One of the best remedies for contractors, subcontractors, or anyone else in the contracting industry looking to remedy payment issue is a mechanic’s lien. If any of these individuals file a mechanics lien in California against a property owner, it will put a hold on refinancing or selling the property without first settling the disputed debt. Mechanic’s liens are a tool that, when used correctly, will ensure the owner complies with all required payment arrangements the contractor sets forth while participating in the project.
Preparing and filing a mechanics lien in California requires attention to detail and discipline as there are many ways for making mistakes that could potentially invalidate the lien. Therefore, you must format the documents in detail, comply with the notice requirements, meet the deadlines, and record the lien with the correct office. We’re going to look at how to file and enforce a mechanics lien in California in greater detail.
Are You Eligible to File the Lien?
Before filing the lien, you must first determine if your services are eligible for filing the mechanic’s lien. These filings can only occur if the property owner hires an agent, contractor, or subcontractor to provide labor, services, or materials to a construction project that’s private in the state of California. More about California’s lien deadlines & rules here.
Should You File the Lien?
Once you determine if you’re eligible for filing the lien, the next step is to decide whether you should or not. Under most circumstances, you’re considering the filing of the lien because someone owes you money that’s past due. These liens are a powerful tool that is effective in their design because they help contractors whey payments aren’t received. However, many contractors who have interest in filing liens worry that they’ll cause damage to their relationships throughout the industry. These are valid concerns, and only you can weigh the pros and cons regarding this decision. Ultimately, you deserve the payment if you’ve completed the work.
How Are Mechanic’s Liens Beneficial?
· They’ll prevent the owner from selling the property.
· Mechanics liens California prevent funding of or tie up progress payments of the job.
· Liens help transform the property into payment security.
· Even if you didn’t contract with the property owner directly, liens allow you to sue the owner for the work you performed.
· When you accurately record a “Claim of Lien,” you’re allowed to recover legal costs and attorney fees against non-paying parties.
How Do I Prepare a Mechanic’s Lien?
When preparing a lien document, the law is strict, and all the statutory requirements must be met. The following must be included on the “Claim of Lien” for it to be valid:
· A statement outlining your demand
· The name of the property owner
· A statement describing the details of the lien
· Name of individual who hired you
· Legal description of the property
· Proof of delivery of the lien to required individuals
· Statement of statutory notice
Check out this free California mechanics lien form.
The Owner Must Be Served a Copy of the Lien
Beginning in 2011, the state of California made it a requirement that a copy of the mechanic’s lien be served to the property owner when the filing occurs. As pointed out in how to prepare a mechanic’s lien, you must show evidence verifying that the owner received the lien. California views service to the owner as a vital detail and, just as critical is the proof of service.
How Can You File the Mechanics Lien California?
Step one: The Preliminary Notice
The first step in this process is to preserve your rights by delivering a 20-day preliminary notice if contracting did not occur directly with the property owner. You must send this notice to the property owner, the lender, and the prime contractor through certified mail. In this preliminary notice, you must include the exact language the statute mandates, and it’s also essential that you retain the delivery’s proof. You must send the notice within twenty days of first furnishing services, labor, or materials. If you fail to meet the twenty-day deadline, this notice should still be sent out immediately. The notice will still preserve the rights of the lien for all benefits provided beginning with the day falling twenty days before the date of service of the notice.
Step Two: Recording the Mechanics Lien California
The contractor must complete all the work under the contract before the mechanics lien California can be recorded. What this means is that you must provide the entire scope of your work or, if a breach of contract occurred, being excused from the remaining work. However, if an argument is happening between the claimant and the party breaching, care should be taken when filing the lien.
Recording of the mechanic’s lien must occur at the County Recorder’s Office in the same county of the project’s location. Here’s a list of county recording offices in California to file your mechanic’s lien. You must do this within 30/60/90 days of completing the work at the property. If you’re a subcontractor at the property, you have up to ninety days after completion of the entire project to file your lien.
Stop or Stay Notices
When money hasn’t been paid by the owner, a stop notice will go against these funds. The freezing of these funds makes it so the lender or property owner must hold this money so the claimant can have some recovery for the work they’ve already completed. If a claimant has any direct contractual relationships with the owner, then a stop notice is not available because they fall under the Miller Act.
How Can You Enforce a Mechanic’s Lien?
Once a mechanic’s lien is filed, it is valid for ninety days after its filing date. Once this ninety-day period concludes, and the lien is not extended or foreclosed upon, it will become unenforceable and null. Before the ninety-day deadline approaches, you’ll want to take action.
Actions You Can Take:
1. Extend the Deadline for Enforcement: In the state of California, liens can go through an extension. Then, you can have longer than the ninety-day period for the lien for making collection attempts before the need for enforcing the lien becomes necessary. However, receiving a lien extension in California could also be tricky. The only way to obtain a valid lien extension is if the property owner agrees and will sign the document for the extension. Under most circumstances, you and the property owner will be undergoing negotiations or working out payment arrangements, for an extension agreement to come to fruition.
2. Lien Enforcement: If you’re unable to get your deadline extended, and payment still hasn’t been received, you’ll most likely want to seek lien enforcement. These efforts allow you to foreclose upon the property so you can recover the funds owed to you. At this point, you’ll need to file a lawsuit to enforce the lien. Hiring an attorney will be to your benefit in these attempts.
3. Cancel or Release the Lien: If you’ve received payment in full, the property owner will most likely request that you file a lien release. You’ll find that this process is similar to filing the original lien. Filing the lien release must occur in the same office where you filed the lien.
About Foreclosure Lawsuits
If you’re going to file a foreclosure lawsuit, all parties claiming an interest in the property must have their name included in the lien. These individuals can include service providers, suppliers, contractors, and subcontractors who have recorded liens, as well as any other individual who has recorded any other liens, judgments, or mortgages. An attorney should be involved regarding foreclosures because these kind of lawsuits are tricky. You should give the attorney at least fourteen days notice to prepare and file the lawsuit for the lien foreclosure.
You’re Just as Responsible as the Owner
Your responsibilities are not in any way less than the owner’s regarding payment enforcement. Just because there are requirements in place regarding the property filing and serving a completion notice for their lien, that doesn’t mean you have no further responsibilities if they fail to comply. You still have deadlines to meet, or you will lose your rights even if they forfeit their notice to comply.
You must meet your notice requirements to start the process of filing your mechanics lien California. The clock will run out fast, so paying attention to these requirements is critical and typically occur within twenty days after you being work. You must prepare your lien documents with detail and according to the California lien statutes. If you forget to include the proof of service affidavit, the mechanic’s lien will become void. The lien must be recorded in the county recorder’s office in the same county where the work was performed on the property.
Following the recording of the lien, this is when another deadline will approach quickly. You may need another extension for the property owner if ninety days have passed and payment has not been received in full. If that option is not one that can be worked out, you may have to take measures to enforce the lien. With the help of an experienced attorney, this is manageable, and you can recoup your funds faster. Once this has occurred, you can file a lien release in the same office where you filed the original lien. These are the basics for filing a mechanics lien California.