I have served a 20 Day Prelim notice and my customer is selling her home. How can I protect my rights before the home is actually sold. Thank You!
Apr 24, 2018
After a proper preliminary notice has been provided on a project, the subsequent sale of the property may not stop the ability to file a mechanics lien for the work performed. Generally, as long as as a lien claimant complies with the timing/deadline and other requirements for filing a mechanics lien, the new property owner will be on the hook for the amount due (through the encumbered property).
Since the lien is attached to the actual property itself, the property owners are kind of secondarily important (despite the fact that the owners or the GC are the ones who end up needing to pay the amount due).
Note, however, that while this is a general rule, there can be exceptions. Two of these exceptions are:
1) The liability of certain purchasers may be limited by statute; and
2) “Unpaid balance” liens work to bar claims against any third party purchaser.
In some states, the liability of certain purchasers is eliminated, or subject to different timing (or notice) requirements. And, states in which mechanics liens are limited to the unpaid balance due the GC from the owner (rather than the full price of the labor or material furnished, if different) limit the ability to recover from subsequent purchasers by application of the unpaid balance rule. If the lien could only be valid for amounts the property owner still hasn’t paid the GC – that amount is likely to be non-existent when the original property owner sells.
Subject to the above, the sale of the property is not necessarily a limiting factor for a potential mechanics lien claimant. And in many situations, the claimant may proceed with noticing and liening the property as they otherwise would have had the property remained in the hands of the original owner.
However, filing a lien on a property when the current owner isn't the party who owes the debt doesn't really seem too fair. Accordingly, it may be more palatable to file a lien quickly and prior to any sale occurring.
This has the added benefit of really putting the claimant in a good position for payment. Since a lien makes the sale process more difficult (since a purchaser usually doesn't want to assume the liability for a lien against the property and it should come up in any sufficient title search) "good" liens are generally paid at or prior to closing. Some counties in California take a long time to record liens, so it would make sense to act with some speed if a lien is desired prior to any potential sale occurring.