with the homeowner. If the contractor isn't paid, he
can sue on the contract and record a mechanic's lien.
But subcontractors, workers and suppliers don't have
a contract with the homeowner. A problem occurs when
the homeowner pays the prime contractor for all or some
of the work, but the prime contractor fails to pay the
laborers, subcontractors and materials suppliers that
were hired to do portions of the job. If they are not
paid, often their only recourse is to file a mechanic's
lien on the home.
What
is a stop notice? A mechanics’
lien is a lien on property. A stop notice is a lien
on construction funds. You may use one, or the other,
or both. However, it should be noted that in public
works, you cannot file a mechanics’ lien and therefore,
your only remedy may be a Stop Notice. Since the Stop
Notice is a lien on funds, it may be preferable to a
mechanics’ lien in some instances.
What
is Design Professional Lien? Design
professionals have a right to record a lien before construction
begins. A design professional lien is a separate remedy
available only to architects, professional engineers
and land surveyors who provide services during the planning
phase of a private work project under a written agreement
with the owner. There are numerous elements that must
be met in order to be able to use this remedy. It is
similar, but distinctly different than a mechanics lien
and should not be confused.
Who
has mechanics lien rights? In the
State of California, mechanics’ liens are provided
in the California Constitution. Article XIV, Section
3 of the California Constitution provides: “Mechanics,
materialmen, artisans, and laborers of every class shall
have a lien upon the property upon which they have bestowed
labor or furnished materials, for the value of such
materials, for the value of such labor done and materials
furnished; and the Legislature shall provide by law,
for speedy and efficient
enforcement of such liens.”
This does not mean that these people must have a contract
directly with the owner. However, they must have a contract
with the agent of
the owner and every contractor, subcontractor, architect,
builder, or other person having charge of a work of
improvement is held to be the agent of the owner. Due
to the fact that a material supplier is not the agent
of the owner, a material supplier’s supplier is
not entitled to a statutory lien. Further, in order
to have your lien, the work, and/or materials, etc.,
must be incorporated into the structure. That is to
say that it has to be installed.
What
work is covered by a mechanics lien?
All persons and laborers performing labor or bestowing
skill or other necessary services, or furnishing material
or leasing equipment to be used or consumed in/or furnishing
appliances, teams, or power contributing to a work of
improvement. Further, in order to have your lien, the
work, and/or materials, etc., must be incorporated into
the structure. That is to say that it has to be installed.
On the surface, this appears to be straight forward,
but there are numerous cases that inidcate that in some
circumstances, equipment and that is used in the work
of improvement do not qualify for mechanics lien rights.
Is
an unlicensed contractor entitled to mechanics lien
rights? California Business and
Professions Code §7031 prohibits a contractor from
suing to recover compensation unless the contractor
was duly licensed “at all times during the performance
of [the] act or contract.
A
licensed contractor who lets his license lapse at
any time during a project is not entitled to compensation.
The California Supreme Court ruled in
MW Erectors, Inc. v. Niederhauser Ornamental & Metal
Works Company, Inc., 36 Cal.4th 412 (2005). that the
contractor could not recover unless it was licensed
at all times during the project.
Can
a contractor record a mechanics lien claim without any
factual documentation? A
mechanics lien is relatively easy to file at the county
recorders office. This process makes it easy to assert
legitimate mechanics lien rights. A mechanics lien claim
when filed and recorded at the county recorders office
does not not have to pass any test for validity. Because
of this, the mechanics lien process may be abused, sometimes
a lien may be recorded without a real cause. When recorded,
the mechanic lien clouds the property and must be removed
if not legitimate.
What
must you do to enforce a mechanics lien once you have
one recorded? In
order to enforce a mechanics lien, this requires filing
a lawsuit in superior court. You cannot file a mechanics
lien lawsuit in small claims court. When a judgement
is obtained, the property may be orderd sold in order
to pay the mechanics lien. That is how powerful a mechanics
lien is. But if your claims as the party that has mechanics
lien rights is not substantiated, you should be prepared
for a costly legal fight. It is a serious move to file
a mechanics lien.
What
happens if you record a mechanics lien and do not take
any further action?
You have 90 days to file a lawsuit after recording
the mechanics lien with the county recorders office.
If you do not file suit to forclose on the lien within
the 90 days, the lien will become unenforceable and
you will have lost your lien rights. The lien will remain
a cloud on the property owners title unless you file
a release. If you do not file a release, the property
owner will by Civil Code §3154 be able to get the
title cleared of the "stale" lien and be able
to recover some of their attorney fees against you in
the process.
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