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Real Estate and Business Law

Mechanics Liens

Mechanics Liens

What is a Mechanics’ Lien?

Contrary to what it sounds like, a mechanic’s lien is not related to your car or an auto mechanic in anyway. A mechanic’s lien is a hold on a property that is recorded by a person who has done some sort of work of improvement on your property, but has not been paid. The lien assures that when the property is sold, the mechanics’ lien holder will get paid out of the proceeds. This also makes the property difficult to insure and clouds title, which creates an incentive for the owner or developer to pay the amount due under the lien.

Who Can Record a Mechanics?

Mechanic’s liens are usually filed by an unpaid contractor, subcontractor, laborer, or material supplier. Design professionals, including architects, professional engineers and land surveyors are treated differently before construction begins. The reason for treating design professionals differently is that design professionals often do work on a proposed project that is never built or developed, so there is no property to put a lien on. However, once construction begins, design professionals have a right to record a lien, provided the design professional meet certain requirements and procedural hurdles required by the law.

Importantly, a mechanics’ lien, if properly recorded, will assure that regardless of the timing of your work on the project, you will have the same “priority” for payment as the very first contractor that worked on the project. Just as design professionals come into a project at the beginning, before construction, many subcontractors, laborers or material suppliers do not complete their work until the very end of the project. For example, carpet and blinds are often the last materials supplied and installed. Mechanics’ liens provide a tool for all unpaid contractors, laborers and suppliers to get paid regardless of when they completed their work on the project.

How to File a Mechanics’ Lien?

Filing a mechanic’s lien can be complicated. There are various timelines and notice requirements that must be met. The best practice for being sure that you get paid is to put procedures in place to assure that your accounting is up to date and accurate and that all critical deadlines are met. Every project is different, so while the laws may be the same, the deadlines may shift depending on how the project is being developed. For example, the date of “completion” for the project is critical because a mechanics’ lien must be recorded within 90 days of “completion.” Depending on how the project is being developed, the completion dates may vary which effects the deadline for filing the mechanics lien.

The most useful resource is the California State Contractors Board which provides updated forms and assistance in filing and perfecting a mechanics’ lien claim. In addition to these forms, contact an attorney to assure compliance with all legal requirements.

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