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Mechanic's Lien placed as a design professional

I am the landscape architect for a new single family home being designed in Hayward, CA. I signed an agreement with the project owner in December 2017 and began my design. When he signed the agreement, he agreed to the following payment schedule: 1. Deposit of $750 due upon entering the agreement, 2. Progress payment due upon city submittal, 3. Final payment upon city approval. The client paid the deposit when he signed the agreement. I began work and completed the design for city submittal by February. Upon sending him the plans for city submittal, I also sent him a payment request for the second payment. He submitted the plans to the city and they were rejected. Supposedly the city told him he cannot build a house on this particular parcel and he is supposedly fighting this through legal channels. I have no idea regarding the details in this matter. He has continuously argued with me over the past six months that the second payment is not due because the city rejected the plans. I have repeatedly explained to him that the second payment has nothing to do with the city accepting the plans and that the simple act of submitting the plans to the city makes that second payment due. He is still refusing to pay me. According to Alex with your company, here in CA, there needs to be a certain document sent to the owner upon starting the project in order to be able to place a mechanic's lien on the property at a later date. Alex has further told me that this document can be filed late, but that would only allow me to place a lien for the work done in the past 20 days. This does not make sense to me for the following reasons: 1. According to this information, every project in CA that is built or designed each year (millions of them) need to have a preliminary notice filed upon starting the project. I very seriously doubt that even 1% of projects have this document filed initially. 2. I've been trying to get paid for over six months now. I've done no work on this project in the last 20 days. If the late filing only allows you to lien for work done in the last 20 days, again, very few projects would fall into this category since most design and construction professionals invoice for work at net 30 days. So, by only being able to lien the last 20 days of work, you're talking about a very small amount that would be liened. It seems to me after attempting to collect the payment due without success and basically being told it won't be paid, that I now should be able to lien the property in violation of the project agreement. Please advise on how to move forward with this issue. Thank you

1 reply

Sep 13, 2018

This seems to be a frustrating situation. Misunderstandings of contract language and requirements can definitely cause payment issues.

Generally, parties in California wishing to claim a mechanics lien for work done to improve property must deliver a preliminary notice. As you mentioned, in order to protect all labor or materials delivered to the project the notice must be sent within 20 days of beginning work; and, while a late notice may still be partially effective, it only works to protect the labor or material furnished beginning 20 days prior to sending the notice. For a design professional, the deadline starts running from the start of the work; "(b) A design professional who has furnished services for the design of the work of improvement and who gives a preliminary notice not later than 20 days after the work of improvement has commenced shall be deemed to have complied with Section 8200 with respect to the design services furnished, or to be furnished."

However, there are some modifications to the general rules. A direct contractor (who has a contract directly with the property owner) only needs to send a preliminary notice to the construction lender on the project - if there is one. In the event that there is no construction lender, a direct contractor is not required to send a preliminary notice in order to later file a mechanics lien. Note, however, that the general timing requirements for mechanics liens still apply to direct contractors, however. This means that a direct contractor must record his Claim of Lien after completion of the direct contract, and before the earlier of either 90 days after completion of the work of improvement; or 60 days after the owner records a Notice of Completion or Cessation.

However, design professionals also have the ability to file a "design professional's lien" instead of the general mechanics lien - notwithstanding the absence of commencement of the planned work of improvement, if the landowner who contracted for the design professional’s services is also the owner of the site at the time of recordation of the claim of lien. This means that the notice and timing requirements are different for a design professional's lien than for a general mechanics lien. The requirements for a design professional's lien are set forth by §8300-8318, and include:

(a) The work of improvement for which the design professional provided services has not commenced.
(b) The landowner defaults in a payment required under the contract or refuses to pay the demand of the design professional made under the contract.
(c) Not less than 10 days before recording a claim of lien, the design professional gives the landowner notice making a demand for payment, and stating that a default has occurred under the contract and the amount of the default.
(d) The design professional records a claim of lien (in sufficient form).

Note, however, that "[a] design professional may not record a claim of lien, and a lien may not be created, under this chapter unless a building permit or other governmental approval in furtherance of the work of improvement has been obtained in connection with or utilizing the services provided by the design professional."

It is true that "every project in CA that is built" is subject to the preliminary notice requirements (absent works of improvement that only have a single contractor who contracts directly with the owner and there is no construction lender involved).

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