Home>Levelset Community>Legal Help>I was contacted by a escrow company and asked to fill out a payment demand letter and release my lien so they can close and I can get paid. Is it saft to do this, now that the escrow company is involved?

I was contacted by a escrow company and asked to fill out a payment demand letter and release my lien so they can close and I can get paid. Is it saft to do this, now that the escrow company is involved?

My lien just recorded for work I did on a project for an investor. Two days ago I received this call from the escrow company who is in process of refinancing the inventors loan on the property. Its a little odd because the owner was very adamant on not paying me. I think my timing was good because they had been in process of refinancing on the property. The lender is listed on the letter but the escrow company is working for the owner of the house. Can the escrow company get my to release the lien and not pay me? Thanks Mike

1 reply

Jan 31, 2019

This is a tricky situation, and determining the level of risk you find acceptable is a personal business decision.

It is generally not a best practice to release a lien prior to being paid (unless the lien is legally required to be released for other reasons). Once a lien is released, the benefits of the lien disappear along with it. The real power behind a mechanics lien is the ability to enforce the lien through foreclosing on the property - and, provided the lien is valid and enforceable - this right should continue even if the property is transferred. Note, however, that an action to enforce a California mechanics liens must be initiated within 90 days from the end of the project.

The likelihood of not being paid when there is an escrow company involved may be less than it would be if a lien was released purely on the promise of a property owner to pay - but it is not necessarily a guarantee. If the escrow company is holding money for the closing, remember that it's money for the closing, not money specifically earmarked for payment of a lien claim. While most people don't want to purchase a property that is subject to a lien, and it would be difficult to get title insurance or a mortgage if a lien is encumbering the property, a lien does no by itself make the property completely unable to be transferred.

It's generally best practice to release the lien claim immediately after payment is made. But, every lien claimant can make his/her own decision related to their own lien claims.

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