California Mechanics Liens: A Guide for Private Work Contractors
What is a Mechanics Lien?
A remedy for contractors who were not paid for their work on a private works project.
A mechanics lien is an involuntary encumbrance against the real property on which the claimant/contractor has provided labor, service, equipment, or material for the value of the work or items provided or the contract price, whichever is less. California Civil Code §8430.
A mechanics lien claimant enforces its rights by the timely recordation of the lien on real property benefited by the claimant, followed by the filing of a suit to foreclose the lien within 90 days after recordation. California Civil Code §8460.
On a successful suit, the property will be sold to pay the claimant for the labor, service, or equipment provided.
Preliminary Lien Notice
A 20-day preliminary notice is a prerequisite to the enforcement of both mechanics lien and stop payment notice rights. California Civil Code §8410.
The legislature imposed the preliminary notice requirement to alert owners, contractors, and lenders to the potential of secured claims arising from contracts to which they were not parties and of which they would otherwise have no knowledge.
The contractor must serve a preliminary notice on the appropriate owner, contractor, and lender within 20 days after furnishing the labor, services, equipment, or material.
Two categories of claimants contributing to a private work of improvement must serve a 20-day preliminary notice under California Civil Code §8200 as a prerequisite to enforcing mechanics lien, stop payment notice, or payment bond rights:
A claimant that has a direct contract with the owner or reputed owner is required to serve a preliminary notice only on the construction lender or reputed construction lender (California Civil Code §8200(e)(2); see Brewer Corp. v Point Ctr. Fin. (2014) 223 CA4th 831); and
All others furnishing labor, service, equipment, or material for the project (i.e., those not under direct contract with the owner and not exempt; see §3.19) must serve a preliminary notice on the owner or reputed owner, the direct contractor or reputed direct contractor, and any construction lender or reputed construction lender (California Civil Code §8200(a)).
Service of a 20-day preliminary notice is a necessary prerequisite to the validity of any mechanics lien or stop payment notice. California Civil Code §8200. In the case of a payment bond, failure to serve either a preliminary notice or a statutory written notice to the surety and the bond principal under California Civil Code §8612 ( will invalidate a payment bond claim. Whether a court will enforce these claims depends on whether the claimant meets all requirements of California Civil Code §8200 or §8612 in giving the notice. Disputes usually focus on
Whether all necessary parties were served;
Whether the form and content of the notice met statutory requirements;
Whether the notice was properly served.
A prevailing practice in the construction industry is for a subcontractor or supplier to send out a preliminary notice immediately after entering into a contract, receiving an order, or signing a purchase order.
Who Can Record a Mechanics Lien?
Under California Civil Code §8400, a person that provides work (as defined in California Civil Code §8048) authorized for a work of improvement, including, but not limited to, the following persons, has the right to record and foreclose on a mechanics lien:
Direct contractor;
Subcontractor;
Material supplier;
Equipment lessor;
Laborer; and
Design professional.
Deadline to Record a Mechanics Lien
For direct contractors aka those who contracted directly with the property owner, the lien must be filed at the earlier of:
• 90 days after completion of the work of improvement; or,
• 60 days after the owner records a Notice of Completion or Cessation
For contractors hired by someone other than the owner, the lien must be filed at the earlier of:
• 90 days after completion of the work of improvement; or,
• 30 days after the owner records a Notice of Completion or Cessation.
What Damages to Put on the Mechanics Lien
In California, the mechanics lien amount 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.
Timeline to Foreclose on the Recorded Mechanics Lien
A mechanic's lien must be enforced within 90 days from the date it was recorded. If no action is taken to enforce the lien within this 90-day period, the lien will expire. California civil code §8460. A claimant may be liable for reasonable attorney fees for failing to voluntarily release a stale lien. See California civil code §8488
If a mechanic's lien in California is bonded off, this effectively extends the enforcement period. Once bonded off, the claimant has six months to enforce the lien.
Questions?
If you have any questions or need help with your private works payment dispute, please do not hesitate to reach out to DM Law!
