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Protect your company’s investment with a mechanic’s lien

On Behalf of | Jun 10, 2020 | Construction Law

When you complete a construction project but the homeowner fails to remit payment, you can protect your business investment by suing the client for breach of contract. You can also file a legal document called a mechanic’s lien. 

Learn how to protect your California construction firm with a mechanic’s lien. 

Who can file a mechanic’s lien? 

Anyone who does not get paid as agreed for completed work on real property can file a mechanic’s lien. This includes design firms, architects, construction supply firms, workers, contractors and subcontractors. When you file a lien, it travels with the property. The owner will be unable to sell, refinance, or access equity on the home without repaying the lien. 

How can I file a mechanic’s lien in California? 

You must file the lien within 90 days of completing the work or receiving word of project cancellation that will result in nonpayment. Complete the California Claim of Mechanic’s Lien form and submit it to the local court. You must also serve the property owner by sending a copy of the lien by first-class mail, registered mail or certified mail. Without proper service, the court will not enforce the lien. 

What happens after I file the lien? 

California courts only enforce a lien when the contractor sues the homeowner within 90 days of submitting the lien. If you do not file a suit, the court will remove your lien and you may have to pay the homeowner’s attorney fees. 

When you file the lawsuit, you have 60 days to serve the property owner with the legal action. Once you do so, he or she will either have to resolve the lien or the court may force sale of the property to repay the lien. 

The value of the lien can equal either the agreed-upon contract amount or a reasonable amount to cover equipment, materials and labor. In some cases, you may also be able to include costs that arise from a breach of contract. When the lien covers costs resulting from a change order, the order must generally be in writing.