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Is an unlicensed consultant able to file a mechanics lien on my HOA?

I live in CA and my HOA had contracted for a construction job with a contractor who had a high-ranked employee named "Mike" that signed the contract. The HOA had no idea that Mike was not an employee of the contractor. Over a year has passed and suddenly we are served with a notice to lien. Apparently, Mike and the contractor had entered their own agreement to complete the HOA project. The project is not yet complete, but Mike is threatening to put a lien on the HOA. There are indemnification provisions between the HOA and the contractor. Can't we just tell Mike to go after the contractor for the money? And how do we know how much work Mike deserves out of the money he's asking? Also, It doesn't seem reasonable if we hire a big company with lots of employees to require lien waivers every month. If you could help me out that would be great!

1 reply

Nov 29, 2018

I'm sorry to hear about your situation. There's a lot going on here, so let's try and tackle this one issue at a time. First, in California, if a party is performing work that requires licensure, they must be licensed in order to file a mechanics lien. In fact, if licensure is required but that license is not held, the party who has performed work may be open to pretty serious consequences. We discuss California licensure in depth here: Contractor’s License California – Understanding the Requirements. Next, it's worth noting that when someone has been hired by a general contractor, they could have a lien right against the property - regardless of whether the owner is actually aware of their presence. However, so that a lien does not pop up out of no where (in a situation such as this one), California requires that claimants who were not hired directly by the property owner send preliminary notice at the start of the job. Such a notice works to inform the owner that others are working on the job, and if payment isn't made, that the party sending notice could potentially file a lien claim. When that notice is required and not sent, a later-filed lien claim would very likely be deemed invalid (unless the lienor is merely a laborer). When a potential lien claimant has threatened a lien but has failed to follow the requirements to do so, notifying them that their lien filing may be invalid for failure to send notice could help fend off the claim in the first place. Further, it may also be worth questioning whether the consultant work performed was the type of work that could give rise to lien rights. Typically, mechanics lien rights are available to those who provide labor and/or materials for the improvement of property - work like consulting might not qualify for mechanics lien protection, depending on the work that was done. For more background on who can file a California lien, this resource should be helpful: California Lien and Notice FAQs. Regarding indemnification - while telling a claimant to go after their contractor could be a fair enough start, the real power of an indemnification agreement is using it to force the party who would be responsible for indemnification to resolve the dispute. Reminding a contractor that they'll have to pay for fending off a dispute and lien claim could help push a contractor to resolving the issue. Still, notifying a potential claimant that their recovery would ultimately come from their contractor could help keep the focus of the dispute between the two parties and off of the property. Finally, without having a preliminary notice to provide an estimated contract amount, and without having knowledge of the agreement between a contractor and their consultant/subcontractor, it's hard to know how much the consultant/subcontractor is really owed. Discussing the matter with the contractor could potentially help to clear this up, though.

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