For construction companies and contractors, the hardest part of a job can, unfortunately, sometimes be collecting payment. When a customer refuses to pay or introduces another dispute, contractors often need to take legal action to ensure they are paid for completed work.
A mechanics lien is a legal claim which can be placed upon a property to protect contractors, suppliers, and subcontractors. By placing a lien on a property, the contractor gains a security interest in the property, which can help the contractor receive payment in the event that a client does not pay according to the contract. This guide contains everything you need to know about a mechanics lien.
What Exactly Is a Mechanics Lien?
A mechanics lien is often placed by contractors, subcontractors, or suppliers who have completed work or provided supplies for a job but have not received payment. It is a means of protecting against unpaid invoices.
If you complete work—for example, construction on a home renovation—and the client doesn’t pay you, a mechanics lien is an effective means of seeking payment and ensuring the terms of your contract are respected. These liens can be applied to real estate and, less commonly, personal property such as vehicles or equipment.
If you choose to file a document in your county, the file will be attached to the property. This means that if payment isn’t made and the lien remains in place, there will be an unsettled debt on the property. If the house is put up for sale by the owners and a bid is accepted, the lien must be cleared before the owner receives payment for the property.
Who Can File a Mechanics Lien?
Direct contractors, subcontractors, laborers, suppliers, equipment lease companies, and any other professionals who are authorized to provide site work can file a mechanics lien if they are not paid for their work or supplies.
If a license is required to complete work, the individual must have the relevant license to proceed with the lien. A mechanics lien can be placed upon a property if the customer doesn’t pay their bill, but it’s also possible to file for a lien in cases where the client is not directly at fault. If a supplier has not been paid by a contractor for materials or equipment, for example, a lien can still be placed on the property.
Similarly, if the work is being paid for by an insurance company or another responsible party, a lien can still be placed on the property itself, and ultimately the property owner will be responsible for ensuring payment is completed.
Where to File
If you wish to file a mechanics lien, you must complete and submit documentation within the county where the project is located. Each county may have slightly different rules and regulations, so it’s critical to check with the recorder’s office before you proceed.
If you don’t follow the relevant guidelines, or if you get information like the dates or locations wrong, there could be significant delays and you could forfeit your rights to file a lien.
When to File
There are strict requirements linked to the time frames and steps for filing a mechanics lien. If deadlines are not respected, you may lose your right to file. There are specific deadlines in place for each phase of the process of filing for a lien, but these can vary depending on the state where you file.
California’s deadlines are as follows:
- Preliminary Notice: Subcontractors and suppliers must serve the property owner, and the direct contractor and lender, if relevant, a preliminary notice within 20 days of the first instance of providing labor or materials.
- Mechanics Lien: The deadline for filing a mechanics lien is 90 days from the completion of the project. This period changes to 30 days if a property owner or other applicable party files a notice of completion or cessation.
- Enforcement: After filing your lien, you have 90 days from the date of recording the claim to enforce it. It is possible to extend the deadline in cases where both the property owner and the claimant sign an Extension of Credit document. Enforcing a lien involves taking court action to foreclose on the property. But if the lien is satisfied, you must release or cancel the lien.
Failing to comply with deadlines can result in unsuccessful attempts to file a mechanics lien, so it’s crucial for contractors and subcontractors to be aware of the specific dates and phases involved in the process.
Enforcing a Lien
Because lien enforcement ultimately ends in foreclosure if it is successful, property owners usually want to avoid this action, and so lien enforcement is not often required; generally, the preliminary notice and placing the lien itself are enough to encourage the owner to pay.
However, when it is required, you must file a lawsuit to enforce the lien, with all the drafting, filing, and serving that goes along with it. At this point in the lien process, you will most likely need a construction law attorney to assist with filing the suit.
If you have concerns about missed or delayed payments, or you have questions about filing a mechanics lien, a construction law attorney can help you navigate the process with minimal hassle. An experienced attorney will understand the ins and outs of filing a lien.
At The Mellor Law Firm, our expert construction law attorney can undertake the leg work for you to free up time to focus on other projects and eliminate stress. Contact us today if you need assistance with filing or enforcing a mechanics lien or solving another construction dispute.