California lien laws, particularly those that involve the construction industry, are critical in protecting the financial interests of contractors, suppliers, and other similar parties. Thanks to these liens, these entities can ensure compensation for their services or products even though their client fails to pay their debts.
At Lienser, we want to do a deep dive into these laws to help you gain a better understanding. Keep reading to learn more.
What Is a Construction Lien?
Like any other type of lien, a construction lien serves as a legal claim over a property to secure the payment of a debt. In this case, the “property” is the construction project itself. The lienholder is typically the contractor, subcontractor, or supplier. Whatever the case, they have the legal right over the property until they receive payment for their services or materials. If the project remains unpaid, the lienholder can sell it to gain back their losses.
Types of Liens in California
There are two main types of construction liens in the state: mechanics’ and material suppliers’ liens.
Mechanics’ Liens
A mechanics’ lien is made for the provider of labor or services, such as contractors and subcontractors.
Material Supplier Lien
On the other hand, a material supplier lien is specifically for parties that provide the materials and supplies for the project.
Both categories protected payment rights. The key difference is the nature of the lienholder’s contributions — labor versus material. Even so, both parties must follow specific legal requirements before they can enforce the lien.
Who Can File a Lien?
Most entities and professionals can file a mechanical lien in California and Arizona, including the following.
- Direct contractors and subcontractors
- Material supplies
- Equipment lessors
- Laborers
- Design professionals
While a valid contract isn’t required in most cases, a party must still follow these requirements and prerequisites to be able to file a lien.
- You must have provided labor or materials to a property.
- You must have yet to receive payment.
- You must file within the set timeline.
- You must serve a preliminary notice to the property owner.
Notice Requirements
A preliminary notice is a notice that contractors (or any other involved party) send to their clients to advise them about the former’s right and intent to file a mechanics’ lien. In California, contractors must send the preliminary notice within 20 days after the first furnishing of labor or materials. To do this, the contract must deliver a Notice to Property Owner statement via certified and registered mail to the property owner.
Failure to serve the notice on time can jeopardize the claimant’s right to file a lien. As such, timely processing is critical.
Filing a Mechanics’ Lien
If the property owner still hasn’t made payments after the notice, the next step is to file the mechanics’ lien. Here are the steps to follow.
- Prepare a lien document that includes specific details about the work performed, the amount owed, and the property description.
- Serve the lien to the property owner.
- File the lien to the county recorder’s office 90 days after your last work or material delivery. Missing this 90-day deadline could result in the forfeiture of your lien rights, so make sure to file on time.
Lienser can help make things easier when it comes to filing a mechanics’ lien. We offer comprehensive solutions that help you process and file the lien with ease.
Enforcing a Mechanics’ Lien
Claimants can enforce a mechanics’ lien through a court action. In California, contractors can do this by filing a foreclosure lawsuit within 90 days of filing the lien. Failing to file within this period results in an unenforceable lien.
The enforcement process involves legal proceedings to sell the property and use the proceeds to pay the lienholder. This action puts significant pressure on property owners to settle the outstanding debt.
Possible Challenges and Disputes Claimants May Encounter
Filing a lien will usually be met with some tension from the property owner. Some claimants may face challenges like the following.
- Disputes over the lien’s validity
- Disagreements over the money owed
- Improper filing
- Property owners contesting the lien for what they believe is subpar work
Legal intervention is essential for this process to help address these issues. By having a legal representative, the involved parties can have a proper channel for mediation and resolution. On your end as a claimant, always make sure that your documentation is accurate and that you’re complying with legal requirements when filing.
Bonding Off a Lien
Property owners in California have the option to bond off a lien. In this process, they can substitute a surety bond for the lien, freeing the property from the lien while the dispute is resolved. The bond guarantees payment to the lienholder if they win their case.
Bonding off a lien can be advantageous as it prevents a lien from clouding the title and enables the continuation of property transactions without lien encumbrances.
Mechanisms To Protect Property Owners
One of the strategies property owners can use to mitigate the impact of liens is the bonding-off process. This is not the only approach. They can also require lien waivers from contractors and subcontractors or insist on payment bonds to ensure that all parties are paid.
Property owners have also the right to challenge the liens. They may argue in court that the lien is invalid or overstated. As such, claimants need legal representatives to argue on their behalf.
Wrapping Up: California Lien Laws for the Construction Industry
Construction liens like mechanics’ and material supplier liens play a role in ensuring that contractors and other concerned parties get the compensation they deserve. In California, claimants must follow the steps we outlined above to ensure full compliance and lien validity. Otherwise, the property owners may contest the claim and cause you to lose your lien rights.
For professional lien processing services, reach out to Lienser today! Our team can guide you through the complexities of construction liens and provide solutions that make the process easy and convenient.