Mechanic's Liens - How to Get Paid When You Work on Another's Property and How to Defend Yourself from Such Actions

Introduction:
A mechanics lien is a hold against a property that essentially holds your property hostage. Essentially, if the owner of a property does not pay someone for the work done on the property, the person who is owed money can place a hold on the property and subsequently sell the property through foreclosure. Persons allowed to use this remedy can be an unpaid contractor, subcontractor or supplier. I have represented both property owners and contractors in mechanics liens and know that it can be a difficult process. However, if you are to understand the basic concepts enforcing and defending them are very easy. See the following question and answer for what happens to property owners.

Question:
Dear Attorney Cheng, I am a property owner in San Gabriel. About two years ago, I paid someone $5000.00 to pave a new driveway. He hired someone else to get it done. Suddenly, he disappeared and when I recently tried to refinance my home I was denied because the bank said I have a lien on the property. I told the subcontractor that I paid the person $5000.00 and it was not my fault that he did not pay him. The subcontractor told me that he did not care and now wants me to pay him $25,000.00 to release my property. I don’t have $25,000.00! That is the reason why I am getting the loan. What do I do? This is completely unfair. Charles – San Gabriel

Answer:
Charles, your issue is very real for many people. The purpose of a mechanics lien is to prevent a property owner from benefiting wrongfully of those that improve his or her property. You see these types of laws in other areas. For instance, one cannot keep a house if they do not pay the mortgage. A car buyer cannot keep a car they do not pay for. One cannot breach a contract and they require someone else to perform on it.

Proper Licensure:
The first issue you must look at has nothing to do with mechanics liens. It is actually licensure. Many subcontractors are actually unlicensed. This can be a big benefit to those that have a mechanics lien on their property. Under the Business and Professions Code it states that regardless of how unfair it is, an unlicensed contractor is barred from seeking compensation for unlicensed work. In other words, no matter how unfair it is for the subcontractor, the lien placed on your property is potentially invalid should it be done by an unlicensed contractor.

Strict Statutory Compliance or Invalid Lien:
Once you find out that the subcontractor is properly licensed the next issue is to understand that a mechanics lien requires strict statutory compliance or it is invalid. In California, although it seems like a mechanics lien is easy to get, in fact, there is a policy in California against creating a cloud on someone else’s title. What that means is that although California does not want anyone to get free work, California actually discourages people from affecting other’s property. The procedure of a mechanics lien is: 1) 20 Day Notice requirement; 2) 90 Day time limit to file a mechanics unless shortened by the property owner by a Notice of Completion; and 3) 90 Day Time Limit to Foreclose on the Lien.

20 Day Notice and the 90-90 Rule:
A subcontractor that wants to assert a Mechanics Line must have previously served the owner, original contractor, and construction lender with a “Preliminary 20-Day notice.” Failure to properly serve a 20 Day Notice notifying of what work or supplies has been done renders any mechanics lien invalid. If you have been served with a 20 day notice the next deadline that must be strictly complied with is what our office terms the 90-90 rule. The 90-90 rule means that you only have 90 days from the date of completion of the project to file a mechanics lien against the property.

Once the mechanics lien has been filed you only have 90 days from that period to foreclose on the property.

Exceptions to the Above Rule:
There are several exceptions that are very important. One is that the property owner can cut the time for the first part of the 90-90 rule. If the owner files a Notice of Completion within 10 days the project is done it will shorten the time for a mechanics lien to less than 90 days. For original contractors it will shorten it to 60 days and subcontractors 30 days for a mechanics lien to be filed. If they file the mechanics lien after the 60 days (original contractors) and 30 days (subcontractors and material suppliers) the mechanics lien is invalid. Very rarely will a subcontractor or contractor notice if you have filed a Notice of Completion.

Failure to Foreclose:
Returning to the 90-90 Rule. Should the Contractor or Subcontractor fail to foreclose on your property the mechanics lien is invalid. However, you will need a court to wipe out the lien. If you fail to have the court erase the lien, the lien can then be re-filed and the clock starts all over again.

Conclusion:
Your case is fairly straight-forward. The lien was presumably filed two years ago. If someone foreclosed on your property you would be notified and you would not be living on your property. The lien is invalid because 90 days have lapsed since filing of the lien. Your first step is to get the court to erase the lien for you. Congratulations you will be able to get your loan and have your lien erased.

Categories: Business Law