Home>Levelset Community>Legal Help>How do we get a Mechanic's Lien released from a company that is suspended from the CA SOS? The mechanic's lien must be released by the company that requested, but if the company doesn't exist, there would be no one to sign. Thanks
How do we get a Mechanic's Lien released from a company that is suspended from the CA SOS? The mechanic's lien must be released by the company that requested, but if the company doesn't exist, there would be no one to sign. Thanks
Client has a mechanic's lien on his property placed by a company that is suspended by the CA SOS. How do we get the mechanic's lien released?
Jul 9, 2019
Great question. When a mechanics lien has been filed, the fastest, easiest, and cheapest way to have that lien removed is certainly to have the lien claimant release it, themselves. Let's look at some interesting angles for getting a mechanics lien released when a business is suspended by the California Secretary of state, as well as some options beyond simply having the claimant release their own lien.
For one, when a California business has been suspended by the Secretary of State, that business cannot legally operate and cannot pursue collection of their debts. So, if a business has filed a lien while it's suspended, it should be apparent that the filed lien is invalid and unenforceable. That doesn't automatically mean the lien disappears, but it's an important undercurrent here.
Because a suspended business cannot legally operate, there's a fair question as to whether that business would be able to release a lien it has filed. However, it's worth noting that the contracts a suspended business enters into are voidable by the other party to the contract. Meaning, when someone contracts with a suspended business, they can later void the contract, if they want. So, conceivably, a suspended business could contract with a property owner to release a lien, and that release could be effective since the owner would not want to void that contract, themselves. Granted, it might be hard to convince a claimant to release their lien, and the claimant technically wouldn't be permitted to try and recover payment for the claim. Still, it's probably worth thinking about.
It's also worth noting that there are other ways to have a lien removed, other than a claimant releasing it themselves. These options typically aren't as cheap or easy as having them release their lien, but they can still be effective when necessary. Further, while a lien claimant might normally try and fight a challenge to their lien claim, it appears that they'd be defenseless if the claimant business has been suspended. Again - businesses suspended by the California Secretary of State cannot legally operate, and they generally cannot take legal action.
With that in mind, under § 8480-8488 of the California Civil Code, an owner can always petition the court for the release of a filed mechanics lien when there's a flaw with the lien claim. Or, even if there isn't a flaw with the claim, if the lien claim isn't enforced before the deadline (which is 90 days after the lien was filed), an owner can petition for its release. Seeking a judgment to have a lien released isn't always an efficient option - but in a situation where the claimant isn't able to defend against a lien challenge, this option could make a lot of sense. Regardless, when a claimant won't release their lien and there's some issue with the claim, trying to get a lien removed in this manner could be fruitful.
Finally, while it may be an expensive option, an owner can always bond off a filed mechanics lien under § 8424 of the California Civil Code. This won't make the claim disappear, but it will remove the claim from the property title - and any recovery action would have to be brought against the bond, rather than against the property title. However, keep in mind that a claimant will have 6 months from the time their lien is bonded off to bring their recovery action against the surety bond. So, effectively, this might extend their deadline to act. In a situation where a business has been suspended by the California Secretary of State, it'd probably be worth considering whether that business might be reinstated within that 6 month window. If so, bonding off a lien might not make an awful lot of sense.