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Are we able to place a lien if the contract is breached and our contract has a clause of penalty of up to 30% of cancellation?

CaliforniaMechanics Lien

We signed a contract in the beginning of 2016 to build a house in the amount of $500K. Also, an additional contract for the grading. We were given a retainer towards grading in the amount of $100K. Client stopped the job in the middle of grading. To date we have a credit balance of approximately $43K. Please advise how to proceed with a lien.

1 reply

Jun 26, 2018

I'm sorry to hear about that. First, it's worth noting that California mechanics liens are 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 (minus payments already received). So, a California lien should not include any amounts that represent a cancellation fee, and a lien should only be filed for amounts owed and unpaid for work performed. As mentioned above, the amount of a lien should take into consideration amounts already received, so, if filed, a California mechanics lien should really represent the amount owed and unpaid for work performed minus payments already received. Assuming all requirements have been met, a claimant will have a few options once they've decided it's time to file a lien. First, a claimant can do it on their own, as set out in this Practical Guide to Filing a California Mechanics Lien. Next, a claimant can use a lien filing service - such as the zlien Document Navigator, to have the lien filed on their behalf. There are a number of options available online. Finally, a claimant can also utilize a lawyer to handle the lien filing, though this is often unnecessary since a lien filing does not constitute a lawsuit. Lastly, it's also worth noting that there are other options for recovering debt in construction without having to resort to a lien - such as a demand letter like a Notice of Intent to Lien. It's unwise to jeopardize a lien deadline, but if there's time, sending a document like a Notice of Intent to Lien can be an effective warning shot that leads to payment.

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