What Happens After I Record My Lien? How Do I Get Paid? - California - Webinar

In this blog, presented by SunRay Construction Solutions and legal expert William L. Porter, we will understand the functioning of mechanics liens, especially in the complex legal landscape of California, and how it is paramount for those in the construction business.

Recording Your Mechanics Lien in California

The journey begins with recording your mechanics lien promptly after completing work on a construction project. This initial step is more than just procedural—it serves as a proactive measure to secure your legal claim against the property where you've contributed your efforts. In California, this action establishes your rights and acts as a barrier against encumbrances on the property before your claim is satisfied.

How to Record your lien in California?

Here is how you can record your lien in California:

Step 1 - Understand Mechanics Lien Laws

Familiarize yourself with California's mechanics lien laws, specifically the requirements and deadlines for filing a mechanics lien. The laws governing mechanics liens in California are detailed in the California Civil Code, particularly sections 8000 to 9566.

Step 2 - Verify Eligibility

‍Ensure that you are eligible to file a mechanics lien. Typically, those who provided labor, materials, equipment, or professional services for improving real property are eligible. This includes general contractors, subcontractors, suppliers, and design professionals.

Step 3 - Serve Preliminary Notice

In California, most parties who did not contract directly with the property owner are required to serve a preliminary notice within a specific timeframe to preserve their lien rights. This notice informs the property owner, general contractor, and other relevant parties that you are working on the project. The deadline for serving a preliminary notice is generally within 20 days of first furnishing labor or materials to the project.

Step 4 - Prepare the Mechanics Lien Document

The mechanics lien document should include specific information, such as the name and address of the property owner, a description of the property, a description of the labor and materials provided, the amount owed, and your contact information. The California mechanics lien form must also comply with legal requirements outlined in the Civil Code.

Step 5 - File the Mechanics Lien

Once you have prepared the mechanics lien document, it must be filed with the county recorder's office in the county where the property is located. You'll need to pay a filing fee, and some counties may have specific requirements for submitting documents, such as formatting or margin requirements.

Step 6 - Serve the Lien

After filing the mechanics lien with the county recorder, you must serve a copy of the lien on the property owner and other relevant parties, such as the general contractor, within a specified timeframe. This is typically done via certified mail, return receipt requested, or by personal delivery.

Step 7 - Enforce the Lien

If payment is not received after the mechanics lien is recorded, you may need to take legal action to enforce the lien. This could involve filing a lawsuit to foreclose on the lien, which could ultimately result in the forced sale of the property to satisfy the debt.

Step 8 - Release of Lien

‍Once you have been paid in full, it's important to release the mechanics lien. Failure to release the lien within a certain timeframe can result in penalties.

It's crucial to follow all the required steps and deadlines carefully when recording a mechanics lien in California to ensure that your lien rights are protected.  

Calendar Important Deadlines

Once your mechanics lien is recorded, meticulous calendar management becomes imperative. In California, the window to file a lawsuit to foreclose on the lien spans a crucial 90 days following its recording (referenced in Civ. Code § 8460). Failure to adhere to this deadline can lead to the expiration of your lien, potentially jeopardizing your chances of recovering payment. Always remember the following points:

• Beyond mere foreclosure proceedings, a mechanics lien lawsuit often involves a multifaceted legal approach, incorporating claims such as breach of contract, bond claims, and stop payment notices. These additional avenues bolster your ability to recover debts owed, underscoring the importance of strategic legal maneuvering.
• Given the intricacies involved, engaging the expertise of a seasoned attorney well in advance of the 90-day deadline is advisable. This allows ample time for gathering pertinent information and devising a comprehensive legal strategy tailored to your specific circumstances.

Resolve the Situation Amicably

During the critical 90-day period post-recording, pursuing an amicable resolution to the payment dispute is advisable. Leveraging the recorded lien, negotiation with pertinent parties—be it the property owner or general contractor—can potentially circumvent protracted legal battles, expediting payment for your services. Here is what you need to do:

- Prioritize payment settlement for seamless resolution.

- Ensure timely clearance of checks within the 90-day timeframe.

- Leverage the potency of your position during this period for cost-effective resolution.

- Minimize attorney fees incurred by acting promptly.

- Explore compromises and formalize agreements through written settlement documents.

- Consider engaging legal experts for drafting settlement documents to ensure clarity and enforceability.

Consider Extending the Lawsuit Deadline

In certain scenarios, extending the mechanics lien foreclosure lawsuit deadline becomes necessary. This extension, achievable through the recording of a "Notice of Credit" with the County Recorder, postpones the lawsuit deadline for up to one year from project completion. It's imperative to adhere strictly to statutory requirements to avoid jeopardizing your rights.

Filing a Notice of Credit in California involves the following steps:

Step 1 - Prepare the Document

Gather all necessary information and details related to the credit you wish to assert. This includes the amount of the credit, the parties involved, the property or project related to the credit, and any supporting documentation.

Step 2 - Complete the Form

Obtain the official Notice of Credit form for California, ensuring it complies with state requirements. Fill out the form accurately and completely, including all relevant information about the credit and the parties involved.

Step 3 - File the Notice

Submit the completed Notice of Credit form to the appropriate office or entity. In California, this typically involves filing with the county recorder's office in the county where the property or project related to the credit is located. Make sure to follow any specific filing instructions provided by the office.

Step 4 - Pay the Filing Fee

Some jurisdictions may require a filing fee to process the Notice of Credit. Be prepared to pay any applicable fees at the time of filing.

Step 5 - Serve the Notice

After filing, serve a copy of the Notice of Credit on all relevant parties involved in the transaction. This may include the property owner, the debtor, and any other interested parties. Follow California's service requirements to ensure proper notification.

Step 6 - Maintain Records

Keep copies of the filed Notice of Credit and proof of service for your records. These documents may be important for enforcing your credit rights in the future.

Step 7 - Monitor Deadlines

Stay aware of any deadlines or requirements related to the Notice of Credit, such as expiration dates or renewal requirements. Failure to adhere to these deadlines could affect the validity or enforceability of your credit claim.

Step 8 - Seek Legal /Professional Advice if Needed

If you face complexities or uncertainties while filing a Notice of Credit, seeking guidance from a legal professional well-versed in California's lien laws and procedures is advisable. Alternatively, you can connect with SunRay’s experts for specialized assistance and resolution tailored to your needs. They offer personalized advice and support to navigate your specific situation effectively.

When Should You File a Lawsuit?

Should negotiations fail to yield results within the stipulated timeframe, escalating to legal action becomes inevitable. Filing a lawsuit to foreclose on your mechanics lien before the expiration of the deadline safeguards your rights and reinforces the validity of your claim.

Filing a lawsuit to foreclose on your mechanics lien in California's construction industry involves several steps:

Step 1 - Review Lien Requirements

Ensure that you have met all the necessary requirements for filing a mechanics lien in California, including timely filing, serving preliminary notices, and adhering to any other statutory requirements.

Step 2 - Consult Legal Counsel

Before initiating a lawsuit, consider consulting with a construction law attorney who is familiar with California lien laws. They can advise you on the specifics of your case and guide you through the legal process.

Step 3 - Prepare Complaint

Draft a complaint to initiate the lawsuit. The complaint should include details about the mechanics lien, the property, the amount owed, and the parties involved. Ensure that the complaint complies with California's pleading requirements.

Step 4 - File the Lawsuit

File the complaint with the appropriate court in the county where the property is located. Pay any required filing fees and follow the court's procedures for initiating a lawsuit.

Step 5 - Serve the Defendant

Serve a copy of the complaint and summons on all necessary parties, including the property owner and any other parties with an interest in the property. Follow California's service requirements to ensure proper notification.

Step 6 - Litigation Process

Once the lawsuit is initiated, the litigation process begins. This may involve discovery, where both parties gather evidence, motions, hearings, and potentially settlement negotiations.

Step 7 - Court Judgment

If the case proceeds to trial and you prevail, the court may issue a judgment in your favor. This judgment could include a court order to foreclose on the mechanics lien, allowing you to enforce your lien rights against the property.

Step 8 - Enforcement

If a judgment is obtained, you can proceed with enforcing the mechanics lien through foreclosure. This typically involves a judicial foreclosure sale of the property to satisfy the debt owed.

Step 9 - Post-Foreclosure Steps

After the foreclosure sale, any proceeds from the sale are used to satisfy the debt owed. If there are any surplus funds, they may be distributed according to California law.

Step 10 - Legal Assistance

Throughout the process, consider seeking guidance from legal professionals experienced in construction law and lien enforcement to ensure compliance with California's legal requirements and maximize your chances of success.

What to Do After You Obtain a Judgment – How to Get Paid?

Success in your lawsuit culminates in obtaining a judgment from the court, affirming the validity of your mechanics lien and mandating payment from the property owner. However, securing a judgment marks only the initial phase of the payment recovery process. Here is what you need to do:

• To enforce your judgment and actualize payment recovery, obtaining an abstract of judgment from the court is imperative. This formal document serves as a tangible record of your judgment, enabling further legal action to recover payments owed.
• Armed with an abstract of judgment, you can pursue various avenues to enforce payment recovery, from wage garnishment to asset seizure. Collaboration with experienced legal professionals is invaluable in navigating this process and maximizing your chances of successful recovery.

Key Takeaway

To summarize, recording a mechanics lien in California starts a complex process to recover payment in construction. Understanding and following the above steps closely can protect your rights and get paid. Consulting SunRay’s experts at 800-403-7660 can help you become familiar with California lien laws, crucial for compliance and increasing your chances of success.

Other Questions Contractors Asked

What happens if I miss the deadline to file a lawsuit to foreclose on a mechanics lien in California?

Missing the deadline, which is typically 90 days after recording the lien, can result in the expiration of your lien. This may jeopardize your chances of recovering payment. It's crucial to adhere to this deadline to protect your rights effectively.

How can I resolve a payment dispute related to a mechanics lien in California?

During the 90-day period after recording the lien, it's advisable to pursue an amicable resolution through negotiation with relevant parties. Leveraging the recorded lien can help expedite payment without resorting to lengthy legal battles.

What steps should I take if negotiations fail to resolve the payment dispute within the stipulated timeframe?

If negotiations are unsuccessful, filing a lawsuit to foreclose on the mechanics lien becomes necessary. This legal action safeguards your rights and reinforces the validity of your claim, initiating the process to obtain a judgment for payment recovery.