Home>Levelset Community>Legal Help>In California, if a contractor engages in a time and materials project with a commercial owner and there is no set price, would a mechanics lien still be a protection for the contractor and therefore a preliminary notice still be required? Would you use an estimated value for the T&M job to establish the preliminary notice?

In California, if a contractor engages in a time and materials project with a commercial owner and there is no set price, would a mechanics lien still be a protection for the contractor and therefore a preliminary notice still be required? Would you use an estimated value for the T&M job to establish the preliminary notice?

We are in California, and engaged in a time and materials project with a commercial owner and there is no set price. We have an internal debate as to whether a mechanics lien can be filed since there is no set "contract price". My thought is that since there is value being added to the property, the owner shouldn't be able to avoid the contractor's mechanics lien protection, just because the contract was in T&M form. If the contractor can still file a mechanics lien for T&M work, is a preliminary notice still be required? Would you use an estimated value for the T&M job to establish the preliminary notice?

1 reply

Oct 15, 2018

That's a great question. First, in California, a party who has directly contracted with the owner will only need to send notice to the lender if one is present on the project. Next - let's look at the right to lien. Under § 8400 of the California Civil Code, if a party "provides work authorized for a work of improvement" will have a lien right. This authorization does not need to be made via a strict contract - rather, under § 8404, "Work is authorized for a work of improvement or for a site improvement in any of the following circumstances: (a) It is provided at the request of or agreed to by the owner." or "(b) It is provided or authorized by a direct contractor, subcontractor, architect, project manager, or other person having charge of all or part of the work of improvement or site improvement." Thus, even when a project is on a time and materials basis, the right to lien will exist in California. Regardless of the type of contract, to preserve the right to lien, a claimant must first send preliminary notice as required by statute. While a time and materials contract may have an uncertain final amount, the California Civil Code does not call for a strict contract amount for preliminary notices. Instead, § 8202 (2) builds in some flexibility, calling for "An estimate of the total price of the work provided and to be provided." Again, that may be hard to come up with if the length and scope of the agreement is truly indeterminable. But, often, the noticing party will have some idea of what the final price may look like. If there is a guaranteed maximum price in the time and materials contract, that could potentially suffice as such an estimate. But, at the end of the day, as long as an estimate is made in good faith, it would likely suffice to fulfill the California Civil Code's requirement for "An estimate of the total price of the work provided and to be provided."

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