Project with Multiple Properties

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Doing construction work for a project in more than one location can cause a lot of confusion when it comes to getting paid. Working in multiple locations is common, whether surrounding work on new residential developments, pursuant to some property management contract, or just delivering materials to a bunch of different and unrelated properties for a single contractor.

There are a few factors to consider regarding the ability to lien such projects, and like most issues regarding mechanics lien law, the answer can change from state to state.

Is It Actually More Than One Property?

One of the first things to consider is whether the work was actually on more than one property. If the project is a new development with a single owner, and the work was done prior to the subdivision of the property, the general rule would be that any lien claim would be asserted against the total pre-divided parcel. After all, prior to being subdivided, it’s still one property with one owner.

On the other hand, if the property has already been subdivided, or if there are multiple owners, or if there are multiple contracts under which the work was performed, the calculation is a bit trickier.

 

When It’s Clearly Multiple Properties

The general rule in circumstances in which there are actually multiple properties (with or without multiple owners) is that each distinct property may need a separate lien claim (and potentially an entirely separate lien process, i.e. preliminary notice, lien filing, lien service, foreclosure, etc.)

This makes sense because in a mechanics lien is a right against the property itself. An essential element of filing a mechanics lien is that the property owner must be made aware of it, and lumping a group of unrelated properties into a single lien and potential foreclosure proceeding is confusing. Multiple properties = multiple liens.

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Exceptions Do Exist

Since we’re talking about mechanics lien law, there are always going to be exceptions, and contrary to the general rule about multiple properties mentioned above, some states allow a single lien to be filed on multiple properties.

One example is California, where Civil Code § 8446 states that:

“A claimant may record one claim of lien on two or more works of improvement, subject to the following conditions:

(a) The works of improvement have or are reputed to have the same owner, or the work was contracted for by the same person for the works of improvement whether or not they have the same owner.

(b) The claimant in the claim of lien designates the amount due for each work of improvement. If the claimant contracted for a lump sum payment for work provided for the works of improvement and the contract does not segregate the amount due for each work of improvement separately, the claimant may estimate an equitable distribution of the amount due for each work of improvement based on the proportionate amount of work provided for each. If the claimant does not designate the amount due for each work of improvement, the lien is subordinate to other liens.

(c) If there is a single structure on real property of different owners, the claimant need not segregate the proportion of work provided for the portion of the structure situated on real property of each owner. In the lien enforcement action the court may, if it determines it equitable to do so, designate an equitable distribution of the lien among the real property of the owners.

(d) The lien does not extend beyond the amount designated as against other creditors having liens, by judgment, mortgage, or otherwise, on either the works of improvement or the real property on which the works of improvement are situated.”

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Wrapping It Up

So, if a project with multiple properties was ultimately contracted for by one party, it may be allowable to file one lien in certain circumstances and in certain states. Although, even in these situations, with the general requirement to partition the work between the different properties, it is really only a potential way to save filing costs, not to save on preparation efforts.

Also, county recorders routinely raise issues with such liens, despite the fact that they are allowed by statute. This is because liens are indexed by property description, and it often becomes a nightmare for the county recorder to get a multi-property lien properly recorded. Finally, the notice and service requirements are not modified, such that the property owner(s) must be provided notice/lien even if there are many owners and only one lien is being attempted to be filed.

Best Practice

The general best practice and safest measure would usually be to file a separate lien for each individual property on which work was performed. However, in certain states, that general rule may be avoided under certain circumstances, though as described above, a multi-property mechanics lien may be more trouble than it’s worth.

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Filing a Lien on a Project with Multiple Properties | Levelset
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