Tuesday, November 12, 2013
Contractors Steps Towards a Mechanics Lien: Blog Post 2
Contractors perform construction work for private and public owners. One right California law has established is the right to place a mechanics lien on your property if they are unpaid. A mechanics lien is a "hold" against your property, filed by an unpaid contractor, subcontractor, laborer, or material supplier, and is recorded with the county recorder's office. If unpaid, it allows a foreclosure action, forcing the sale of the property in lieu of compensation. (Mcgill 2012) There are many steps contractor must go through to ensure a mechanics lien is properly placed on a property in the event of nonpayment. These steps are outlined in the following paragraphs.
The first step for a contractor is to file a 20 day notice prior to the project beginning. This notice is important because by law you have to give notice to the owner that you will do the work and expect to get paid. If the contractor does not send the notice out then they may not be eligible to lien the property for the full price of the work. If you do not fulfill the 20 day notice by certified mail at least 20 days prior to start of work then you can only claim any costs thereafter the notice. So if you send the 20 day notice 10 days into the project then the contractor can only claim the costs after the first 30 days of the project. So in essence send your 20 day notice out! This protects you in the event of nonpayment.
So the next step is hopefully you will get paid and then you can issue a notice of payment which relieves the owner of the lien notice. However, everything is not perfect in life and in the event you as a contractor do not get paid then you must record the lien with the local register’s office. The time frame to place the lien varies, but in general you have 60 days to file the lien if the owner has recorded a notice of completion. If the owner fails to file a notice of completion then the contractor has 90 days to file a lien.
Once the lien is filed the contractor, if still unpaid, has 90 days to file a foreclosure lawsuit. The foreclosure lawsuit essentially will involve the contractor asking the judge to foreclose the property, sell the property, and pay the debts of the property off.
The mechanics lien law and process seems daunting but is in effect to allow contractors to do business with the risk of nonpayment lessened. The bottom line is contractors are in the business to make money and are not a bank. Owners have a duty to pay for work performed in a timely fashion. The timely fashion is usually defined in the contract and often relied upon in the event of litigation.
Diaz III, Julian and J. Andrew Hansz. Real Estate Analysis: Environments and Activities. Dubuque, IA: Kendall Hunt, 2010.
Mcgill, John. Desktop General Counsel: What You Need to Know About California Construction Law. Napa, CA: M3 Publishers, 2012