Home>Levelset Community>Legal Help>How to place a lien on purchase order contract

How to place a lien on purchase order contract

My name is James. our company has California CFL license and a security system company wants to borrow 10k for purchasing equipment for 60 days from us. The owner of the security company said, he will finish the whole project within 20 days and then around another 30 days later, he will receive the entire payment from the client and pay back our principal and interest. As the collateral, we can place a lien on this project or the purchase order contract, the owner of the security company said, the client needs a lien release document from us before he pay the money to them, so we can use this to make sure that they gonna pay all the money back on time as what we all agreed with. My questions are: we never do this kind of loan before, so is this method of finance landing legal and risk-free in California? Is this method call Mechanics Lien? Is it possible for our company to operate place and release lien through this website? What is the approximate cost? Thank you very much.

2 replies

Aug 29, 2019

A mechanics lien is an involuntary security interest in the property being worked on. So, mechanics lien rights don't have to be granted or allowed by anyone else. Instead, they arise automatically as a result of the work that's been performed or the materials that have been supplied. That means, unlike some other types of liens and securities, mechanics liens aren't actually a method of financing. Instead, lien rights are more of a payment recovery tool for when a customer fails to pay for work performed. And, they might even be available in every job to make sure payment is made - depending on the work that's being done. But, if another party has offered some written or contractual security in the work in addition to these rights described above, that security would not be considered a mechanics lien. More on mechanics lien basics, here: What Is a Mechanics Lien? A Practical Definition. Lien rights in California California mechanics lien rights are available to those who perform work or supply materials for the permanent improvement of property. So, to determine whether a security system would permanently improve property, it's important to look to the nature of that system and its installation. Property is generally considered permanently improved when the "improvement" creates a permanent improvement or alteration to the property. Work that changes the nature of the property or at least attaches to that property to a serious degree will generally be considered "permanent." So, if a security system is very thoroughly ingrained in the property - with things like internal wiring, screwing into and attaching to walls, etc. that system may well be considered a permanent improvement. However, where the system could be easily removed from the property without a great undertaking or without damaging the property at all, then mechanics lien rights might not arise. Mechanics liens come with strict requirements and deadlines In order to utilize a mechanics lien, certain steps must be followed and deadlines must be adhered to. I'll explore some important highlights below. When hired by someone other than the owner of the project property, a supplier will need to send preliminary notice in order to preserve the right to lien. A preliminary notice is a simple, informative document and contains info about the project at hand. It must be sent within 20 days of first furnishing labor or materials, and it must go to the owner, the prime contractor (hired directly by the property owner), and the lender (if one is present on the project). More on these notices here: About California Preliminary 20-Day Notices. Finally, recall that mechanics liens have strict deadlines, so if you do have to make a claim, it must be made in a timely manner. However, California does have a pretty relaxed mechanics lien deadline. California mechanics liens must generally be filed within 90 days of the completion of the project (though the timeframe can be shortened). Youu can learn more about the California mechanics lien rules here: California Mechanics Lien Guide and FAQs I hope this information was helpful! If you're curious about how mechanics liens are actually filed, here's a great resource: How to File A California Mechanics Lien – Step By Step Guide

0 people found this helpful

Helpful

Mar 6, 2020

I wanted to follow-up and confirm you’ve been paid on this project matter. If I can further assist your company with any unpaid invoices, please feel free to call or email. My firm can collect for you even when lien rights have expired or were never pursued. Mike Ross Miller, Ross & Goldman mross@mrgpartners.com (512)275-6412 Direct https://www.mrgpartners.com/levelset

0 people found this helpful

Helpful