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Lien Priority

This question relates to California. Lets say a subcontractor works on a property July 1. A lender then comes in on August 1 and puts a lien on the property. If the subcontractor doesn't get paid and puts a lien on the property September 1, do they have priority over the lender because they performed work before the lender filed a lien? Also, in many states, the subcontractor has a specific number of days to file their lien in order to get priority. Is there a time period in California?

8 replies

Sep 27, 2018

In California, mechanics lien priority is determined by a general "first in time - first in right" calculation. A California mechanics lien has priority over 1) other encumbrances that attached to the property after the commencement of the work of improvement, or 2) encumbrances that were unrecorded at the commencement of the work of improvement and of which the claimant had no notice. Note, however, that a mortgage or deed of trust that would otherwise be subordinate to a mechanics lien according to the above, has priority over the mechanics lien after the recording of a valid payment bond if the bond refers to the mortgage or deed of trust, and the bond is in an amount not less that 75% of the principal amount of the mortgage or deed of trust.

Accordingly, in a situation in which a mechanics lien right arose for work performed on July 1, and the lender's interest is not filed until a month later, the mechanics lien would have priority (absent the recording of a sufficient payment bond).

Provided a preliminary notice was provided within 20 days from beginning work (and other requirements are met), a subcontractor is fully protected and able to file a valid and enforceable mechanics lien until 90 days after completion of the entire work of improvement as a whole (or 30 days from the filing of a notice of completion or cessation).

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