HOW TO FILE A CALIFORNIA MECHANICS LIEN (California Mechanics Lien and Notice Requirement Overview)
Mechanics liens are a crucial component of the construction payment ecosystem, and a powerful tool to make sure construction companies get paid what they deserve. However, the requirements surrounding mechanics liens and notices are complex and confusing. This guide sets out and simplifies the rules
Who Can File?The following parties are entitled to mechanics lien rights in California: direct contractors, subcontractors, material suppliers, equipment lessors, laborers, design professionals, and any person providing work authorized for a site improvement. For all parties, of course, it is required that the party provided work authorized for a work of improvement.
Construction managers are a special situation in California. A controversial appeals court decision in the state suggests that Construction Managers Probably Can File a Mechanics Lien in California...Even without a license, but recent legislation was advertised as reversing that. Our review of the case, however, suggests that the case for construction manager lien rights is even stronger after that legislation.
Lastly, California law requires contractors who are required to be licensed, to actually be licensed in order to file a valid mechanics lien.
PRELIMINARY NOTICE (20-Day)California law requires that a preliminary notice must be sent prior to recording a mechanics lien, giving stop payment notice, or asserting a claim against a payment bond as a prerequisite for validity. The failure to provide a preliminary notice to all required parties, and in compliance with the form and time requirements set forth is fatal to a lien in California. However, a laborer is not required to give preliminary notice, and a claimant with a direct contractual relationship with the owner of the property is only required to give preliminary notice to the construction lender, if any. Note that only one notice is required, even if the estimate or actual furnishing of labor/materials increases. While it may be a good idea to let people know the scope has changed, the law does not require an additional notice.
Who Must Receive the Notice?
In California, the preliminary notice must be given to the owner or reputed owner, the direct contractor, and the construction lender (if any).
Timing of Notice to Owner
The notice must be given no later than 20 days after the claimant has first furnished labor or materials to fully protect the lien claimant. A lien claimant who failed to provide a 20-day notice within 20 days of first providing labor or materials may provide the notice at a later date, but will only retain lien rights for materials and/or labor furnished within the 20 days preceding the late notice, and the labor and/or materials provided thereafter.
Content of Notice
The notice must include the name and address of the owner or reputed owner, general contractor, and construction lender (if any). The notice must also include a description of the site sufficient for identification, including the street address of the site, if any. Lastly, the name address and relationship to the claimant is required in the notice. If the claimant is the one sending notice, this must also include a general statement of the work provided, the hiring party's information, and a statement or estimate of the claimant's demand (after deducting all just credits and offsets).
How to Send the Notice
The Preliminary 20-day Notice shall be given by personal delivery, or registered or certified mail, express mail, or overnight delivery by an express service carrier. Return receipt requested is not required. Note that there are requirements in ? 8118 that describe what constitutes proof of sending/delivery by sufficient methods.
When is Notice Effective?
In California, while the preliminary notice must be sent within the 20-day notice period, actual delivery is not required within the period. The requirement is considered met if the notice properly sent within the period. It's important to keep and maintain proof that you properly mailed the California construction notice.
FILING A LIENContents of California Mechanics Lien
A claim of mechanics lien shall be a written statement, signed and verified by the claimant, containing:
1. A statement of the claimant's demand after deducting all just credits and offsets.
2. The name of the owner
3. A general statement of the kind of work furnished by the claimant
4. The name of the person by whom the claimant was employed or to whom the claimant furnished work.
5. A description of the site sufficient for identification.
6. The claimant's address.
7. A proof of service affidavit completed and signed by the person serving a copy of the claim of mechanics lien pursuant to subdivision (c). The affidavit shall show the date, place, and manner of service, and facts showing that the service was made in accordance with this section. The affidavit shall show the name and address of the person or persons upon whom the copy of the claim of mechanics lien was served, and, if appropriate, the title or capacity in which he or she was served.
8. The following statement, printed in at least 10-point boldface type. The letters of the last sentence shall be printed in uppercase type, excepting the Internet Web site address of the Contractors' State License Board, which shall be printed in lowercase type:
"NOTICE OF MECHANICS LIEN ATTENTION! Upon the recording of the enclosed MECHANICS LIEN with the county recorder's office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanics lien is recorded. The party identified in the enclosed mechanics lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanics lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanics lien is released. BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMATION ON MECHANICS LIENS GO TO THE CONTRACTORS' STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov."
The lien is limited to the reasonable value of the work provided by the claimant, or the price agreed to by the claimant and the person who contracted for the work (less payments already received). However, if you foreclose on the lien, the court may award the prevailing party the money paid for recording the lien, and attorney's fees, as costs.
To be valid, a mechanic's lien in California must only include a description of the site sufficient for identification.
DeadlinesDeadline to File
A direct contractor must record his Claim of Lien after completion of the direct contract, and before the earlier of either 90 days after completion of the work of improvement or 60 days after the owner records a Notice of Completion or Cessation.
A claimant other than a direct contractor must record his mechanics lien after the claimant ceases to provide work, and before the earlier of either 90 days after completion of the work of improvement or 30 days after the owner records a Notice of Completion or Cessation.
Deadline to Enforce Lien
California has a relatively short time in which to enforce a valid mechanics lien. In California, a mechanics lien must be enforced within 90 days from when it was recorded. If this 90-day period passes without an action being commenced to enforce the lien, the lien expires.
However, in California it is possible to extend the time in which an action to enforce must be commenced if the claimant and the owner agree to extend credit pursuant to California law. In this instance, the action to enforce must be commenced within 90 days after the expiration of the credit, but in no case more than 1 year after completion of the work of improvement.
Once an action to enforce the lien has been filed in the appropriate court, the complaint must be served on the defendant within 60 days of the filing. Further, proof of serving the summons and complaint on the defendant must be filed with the court within 60 days of the service on the defendant.
Special Rules for Condominiums>In California, you may file a lien against both an individual condominium (for work done to benefit that unit), and against each individual condominium in the association (for work done on common elements) provided you follow the legal requirements, and had the owner's consent to perform the work.
Notice of RecordingA copy of the Claim of Mechanics Lien (including the required Notice of Mechanics Lien wording) must be served on the owner or reputed owner of the property. Service may be accomplished by sending the lien by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing, postage prepaid, addressed to the owner or reputed owner at the owner's or reputed owner's residence or place of business address or at the address shown by the building permit on file with the authority issuing a building permit for the work. Service is complete at the time of mailing. Failure to comply with these service requirements will cause the lien to be unenforceable as a matter of law.
CONCLUSIONA mechanics lien can be a powerful tool to get paid on construction projects. But, the efficacy of the tool is dependent on the lien being valid. Following the necessary notice requirements and procedures from the beginning of the project, and following the lien filing rules in order to make sure the lien is valid greatly increase a lien's ability to result in payment.
A potential lien claimant should make sure to give careful attention to the requirements if filing themselves, utilize software products to manage lien rights as an intermediate step, or obtain assistance from attorneys if they need legal guidance or assistance.