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In what state (if any) is a property owner able to file a lien on their own property?

CaliforniaLien WaiversRight to Lien

I have a loan on a residential property that I am improving. The renovation loan is a first mortgage that is secured by the property with disbursements as I make improvements that the lender will release. The lender is asking me the borrower/owner to sign lien waivers. I am not aware that I can even file a lien on my open property, and second, how can I waive my rights if I am only waiving them against myself? This is for ALL states.

2 replies

Jun 24, 2020
While I won't review all 50 states' lien laws here, I'd be surprised if any state explicitly stated that owners will have lien rights against their own property. With that being said, in a small minority of states, owner-builders are specifically identified in the lien statute and might be included under the definition of a "contractor" who's entitled to lien. But that'd be an exception to the rule, and it'd probably be an unintended consequence. On top of that, it doesn't really make any sense for an owner to file a lien against their own property. Mechanics lien rights are available for those who have performed work but gone unpaid for their work. But, when you were never expecting payment, then lien rights wouldn't seem to be appropriate. What's more - mechanics liens generally have a short shelf life. For example: a California mechanics lien must be enforced within 90 days of when it's filed. And, if that deadline comes and goes without a lien enforcement action, the lien becomes invalid and unenforceable (though, an Extension of Credit might buy a little extra time). So, using a mechanics lien in an attempt to secure your investment wouldn't be a very optimal tool. Recording some other interest in the property might be more appropriate. But, if you're the record owner of the property, that may not be necessary. Upon a sale, you'll still be entitled to all funds in excess of other liens on the property (like the mortgage and construction loan).

Why would a lender request lien waivers from the owner?

As for why the lender is requesting mechanics lien waivers - it's probably a part of their standard draw process. Typically, when construction loans are dolled out, the parties performing work - like the GC, subs, suppliers, etc. - will have to submit waivers before funds are released. When an owner is doing the work themselves, the lender may decide to play things on the safe side and treat that owner as if they're the GC. While an owner generally won't have lien rights against their own property, signing a lien waiver to keep the loan process moving might be a good idea. Still - if you're uncomfortable, discussing the matter with a California construction lawyer might provide some additional clarity. You can find one here: Find a California Construction Lawyer.
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Sep 24, 2022
Makes sense to me. Since the bank owns your house - technically, until you repay them - yet you are putting in time and labor into the property, you are adding a bigger investment into the property than normal home buyers who simply put a down payment for a loan they need to repay. You have what is termed sweat equity into the property, alongside of your down payment and monthly payments. You’re investing sweat equity for the desired outcome… should the desired outcome not end the way it’s planned… say you become disabled, due to no fault of your own, you could technically sue for the ‘sweat equity’ that you put into the property. Your investment has been improved upon due to your time and labor and your mortgage lender should not profit from that, you should be compensated for your time and labor. So it’s not a lien against your own property… it’s waiving the right to be compensated for your own time and labor into a property that is still owned by the lender and may very well end up being sold for an even bigger profit thanks to you, your time and labor, if ownership should return to lender for any unforeseeable reason(s).
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