Home>Levelset Community>Legal Help>Can we refile a lien if the GC stops paying us?

Can we refile a lien if the GC stops paying us?

CaliforniaMechanics LienRight to Lien

We have a lien on a hotel. The sub stopped paying us. We are the supplier. The GC has stepped in and stated he will pay us in 3 monthly installments however he wants us to remove the lien. He stated that if he defaults we can file another lien on the hotel. Is this correct?

1 reply

Apr 4, 2019
Great question, and it's good to be skeptical of payment promises after nonpayment has become a contentious issue. First, let's look at some factors that would affect the ability to file a second lien on a project. Then, I'll dive into some other relevant considerations. When a mechanics lien has been filed, it's common to receive a promise for payment in an effort to have the lien removed. However, for parties who have had to file a mechanics lien, it can be hard to trust in that promise. Once a lien has been filed then released, often, a claimant might be restricted from filing future liens. Two factors that may restrict the ability to file another lien after releasing the first filed lien are: (1) the deadline to file a mechanics lien; and (2) the language of the lien release. Looking to the deadline - mechanics lien deadlines are very strict. For California subs and suppliers who weren't hired directly by the owner, the deadline for filing a mechanics lien is either 90 days after completion of the project, or 30 days after the owner files a Notice of Completion or Cessation. So, in the event that a lien claimant released their already-filed mechanics lien, they would not be able to file another lien if the deadline to file a mechanics lien had passed. Secondly, even if the deadline to file a lien would not be in jeopardy, many mechanics lien releases include language stating things to the effect of "payment was made in full" or that all claims against the property are released. If that's the case, then if a claimant attempts to file a second mechanics lien after releasing a prior lien, then they might be barred from placing another claim against the property. Thus, in most cases, a lien claimant would be better off leaving their originally filed lien in place (so long as that lien is valid and enforceable) than they would be releasing their lien with the fallback option of filing another one. At the same time, bluntly refusing to cooperate with a contractor who's promised to make payment won't help anything, either. The objective of a lien is to get paid for work performed, not to be a pain in the rear. So what gives? One option, when faced with a promise for payment, might be to have the party making payment execute a personal guarantee. Having that party sign a document stating they must make payment according to a set-out schedule could provide some security to a lien claimant. Another option could be to utilize a promissory note that acts much in the same manner. This article should provide some helpful background on those options: Don’t Want to File a Mechanics Lien? Here Are 5 Other Options. Of course, leaving the mechanics lien as-filed until payment is made is always an option, too. This is especially true when a lien claimant is prepared to continue on with enforcing the filed lien claim (or can at least convince the other party that they're willing to enforce the lien). Because mechanics liens are such a powerful and drastic remedy, no owner or contractor wants to deal with fighting off a lien enforcement lawsuit. So, if a claimant can show that's ultimately where the path is headed if payment isn't made, they might be able to convince the other side to play ball and make payment. And with some leverage, a claimant may be able to set the payment terms to their liking. For more information on leveraging an already-filed mechanics lien into payment, this resource should be helpful: What is a Notice of Intent to Foreclose? Whatever option makes the most sense for your situation, there's one more consideration to keep in mind: the deadline to enforce the mechanics lien. In California, once a mechanics lien claim is filed, the party who filed the lien will have 90 days before the deadline to enforce that lien. That provides 90 days to try and compel payment, negotiate payment terms and schedules, or to prepare for the lien enforcement action. But, if a lien claim is filed and no lien enforcement action is filed before the deadline to do so, much of a lien claimant's leverage will be lost - and some other method of recovery might become necessary. So, when deciding how best to proceed after a lien has been filed, it's important to remember there's a clock ticking in the background. Generally, when a lien filing has taken place, if payment still isn't forthcoming, it's wise for a claimant to consult a local construction or real estate attorney to represent their interests. An attorney will be able to review the situation, negotiate on behalf of the claimant, and advise on a best course of action. For more background information about California mechanics lien laws, this resource should help: California Mechanics Lien & Notice Overview.
0 people found this helpful