Tagged: Mechanics Lien
We have several big jobs that haven’t paid us in over 90 days. GCs keep saying they haven’t received a payment from the owner. How do we file a lien in CA? What do we need? And what does it mean for us as a Subcontractor to file liens, does it look bad on us? We’ve never done this before.
These are great questions, and I’m sorry to hear that you’re having to scratch and claw for payment here. Let’s take a look at: (1) recovery via the mere threat or warning of lien, (2) lien requirements/how to file a lien in California, and then (3) the stigma surrounding lien claims.
First, it’s worth mentioning that before proceeding with a mechanics lien, there’s a cheaper and less combative option that many claimants use to speed up payment. By sending a warning like a Notice of Intent to Lien, a claimant can let their customer and the property owner know that they’re serious about getting paid, and that they’ll file a lien if payment doesn’t come soon. Because a mechanics lien is such a drastic remedy, property owners and contractors will generally want to resolve any issues before it comes down to a lien filing – and the owner’s inclusion in the matter can help to either make sure they release funds, or help to put pressure on the contractor to make payment. More on that idea here: What Is a Notice of Intent to Lien and Should You Send One?
As for how to file a California lien…
That’s a question we get pretty often here, and Levelset has a great article on that: How to File a California Mechanics Lien. Still, let’s cover some basic principles here like deadlines, where the lien is filed, and how exactly a lien is placed for filing. For a deeper dive on lien requirements, this resource has great information: California Lien and Notice Overview, FAQs, and Statutes.
Anyway – in California, a lien claimant must file their lien within 90 days of their last furnishing date on the project. That is, they’ll have 90 days from the last date where they contributed labor and/or materials to the project pursuant to their contract (which is shortened if a Notice of Completion is filed). This deadline is strict – so it’s important to keep an eye on it. There are certain form requirements and information that must appear on a mechanics lien – both of which are further detailed in the “How to File a California Mechanics Lien” article linked above. Once the lien form is properly filled out, it must be filed with the county recorder in the county where the work was performed. There’s a fee for filing, so it’s a good idea to get in touch with that county recorder’s office to determine what fees will apply so you can get it right the first time. Documents can be mailed in for recording, along with the appropriate fee, or they can be brought in person for recording. Obviously, when mailing, it’s more important to nail down the filing fee beforehand.
Finally, recall that the work is not done once a lien is filed. a copy of the claim of lien must be served on the property owner. This can be done by registered or certified mail, by first class mail with a certificate of mailing (postage prepaid), and by personal service (with proof of service). If service is mailed, it is considered complete at the time of mailing.
Lastly, let’s look at some implications of filing a lien claim..
Obviously, no one wants to file a lien claim, and no owner or contractor wants a lien filed on their project. So, because no one likes liens, it’s generally worthwhile to try and collaborate and communicate before things get to a place where a lien claim becomes necessary. Unfortunately, some payment disputes persist regardless of a subcontractor’s best efforts. In those cases, it’s generally helpful to try and discuss the matter with the customer to get to the bottom of the payment issue and to see what might be done about it. Letting them know that the payment issue is impacting your business might help convince them to work with you to smooth things out. And, if that doesn’t work, a document like the Notice of Intent to Lien discussed above will provide one last chance to make payment – and, while contractors still won’t like the idea that a lien might be filed, they’ll generally want to know beforehand if a lien is coming. So, by offering one more chance to make payment, a claimant can help soften the impact of a lien filing or help their customer avoid one altogether.
If push comes to shove and a lien gets filed, it shouldn’t be a black eye for a subcontractor as long as the payment dispute is legitimate and the subcontractor has done their part in working with a contractor to resolve the issue. It’s unfortunate, but liens happen. Most construction businesses understand how things go awry, and as long as no other actions were taken that could serve as a bad look for the lien claimant, the mere filing of a lien shouldn’t be damaging for a subcontractor’s reputation. Further, if that sub can show prospective customers exactly what happened, and/or exactly what their mechanics lien policy is beforehand, it will be easier to calm nerves of anyone who might be worried that the sub has filed a lien before.
Obviously, every business is different and everyone will respond to a lien filing differently. Some contractors might care that a sub has previously filed liens, and some might not. But, if there’s a sound and reasonable explanation for why a lien had to be filed in that instance, most people are reasonable. Still – filing a lien isn’t a decision to be taken very lightly, and it should generally be reserved as a last-ditch effort when payment is obviously not coming from a customer. Because the lien deadline is 90 days from a claimant’s last furnishing date, this generally provides some time to resolve issues before they snowball out of control and before a lien becomes necessary to reel things back in.
Here are two more articles that I think might provide some additional insight here:
(1) Are There Any Risks to Filing a Mechanics Lien?
(2) Will Filing a Mechanics Lien Ruin Your Business Relationships?