The mechanic’s lien process provides a powerful way for those involved in the construction industry to resolve payment problems on a project. However, you need to understand how the process works to protect your company's legal rights.
Benefits of Mechanic’s Liens
If your firm is struggling to collect payment, some of the benefits of filing a mechanic’s lien include:
- The lien encumbers the property. It will appear on a title search, so the property can’t be sold, refinanced, or otherwise transferred before the lien is addressed.
- The lien causes contracts to be breached. It’s common that construction contracts require a property to be free of liens. A mechanic’s lien creates a situation where the owner is automatically in breach of contract—putting pressure on them to resolve the issue as soon as possible.
- More parties become obligated to repay the debt. If you’re a supplier to a subcontractor, you’d normally be able to only request payment from the company you contracted with. However, the mechanic’s lien process lets your company bring many other parties to the table to collect the debt—including the general contractor and the property owner.
- It sets a firm deadline for payment. The construction industry is notorious for issues with slow payments. A mechanic’s lien forces prompt payment because the property owner knows any more delays create the risk of time-consuming and costly litigation.
How the Process Works
California Civil Code Section 8416 outlines the process for filing a mechanic’s lien. It requires your business to prepare a statement detailing the claim for payment, which must be served upon the property owner. The statement and proof of service must then be filed with the county recorder’s office in the county where the property is located. California law requires mechanic’s liens to be recorded 90 days from completion or abandonment of the project or 60 days from when the Notice of Completion or Notice of Abandonment/Cessation was filed.
When the lien has been filed, your business can resume attempts to collect the debt. The lien is a powerful negotiating tool and often provides the leverage needed to get the payment your company is owed. If your firm is paid, you must file a lien cancellation to remove the lien. If your firm is not paid, you have 90 days from the date the lien is filed to file a lawsuit to enforce the terms of the lien.
Stone LLP has extensive experience preparing and enforcing liens for construction contractors and suppliers throughout California. Contact our office today to learn more about how we can help ensure your business is paid for the labor or materials you’ve provided.