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California Mechanic's Lien Basics

Updated: Feb 21

California's Constitution stresses that mechanics, materialmen, laborers, etc. are entitled to a lien on property which they help to improve. Cal. Const. Article XIV, section 3.


If you increase the value of someone's property, you are responsible and entitled to payment for that increase in value. The policy behind this is to encourage contractors in improving and developing real property.


Who is entitled to a mechanic's lien?


California law entitles anyone authorized for a private work of improvement to a mechanic's lien. This includes, but is not limited to, direct contractors, subcontractors, laborers, and material suppliers. See Cal. Civ. Code section 8400.


If you are a CSLB-licensed contractor working within the scope of your license pursuant to a written contract, you are probably entitled to a mechanic's lien if payment stops.


What is a "work of improvement"?


The definition is very broad. As above, if you're a CSLB-licensed contractor working on a project pursuant to a written contract, you're probably engaged in a work of improvement. It includes construction, alteration, repair, and even demolition. See Cal. Civ. Code section 8050.


That said, mechanic's liens are only available on private works of improvement (not public works of improvement). Cal. Civ. Code section 8160.


What property is subject to mechanics liens?


The mechanic's lien attaches to the work of improvement and the real property on which the work of improvement is situated (including an interest in that property, like an easement). Cal. Civ. Code section 8440.


If there are separate residential structures, then each separate unit is considered a separate work of improvement. Cal. Civ. Code section 8448. Bear this in mind, as you might have to record more than one claim of lien on one project.


What amounts can I include in my lien?


The lien is limited to the work contained in the actual, written contract (and any changes or modifications to that contract), and payments to other claimants must be deducted. Cal. Civ. Code section 8432(a), section 8434.


That said, you are entitled to the lesser of the following:

  1. The price agreed to in the written contract; or

  2. The reasonable value of the materials and services provided.

Cal. Civ. Code section 8430(a).


What is the procedure for enforcing a lien?


The procedure deserves a post of its own. But the short answer is:

  1. Serve a 20-Day Preliminary Notice;

  2. Keep accurate records, and keep track of conditional/unconditional waivers and releases;

  3. Serve and record a Claim of Lien; and

  4. File a lawsuit.

What's the catch?


Mechanic's liens are governed by the Civil Code fairly strictly. The failure to abide by one of the steps above is fatal to a claim of mechanic's lien.


So I can’t sue if I don’t follow those steps?


Not necessarily. First, you can still sue for other causes of action (like breach of contract, which has a four year statute of limitations if the contract is written). Second, if the work of improvement is ongoing, you can serve and record a subsequent claim of lien and then file a lawsuit.


The point of perfecting your lien rights is so that you have a claim not just against the property owners (like breach of contract), but against the property itself. If the property is sold and you have not perfected your lien, you probably won't be entitled to any proceeds of that sale until you settle or win at trial, which could be years later.


What if a contractor put an improper lien on my home?


California allows property owners to remove improper liens by filing a petition. This is called a petition to release mechanic's lien. Cal. Civ. Code section 8480. And the party that prevails on that petition is entitled to attorney fees. Cal. Civ. Code section 8488(c).


Conclusion


California mechanic's liens are governed strictly by the Civil Code. California contracts would do well to familiarize themselves with the rules of the Code, to find a service to help them keep track of lien documents and deadlines, and to make sure they hire attorneys familiar with the process (remember, if your business is an LLC or corporation, it must have an attorney in civil cases).

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