The purpose of the California mechanics lien

Mechanics liens provide a legal vehicle for contractors and others that work on real estate to get paid for their work.

Many people, while having heard the term "mechanics lien," only have a vague notion of what it is. Yet, a mechanics lien has the potential to have a legal or financial impact on many different parties. In certain circumstances, mechanics liens can impact the personal or business affairs of residential or commercial real estate buyers and sellers; lenders; title companies; and construction contractors, subcontractors, suppliers, professional service providers, laborers and equipment lessors.

Purpose of mechanics lien

A mechanics lien is a legal and financial interest in private real estate owned by another, based on authorized construction work (labor or materials) that was performed or provided by the lien holder that increased the value of the real estate, but for which the lien holder was not paid.

The thinking behind a mechanics lien is that a property owner should not be enriched by another party's contribution to the property value without the contributing party having some way to get paid.

A mechanics lien is filed with the property's associated public records, providing notice to anyone who wants to buy, sell or use the property as security for a mortgage, or to a title company seeking to ensure clear title that the property is subject to the lien. Thereby, interested parties will know the lien needs to be satisfied or otherwise cleared to allow ownership of the property without any cloud on the title.

According to the California Construction Law Manual, Maryland passed the first U.S. mechanics lien law in 1791 to encourage property development in the District of Columbia, providing a way for contractors and others to get paid for their contributions to the construction of the new capitol city in a time when payment was not always guaranteed.

On the other coast, the California Constitution has long guaranteed the right to mechanics liens and a mechanics lien statute has been in place since 1872. It has been amended repeatedly since, with a major overhaul that took effect in 2012.

California mechanics lien laws are complex and procedurally challenging, with very specific notice, filing, deadline and enforcement provisions. State statutes provide for a lawsuit to try to enforce a mechanics lien and, on the other side, a procedure for requesting a court order to release the property from the lien. If the filer of a mechanics lien does not follow the appropriate legal procedures to enforce it within certain required timelines, depending on the situation, the lien may be extinguished.

Another option for a property owner or other interested party subject to a mechanics lien is to purchase a lien release bond that in essence releases the lien from the property and transfers the lien holder's claim to the bond instead. This would allow work on or a sale of the property to proceed without worrying about the lien, as the dispute over the money the lien holder claims is owed is now secured by the bond instead.

It is important for anyone either asserting a lien, challenging one or trying to determine how to clear a mechanics lien from a property title to consult experienced legal counsel for advice and direction. It is imperative to comply with the statutory requirements in order to preserve all rights and options vis-à-vis the lien and legal guidance is important for compliance.

From their offices in Walnut Creek, California, the real estate lawyers at David M. Sternberg & Associates represent individual and business clients in the Bay Area and throughout Northern California in mechanics lien matters and a wide variety of other real estate issues.

Keywords: mechanics lien, contractor, real estate, California, labor, materials, title, bond