Calculation of the Amount of and What Costs May be Included in a Mechanics Lien under California Laws
California's Constitution is unique in that provides that :
"Mechanics, persons furnishing materials, artisans, and laborers of every class, shall have a lien upon the property which they have bestowed labor or furnished material for the value of such labor done and material furnished; and the Legislature shall provide, by law, for the speedy and efficient enforcement of such liens." (Cal. Const., art. XIV, § 3.)
Basic Modular Facilities v. Ehsanipour (1999) 70 Cal. App. 4th 1480, 1483.
The amount recoverable under a mechanics' lien is thus fixed by statute.
Civil Code Section 8430 (previously section 3123) provides:
"(a) The liens provided for in this chapter shall be direct liens, and shall be for the reasonable value of the labor, services, equipment, or materials furnished or for the price agreed upon by the claimant and the person with whom he or she contracted, whichever is less. The lien shall not be limited in amount by the price stated in the contract as defined in Section 3088, except as provided in Sections 3235 and 3236 and in subdivision (c) of this section. (b) This section does not preclude the claimant from including in the lien any amount due for labor, services, equipment, or materials furnished based on a written modification of the contract or as a result of the rescission, abandonment, or breach of the contract. However, in the event of rescission, abandonment, or breach of contract, the amount of the lien may not exceed the reasonable value of the labor, services, equipment, and materials furnished by the claimant."
The amount of a contractor’s lien is thus usually equal to the unpaid balance of the contract price, where there is a direct contract between the parties. Bokus v. Bohig (1916) 173 Cal. 687, 690 (predecessor statute); Civil Code § 8430.
But where the owner ordered and the contractor performed work in excess of that described in the original agreement of the parties, under change orders or even verbal extra work orders the contractor may recover on its lien the cost or value of that extra work. Nuttman v. Chais (1950) 101 Cal.App.2d 476, 478
Also, where a contractor furnishes work at the request of owner but not pursuant to a written contract, the contractor may have a lien for the reasonable value of the services rendered. Benson Elec. Co. Hale Bros. Assoc. (1966) 246 Cal.App.2d 686, 693-694.
Where a contract and the evidence permit, a contractor or subcontractor may recover on their mechanics lien the actual costs incurred for labor and materials on the job as well as overhead at 15 percent, and a contractors fee of an additional 10 percent. Cunningham v. Weaver (1955) 130 Cal.App.2d 787, 788-789.
Prejudgment interest from the date the lien is recorded may also be included in a mechanics lien. Vowels v. Witt (1957) 149 Cal.App.2d 257, 264-265.
However, it is not yet clear whether statutory late payment penalties on progress payments or retention payments - such as those in Civil Code §§ 3260 or 3260.1 or Bus. & Prof. Code § 7108.5, which are typically imposed “in lieu of interest” - may be included in a Mechanics Lien.
“The use of the disjunctive ‘or’ in section 3123, subdivision (b) permits a claimant to include in the lien an amount for the reasonable value of the labor, services, equipment or materials furnished based on the owner's breach of contract, even if based on oral modifications to the contract.” (Emphasis added)
Basic Modular Facilities v. Ehsanipour, supra, 70 Cal. App. 4th at 1485.
Demobilization costs on a terminated contract apparently may also be included in a lien. Braun v. Agri-Systems, 2005 U.S. Dist. LEXIS 37604 (E.D. Cal. Dec. 8, 2005)
In some cases, a filing or recording of the construction contract by the property owner may limit the contractor’s lien amount to amounts owed under the prime contract.
Civil Code section 8430 does not permit a lien for delay damages, whether or not the contract describes them as extra work.
Nor may lost profits on a terminated contract be included in a Mechanics Lien in California.
Likewise attorneys fees or costs of a lawsuit or arbitration may not be included in a Mechanics Lien
The function of the mechanic's lien is to secure reimbursement for services and materials actually contributed to a construction site, not to facilitate recovery of consequential damages or to provide a claimant with leverage for imposing the claimant's view of who caused the breakdown in the contract.
Under Civil Code § 8422 (previously § 3118) when a contractor wilfully or fraudulently includes in its Mechanics Lien sums for labor or materials not furnished to the property, the Court or arbitrator may order the lien forfeited in its entirety.
Also, where a contractor records an excessive mechanics lien, under some limited circumstances the property owner may be able to obtain a reduction in the amount of the Mechanics Lien by the Superior Court or by an arbitrator (if the parties have agreed to an arbitration), prior to entry of a final judgment or arbitration award in the case.
Where the parties have agreed to a broad type of arbitration proceeding, the arbitrator(s) determine the amounts actually owed on the lien, and then the Court can order foreclosure of the property pursuant to the Mechanics Lien based on the findings of the arbitrator in the arbitration award. (See our related article on this topic on this Website, or at www.wolfflaw.com)
Where the property owner has recorded a Mechanics Lien Release Bond, a lien action in Court then proceeds against the surety on the bond, and not against the property or the property owner.
However breach of contract and other claims may still be brought against the property owner or general contractor.
N.B. This article DOES NOT constitute legal advice or create an attorney/client relationship with the reader, and YOU MAY NOT rely on it without retaining a competent California Construction lawyer to consult regarding your particular situation.
Facts and contracts vary greatly, and the law is constantly changing and evolving.
The California Mechanics Lien Law has been extensively revised effective July 1, 2012, and this articles DOES NOT discuss those changes, which may affect the accuracy of statements made herein.
For further information on the subject of this article or for legal questions on contractor, subcontractor, or materialman’s liens, stop notices, or bond claims or other questions on private construction contracts, issues, defects or disputes and litigation and on the law applicable to your unique contract, facts and circumstances, please call us at (415)788-1881, x 222, or Contact Us via email, or see www.wolfflaw.com.