As a homeowner in the Golden State, your home is not merely a place to live, but also a valuable asset. You may wish to sell or refinance it over the course of your life. Unfortunately, mechanic’s liens placed on your property can impede these efforts and diminish the value of your home. Liens are essentially clouds on your home title, usually filed by contractors or subcontractors who claim that they are owed money for repair or renovation work done on the property.
Imagine, for example, an electrician who claims that she fixed the lighting in your Los Angeles condo without receiving compensation from you, or a brick company that claims it laid bricks in your San Francisco driveway but was never paid the contract balance. These entities can potentially sue you for breach of contract. But they can also secure their financial interests without filing a formal lawsuit against you in California Superior Court, by filing a simple lien.
What exactly is a mechanic’s lien, and what can you do if one is placed on your California home?
As a California homeowner, you have hopefully never encountered a mechanic’s lien. These legal documents are somewhat obscure compared to regular lawsuits, and many homeowners have not heard of them at all.
To start, you may wish to know what a lien form actually looks like. A California mechanic’s lien is a short document, generally just a few pages long. You can easily find model firms on various law firm and bar association websites throughout California. A good model is available here.
In a nutshell, a lien is a document that gets publicly filed in the California county clerk’s office where the subject property is located. You may know that there are 58 counties in California; the contractor would file the lien in the county where your home is (not necessarily the county where his or her business is based). Once filed, the lien creates a situation where your home title is subject to the contractor’s stated financial interest in it.
To understand how a lien functions in practical terms, consider this example: You hire a plumbing company to install new pipes in your basement in your suburban home in San Diego. After the contractor finishes the work, the company tries to charge you $5,000 more than you had agreed in the original contract, or claims that you asked for additional work, when you did not.
You refuse to pay the additional sum. The contractor could then file a $5,000 mechanic’s lien with the local California county clerk. (San Diego is located in San Diego County). This essentially means that anyone who buys your property would buy it subject to owing the contractor that $5,000. This will make it difficult to sell or refinance the property. Contractors therefore use liens as a means of incentivizing property owners like you to settle with them.
Under the California statute, the person or entity filing the lien must include on the document the company’s name, the owner’s name, the location of the property, and the amount of money still due, among other pieces of information. The lienor must also describe the labor or material provided (in other words, how the contractor improved your property).
Now that you have a basic understanding of what liens are and what they do, you can consider how to fight them.
The best way to fight a lien is to avoid it altogether. You may be able to avoid the bother of having a mechanic’s lien filed on your property by engaging in a reasonable negotiation with your California contractor before the lien is filed. Liens are typically a sign of frustration that the relationship between you and your contractor has broken down. The contractor believes you are either ignoring payment requests or have no intention of entering into a good faith negotiation.
If your contractor asserts that he or she is owed an extra sum of money, do not just ignore the phone calls or invoices. While you might think that this “strong signal” will convince your contractor to simply go away, the contractor might view it as a sign of disrespect, prompting a lien or a lawsuit or both.
You and the contractor may have a good faith disagreement about whether certain work was part of the contract, or about the quality of that work. Rather than ignoring the issue, have a frank discussion about it, or consider going to mediation. In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your contractor to negotiate a fair settlement.
In both negotiation and mediation, you should be open to creative settlement strategies. Rather than paying a lump sum, for instance, perhaps you could schedule payments over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work. The possibilities depend on the facts of the situation.
Of course, there are legal remedies available to California homeowners to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the payment dispute with the contractor. This does not necessariy mean giving in to all of the contractor’s demands, but it does mean that you should keep in mind the costs of legal action and do your best to avoid it.
If a lien is placed on your property, it will be helpful to familiarize yourself with the statute that permits liens in California. Liens are governed by California Civil Code § 8000 et seq. Like with most states’ lien statutes, California’s lien laws are complex. They contain many rules and exceptions, depending on the type of property involved and the work performed. But there are some general important concepts to remember:
How can you remove a lien on your property once it’s filed? There are several strategies to get the lien removed in California. The first, as mentioned, is to negotiate a resolution with your contractor.
A second option is to obtain what’s known as a “lien bond,” through a surety company. The bond essentially guarantees payment to the contractor in the amount of the lien if the contractor is successful on the legal claims, but also removes the lien from your property record.
A third option is to petition a court (specifically, the California Superior Court serving your county) to remove the lien. Your grounds for removing the lien could include that the contractor never did the work that the lien claims, or that the work was already compensated. This would require you to present evidence in support of your allegations, possibly through expert testimony.
You can also attack legal deficiencies in the contractor’s lien filing. The most legal common deficiency for California liens involves the strict deadlines for filing. California is somewhat unusual in that would-be lienors cannot simply file a lien out of nowhere. They must first serve a formal “notice” to the owner (you!), or your general contractor (if you have one, and a sub is filing the lien). The public policy purpose is to advise owners of the fact that someone is claiming to be owed money on a construction project, creating an opportunity to work out the dispute.
According to California Civil Code § 8200, “before recording a lien claim… a claimant shall give preliminary notice to the following persons: (1) The owner or reputed owner; (2) The direct contractor or reputed direct contractor to which the claimant provides work, either directly or through one or more subcontractors; (3) The construction lender or reputed construction lender, if any.” The notice must include “(1) A general description of the work… provided; (2) An estimate of the total price of the work provided…” as well as a lengthy formal statement of the owner’s and lienor’s respective rights, which is spelled out in the lien law.
Even after this Notice is served, there is still another critical deadline that lienors must meet: Under California Civil Code § 8412, the lienor must file their lien within 90 days after completion of the work or delivery of the materials for it to be valid. Three months is a relatively short time period, which means that you might be able to defeat a lien on the basis of this limitations period.
Keep each of these deadlines in mind; they are a homeowner’s friend. Often, busy contractors will sit on their rights for too long, in which case California law will no longer permit their liens to be sustained against your property.
Liens are unfortunately a possible result of California home improvement projects. Homeowners should not be overly surprised if they face a lien filed on their property (or at least the threat of such a filing) during or after a construction project.
Fortunately, few contractors in the Golden State wish to actually initiate litigation against a homeowner in order to foreclose on a lien. Litigation is time-consuming and expensive. Most contractors would prefer to settle with you quickly for a reasonable sum. Keep this leverage in mind as you explore the legal options available to you under California law.
Finally, remember that liens and the laws surrounding them in California can be highly technical. Retaining an attorney with experience in construction or real estate law might be worth your expense, depending on the amount of money in dispute. For more on retaining a qualified lawyer to suit your situation, check out Guide to Finding an Excellent Attorney.