Steps, Issues, Deadlines, and Requirements for Valid Mechanics Liens
Step 1: What are you?
Are you a prime contractor or a subcontractor?
Even if you are a licensed general contractor, you are considered to be a "subcontractor" for certain purposes under the California Mechanics Lien Law when your contract is not a direct contract with owner of the property, such as when a general contractor contracts with a tenant of the owner of the property.
All persons who do not have a direct contract with the owner of the property - including material suppliers to a contractor or subcontractors - are considered "subcontractors" for purposes of meeting the requirements of the Mechanics Lien Law.
Step 2: If you are considered a "Subcontractor", have you timely and properly served a Preliminary 20-day Notice?
All persons not having a direct contract with the property owner usually are considered "subcontractors" and must have served either personally or by certified or registered mail a "20-day Preliminary Notice" on the owner of the property, the construction lender, General Contractor, and the "owner" (which may also be the owner's tenant, if the tenant has contracted for the work) within 20 days of the date on which you start work on the property, in the form provided in Civil Code §309.
If you did not serve the notice at the beginning of your work, you may still serve such a notice if you did work within 20 days prior to serving the Notice, but your mechanics lien may only cover work done in the 20 days before serving the Notice, and for all days thereafter.
Step 3: Determine whether and when "Completion" of the project or "Cessation of work" on the project has occurred.
"Completion" of the project occurs typically when the entire project is done, not just when your own work is done or ceased.
When the owner moves in or accepts the work, or when a Final Inspection or Certificate of Occupancy is received, may often mean that "completion" has occurred.
Cessation of Work for 60 days can also be deemed "completion".
"Cessation of Work" occurs when all work by all contractors and subcontractors has stopped for a continuous, uninterrupted period of 60 days.
Mechanics Liens usually must be recorded by a "subcontractor" within 90 days of "completion" or "cessation of work". A general contractor who has a direct contract with the owner usually also must record within 90 days of completion or of cessation of labor.
Do not wait until the last day to record your lien, as when " completion " or " cessation of work " have occurred may often be unclear or disputed, and you could forever lose your mechanics lien rights if you are mistaken or delay too long.
Step 4: Determine if the Owner has Recorded a " Notice of Completion " or a " Notice of Cessation".
The owner can shorten the above 90 day deadlines for you to record a Mechanics Lien by 30 or 60 days by recording "Notice of Completion" or "Notice of Cessation" with the County Recorder within 10 days of when those events occurred.
If you served a Preliminary Notice, the Owner is required to send you a Notice within 10 days that these have been recorded. Otherwise you will head to check frequently with the County Recorder.
Warning: If the job has stopped or is near completion, record your Mechanics Lien even if the owner has promised to pay you, as this will protect your rights best and avoid disputes over whether your Mechanics Lien was timely recorded. Such disputes can be costly and even fatal to your lien rights and ability to get paid.
Step 5: Sue to Enforce your Mechanics Lien.
Mechanics liens expire unless you file a lawsuit to enforce your Lien within 90 days of when the lien was recorded.
Just recording a lien does not get you paid, if you do not sue to collect on it in 90 days.
And if you allow the lien to expire after 90 days without suing on it, the Owner can file in Court a Petition to Release the Property from the Lien, and you may be liable for paying the owners attorney fees and costs if you do not record a release of your expired Mechanics Lien.
If the above deadlines for recording a new lien have not yet expired, you might still be able to record a new Mechanics Lien even if your prior lien has expired or been released, but do not keep recording invalid liens, as this could subject you to liability or subject you to discipline from the Contractors State License Board.
Once you file suit on the Mechanics Lien, the case may proceed to mediation, Arbitration or even settlement, and could be joined with other suits of other contractors, subcontractors, or material suppliers on the same job.
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NB. The above is not legal advice and you may not rely on it. Please consult a competent construction lawyer for legal advice regarding your specific situation, as each person's situation is unique and the facts of each particular situation may affect or change the legal requirements and outcome of your case. Also, laws frequently are changed by subsequent Legislation or are affected by new Court decisions. For legal questions on Mechanics Liens and other Construction Law issues on Private and Public construction jobs, please call George Wolff at (415)788-1881, x 222, or Contact Us via email. |