Mechanic's Liens in California for Homeowners

Your home in the Golden State is not merely a place to live, but also a valuable asset. You might wish to sell or refinance it at some point. Unfortunately, mechanic's liens placed on the title your property can impede these efforts and diminish the value of your home. Liens are essentially clouds on your 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 says 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 even before going to court, they can secure their financial interests by filing a lien.

What exactly is a mechanic's lien, and what can you do if one is placed on your California home?

What Is a Mechanic's Lien Under California Law?

As a California homeowner, you have hopefully never encountered a mechanic's lien; and might not have heard of them at all.

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 might 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, imagine that the electrician who said you never paid her files a $5,000 mechanic's lien with the Los Angeles county clerk. This essentially means that anyone who buys your property would do so subject to owing the contractor that $5,000. You'll have a tough time selling or refinancing the property, until you either pay off the lien or lower the price by $5,000.

Contractors therefore use liens as a means of incentivizing property owners like you to settle with them.

Now that you have a basic understanding of what liens are and what they do, you can consider how to fight them.

Importance of Negotiating With Your California Contractor

The best way to fight a lien is to avoid it altogether. You might 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, indicating that the relationship between you and your contractor has broken down.

If your contractor asserts that you owe an extra sum of money, do not just ignore the phone calls or invoices. While you might think that this behavior will convince your contractor to simply go away, realize that the contractor might view it as a sign of disrespect.

You and the contractor might 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 strategies. Rather than paying a lump sum, for instance, perhaps you could schedule payments over time. 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 dispute.

California Mechanic's Lien Laws

If a lien is placed on your property, it will be helpful to familiarize yourself with the statute that permits liens in California: 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:

Who Can File a Lien in California?

Any person or entity that has provided labor or materials to benefit property is entitled to file a lien. California Civil Code § 8400 specifically says that someone who works on improvements have a right to file a lien, including the direct contractor, subcontractor, material supplier, equipment lessor, laborer, or design professional (such as architects, engineers, or landscapers).

How Much Can Lienors File for in California?

According to California Civil Code § 8430, lienors can file a lien in either the amount unpaid under the contract or in the amount of any additional (uncompensated) work that they performed above and beyond the contract. Lienors cannot include consequential damages in their lien, such as lost profits, damages due to delay, or attorney's fees. They are largely limited to the value of the labor or materials that you contributed to the real property.

Procedures You Must Follow to Properly File a Lien in California

Under California's 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). If they fail to follow these procedures, the lien might fail.

Actions to Take When Faced With a Mechanic's Lien in California

There are several strategies to get a lien removed in California. The first, as mentioned, is to negotiate a resolution with your contractor.

Lien Bond

A second is to obtain what's known as a "lien bond," through a surety company. This 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.

Petition a Court

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, for example, 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.

Attack Legal Deficiencies

You can also attack legal deficiencies in the contractor's lien filing. For example, California is somewhat unusual in not letting would-be lienors 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). (See California Civil Code § 8200.) 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.

The notice must include a general description of the work done, an estimate of its total price, and a lengthy formal statement of the owner's and lienor's respective rights, using language spelled out in the lien law. If your notice didn't comply with the statutory rules, you've got grounds upon which to fight the lien.

Even after giving you this notice, lienors must meet another critical deadline: 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, which means that you might be able to defeat a lien it the contractor files late.

Keep track of each of these deadlines: 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.

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.