Understanding a Mechanics Lien
A mechanics lien is a legal claim against a property that can be filed by an unpaid contractor, laborer, or material supplier. This lien serves as a "hold" on the property and is recorded with the county recorder’s office. Homeowners are generally liable for these liens, even if they have paid the prime contractor in full, making it crucial to ensure that all parties involved in recent work on the property have been compensated.
If you are purchasing a home with visible signs of recent work (such as renovations or repairs), it's important to investigate whether a mechanics lien could be filed on the property.
Preliminary Notice and Its Role
Subcontractors and material suppliers are required to provide a Preliminary Notice to the homeowner before filing a mechanics lien. This notice informs the homeowner that the subcontractor or supplier has the right to file a lien if they are not paid. However, issues can arise if the notice was sent to the previous owner who is no longer reachable or claims they never received it. If a subcontractor or supplier fails to send the notice, they lose their right to file a lien.
Protecting Against Mechanics Liens
Homeowners can take certain steps to protect their property from mechanics liens:
Joint Checks: Homeowners can make payments using joint checks that require endorsements from all parties involved (e.g., the contractor and supplier). This provides proof that everyone has been paid.
Proof of Payment: If the seller can provide proof of payment for all recent work, such as receipts or cleared checks, it can help prevent liens from being filed.
Lien Releases: It is also possible to request lien releases from subcontractors and suppliers once they are paid. This legally waives their right to file a mechanics lien after payment is received.
Notice of Completion
A Notice of Completion is a legal document that shortens the timeframe for filing a mechanics lien. Once the work on a property is completed, the property owner can file this notice with the county recorder's office. Filing this notice reduces the time allowed for contractors, subcontractors, and suppliers to file a lien:
Prime Contractors: Have 60 days to file a lien (instead of 90).
Subcontractors and Suppliers: Have 30 days to file a lien (instead of 90).
How to Handle a Mechanics Lien
If you discover that a mechanics lien has been filed on your property, there are steps you can take to challenge or remove the lien:
Validate the Lien: Determine if the lien is valid. A mechanics lien may be invalid if:
The work or supplies were not part of the agreed-upon plans or contracts.
The required timelines for filing the lien were not met.
Obtain the Preliminary Notice: If a Preliminary Notice was filed, verify whether the work or supplies were delivered within the 20 days before notice was given through the end of the project.
Check for Accompanying Documents: Ensure the Notice of Mechanics Lien is accompanied by a Proof of Service Affidavit, which must be completed and signed by the person serving the notice.
Foreclosure Action: Check with your local superior court to see if a foreclosure action has been filed within 90 days of the recorded lien. If no action is filed within 90 days, the lien may be considered invalid.
Contact the Claimant: In some cases, directly contacting the person or company that filed the lien can lead to a resolution. They may agree to remove the lien if you negotiate payment or dispute the claim.
Seek Legal Help: If the situation becomes complicated or the lienholder refuses to remove the lien, you may need to hire an attorney to petition the court for removal.
Conclusion
A mechanics lien can cause significant issues for homeowners and potential buyers, especially if it was placed on the property due to unpaid work or supplies. It is important to conduct thorough due diligence, verify payment records, and ensure all contractors and suppliers are compensated to avoid or resolve a lien. If you're dealing with a mechanics lien, understanding the process and timelines can help you take the right steps to remove or challenge the claim.