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Is mechanic lien the right step for us next?

My name is Shawn, the project manager in Rega Development, a licensed GC in Los Angeles County. We signed a contract with the homeowner for a house remodeling project in San Gabriel City. The payment plan was divided into 6 phases, where 6 payments are expected after certain job is done. The trigger for the 6th phase payment (20% of the project total charge) is "passing the final inspection", where there's no job will be delivered from our end. And this is where we are standing at now. The owner has upgraded a lot of material during the construction process and we have recorded all those into our "Change Order" invoice at last. Also, the owner has privately dealt other jobs with one of our subcontractors where Rega Development is not involved at all, as the owner rejected our proposal. And these private deals screwed the final payment we were expecting. The private deals didn't turn to deliver satisfying results to the owner, and the owner blamed all those on us and used those against us. We scheduled the final inspection two weeks ago and it didn't pass because of two issues: water leaking under the kitchen sink and bedroom door not assembled (The owner removed it as it's not good for Feng Shui). And the minute we got this feedback from the inspector, we started contacting the owner by all means to get those fixed, but not responded at all. Three days later, the owner texted us saying she's very unhappy with our job and not going to pay what's owned in full, bargaining the payment with much off. Then the owner orally authorized another owner, who is not in the contract with us, to deal with us after, as the owner will be out of the country for 2 months. The 2nd owner met us twice, 1st was in the property under the contract, and we agreed to fix all problems that they'are not happy with. However, the 2nd owner called another meeting yesterday, brought 4 people we don't know along, saying they will not continue the contract with us, and they will find another contractor to repair and finish the case, at our company's cost. We have stated that we will go back and fix everything they don't like without additional charge, honoring our builder warranty from the very beginning til now. Now we're stuck in the middle that the owner don't allow us to access the unit and finish/repair the issues, and trying to pay much less than they are supposed to pay. We are about to file a lien on this property while seeking some legal advise from you as well. Please contact Jennifer or Shawn at 626-331-1869 or sales@real777.com if you have any comments, questions or advise. Thank you so much and we're looking forward to hearing from you soon!

1 reply

Aug 27, 2019

When unpaid for work performed, filing a mechanics lien is often a great tool for making sure that payment is ultimately made. So, filing a lien is a common next step in a situation like the one you described above. Of course, merely threatening to file a mechanics lien - through a document like a Notice of Intent to Lien - might do the trick, too (or at least get payment talks moving in the right direction). But every situation is different. That means the steps toward getting paid could be different for every claimant - and that means other options might end up being a better fit. Note that I'm unable to provide you legal advice. While the Experts here at the Expert Center are able to provide helpful legal information, we're not able to give legal advice. If you do need legal advice, it would be wise to consult with a local construction attorney. They'll be able to review your situation and advise on how best to move forward. With that being said, there are some important details to keep in mind here regarding change orders. Mechanics liens and change orders Note that change orders will often complicate things when a mechanics lien is in play. The safest way to proceed with change orders, in order to ensure those changes would ultimately be lienable, is to get all change orders in writing in the manner prescribed by the contract. The California Civil Code creates some cause for caution when dealing with change orders. Under § 8430(a), a mechanics lien is generally avaiable for the lesser of: (1) the reasonable value of the work done or materials furnished by the claimant; or (2) the price agreed to between the claimant and their customer. So, if an owner did not agree to an increased price as a result of the change, that change might not necessarily be lienable. Of course, § 8430(c) of that section allows a claimant and their customer to modify their contract in writing. So, when written change orders are present, and where an owner has specifically agreed to a change in price due to a modification of the work being performed, then presumably that work would be lienable. However, if an owner did not know about or never agreed to an increased price, change orders might not be subject to lien since the amount of a lien is limited to either the contract price or the price of the work done, whichever is less. You can read more about change orders and lien rights here: Change Orders and Mechanics Lien Rights. And, you can learn more about California mechanics liens here: California Mechanics Lien Guide and FAQs. I hope this information was helpful! Please feel free to come back with whatever questions you may have, and we'll do our best to provide some help.

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