Filing a mechanics lien is often a stressful experience. Claimants must be careful to adhere to procedural rules and comb their documents for errors and typos or else the claim might be denied. These claimants are merely attempting to recover sums they have already earned, which makes the whole experience that much more frustrating. When filing a lien, costs are also a factor. In California, these costs will spike if Senate Bill 2, also known as the Building Homes and Jobs Act, is passed. Considering Louisiana and Indiana have also recently raised filing fees, this is beginning to feel like a trend.
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California Mechanics Liens and SB2
Senate Bill 2 (“SB2”) has passed the California Senate and is now in the Assembly. If SB2 ultimately becomes law, it will affect more than just California mechanics liens. The bill would tack on a $75 fee at the time of recording any real estate instrument, paper, or notice required or permitted by law. The $75 fee actually applies to each parcel of real property, so when multiple parcels are included in the same filing, the fee will multiply. However, the bill would cap the fee at $225 for a filing. Also, it’s important to add that the bill does not apply to recordings made in connection with the sale of real property.
What will the fees be used for?
The fees collected will support the construction of affordable housing. Here’s a breakdown of specific uses:
10% of the fund will be spent to address affordable homeownership/ rental housing opportunities for agricultural workers
20% of the fund will be spent for affordable owner-occupied workforce housing
The remaining 70% may be used on some combination of:
- development of affordable rental housing for extremely low to moderate-income households,
- affordable rental and ownership housing up to 20% above the area median income,
- matching funds,
- capital reserves for future housing developments,
- emergency shelters, transitional housing, and rapid rehousing,
- accessibility modifications,
- acquiring and rehabbing foreclosed or vacant homes,
- aiding homeownership opportunities (including, but not limited to, downpayment assistance),
- local and regional development grants,
- fiscal incentives or matching funds to local agencies approving new housing for low to moderate-income housing,
- costs of periodic audits.
Can the fee be included in a lien claim?
No! Well, sort of…
In California, you may not include the cost of filing a mechanics lien in the amount of the lien claim. However, when enforcing a California mechanics lien a party may recover costs.
California Civil Code article 3150 states:
In addition to any other costs allowed by law, the court in an action to foreclose a lien must also allow as costs the money paid for verifying and recording the lien, such costs to be allowed each claimant whose lien is established, whether he be plaintiff or defendant.
$75 may not seem like a lot of money, but considering the fee applies to each parcel for each filing, expenses could add up in a hurry. Regardless of the purpose, those filing non-sale real estate documents could see a pretty dramatic increase in the cost of filing documents. Those that succeed in enforcing their California mechanics liens would be able to recoup the extra costs, but increasing the burden for filing a lien, which is already very steep, will undoubtedly affect contractors, subs, and suppliers. If SB2 is passed, there will be that much more reason to avoid mistakes when filing a California mechanics lien.