What Every Lawyer Should Know about Filing and Perfecting a Mechanic’s Lien
by Jerry Abeles
(County Bar Update, October 2006, Vol. 26, No. 9)

 

What Every Lawyer Should Know about Filing and Perfecting a Mechanic’s Lien

 

By Jerry Abeles, a partner at O’Brien Abeles LLP, where he practices in the areas of construction, insurance, products liability, and trade secret matters. The views expressed are his own.

 

1. What is a mechanic’s lien?

A mechanic’s lien is a recorded instrument evidencing a debt by the owner of real property. Unlike other liens, there is no requirement that there be a contract between the debtor (the property owner) and the creditor (generally, a contractor or material supplier). Indeed, the property owner typically has no contract with the claimant, and often has no idea who the claimant is or that the claimant performed any work on the property until shortly before the lien is recorded.

 

It may appear unfair to owners that their property can be liened—and ultimately sold—by an unknown person. In California, the mechanic’s lien laws1 are generally designed to protect contractors and materialmen who, if they are not paid by the general contractor on a construction project, would have no other means to collect for the work they performed or the supplies they provided for the project. In short, the statutes are designed to prevent unjust enrichment by a property owner.

 

2. Who can obtain a mechanic’s lien?

Civil Code Section 3110 lists those persons who are entitled to record a mechanic’s lien, with the catch-all phrase being “all persons and laborers of every class performing labor upon or bestowing skill or other necessary services on, or furnishing materials or leasing equipment to be used or consumed in or furnishing appliances, teams, or power contributing to a work of improvement.” The breadth of the list is intentional; every person supplying labor, equipment, or materials to a construction project is equally in need of protection from unscrupulous or insolvent general contractors or property owners who, but for the threat of a foreclosure sale, may be inclined not to pay for the work performed or supplies provided.

 

3. What must be done to obtain a mechanic’s lien?

Before recording a lien, a contractor must serve the owner with a preliminary 20-day notice.2 The preliminary 20-day notice provides the owner with information about the contractor, including the nature of the services or materials provided to the project, an estimate of the total price of the goods or services to be provided, and who hired the contractor. The notice should be given no more than 20 days after the contractor first provided labor or goods to the project; otherwise, a mechanic’s lien still can be recorded, but the contractor will lose its right to claim recovery of the value of the labor or goods that were provided more than 20 days before the notice was given.3 It is good practice for contractors to serve the owner with a preliminary 20-day notice as soon as they begin work on a project (or even when they are awarded the subcontract) to ensure maximum recovery if a mechanic’s lien is later needed.

 

A contractor who is not paid when the work is completed must then record the mechanic’s lien at the county recorder’s office in the county where the property is located. The lien must be recorded after the contractor has finished work on the project and no more than 90 days after the entire project is completed.4 To be valid, the mechanic’s lien must (a) include the nature and value of the goods or services provided, and (b) be signed and verified by the claimant.5 A claimant who intentionally includes in a lien any services or goods that were not provided will forfeit the lien.6

 

4. What must be done to perfect a mechanic’s lien?

Merely recording a mechanic’s lien is not enough for it to be effective. The claimant must thereafter, no more than 90 days after recording, file suit to foreclose on the lien.7 Failure to perfect the lien through suit renders the lien “null and void and of no further force and effect.”8

 

The foreclosure lawsuit should name all other lienholders so the rights of all interested parties are resolved at once rather than through multiple suits. At trial, the court will decide the amount and validity of each lien.

 

5. What is the priority of a mechanic’s lien vis-a-vis other liens on the property?

Lien priority often determines whether a lien has any value. Generally, all mechanic’s liens have the same priority to ensure that the painter at the end of a project stands in the same position as the mechanical engineer who installed the underground water line at the beginning of the job. Mechanic’s liens relate back to the date that work on the project first begins and are senior to all liens, including mortgages and construction loans, recorded after work of improvement commenced.9

 

The penalties for failure to comply with the statutory procedures for obtaining and enforcing a mechanic’s lien are severe. To the extent possible, claimants should use preprinted forms that comply with the statutory requirements and a construction-industry calendaring program to ensure their lien rights are preserved and perfected. Attorneys unfamiliar with the details of the process should consider referring a new matter to a construction attorney, especially as deadlines rapidly approach.

 

1 Civ. Code §3109 et seq.

2 Civ. Code §3114. Contractors who have a direct contract with the owner, or certain laborers, are not required to serve a preliminary 20-day notice. See Civ. Code §3097. The required wording for the notice is specified in Section 3097(c).

3 Civ. Code §3097(d).

4 Civ. Code §3115. See Civ. Code §3086 for the definition of “completion,” which could be any of several different dates.

5 Civ. Code §3084.

6 Civ. Code §3118.

7 Civ. Code §3144(a).

8 Civ. Code §3144(b).

9 Civ. Code §3134. See D’Orsay Int’l Partners v. Superior Court (2004) 123 Cal.App.4th 836, 838, citing Walker v. Lytton Sav. & Loan Assn. (1970) 2 Cal.3d 152, 157 for an explanation of the time when work is considered to have commenced on a project for which a mechanic’s lien can attach.

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