What You Need To Do Immediately After Filing A Construction Lien

So, you filed your construction lien on time.  Whew!   Now what?

If you’re a subscriber to our blog, you know we frequently post about the technical requirements and strict deadlines that lead up to the filing of a construction lien.   We don’t, however, frequently discuss the technical requirements and strict deadlines that follow a lien’s filing.   There are a few, and as usual, these requirements vary state-by-state.

Generally speaking, however, you have to keep two things in mind immediately after filing a construction lien.

First, you may need to send notice of filed lien to the property owner and/or contractors “up the chain.”  In some states (like in Texas) a lien is actually unenforceable unless a copy of the filed lien is delivered to the property owner within 5 days of its filing.   That’s a serious penalty, and a pretty immediate deadline.   Other states have similar penalties (in Oregon, for example, you cannot collect attorneys fees from the other party in foreclosing on lien that was not delivered to the property owner after filing).

Now, here is how Express Lien helps.

Any liens ordered from us (in any state) are delivered to the property owner and all other interested parties (those named on the lien) immediately after filing.   Notice of the filing is delivered certified mail, and a record of the mailing is maintained in your online account, available for you to review or download at anytime.   You simply place your order and forget about it – we do all the rest.

Second, liens expired if they are not “foreclosed upon” or “enforced” within a certain period of time.    In some states, liens must be enforced within just 90 days (California), while other states can provide up to 2 years (Texas).   Failure to file a lawsuit enforcing / foreclosing the lien will result in the lien expiring.

How does Express Lien help with this?

Well, once you put the “Lien’s Filing Date” into our system, the system will calculate your lien’s expiration date.  If you order the lien from Express Lien, we’ll put the date in the system for you.    We don’t actually foreclose or enforce the lien for you (you’ll need an attorney for that), we do give you a heads-up when the deadline is approaching.

California Lien Law Forms, Procedures and Laws Changing on January 1, 2011

The California legislature just passed an act to amend California Code § 3084 and 3146, relating to construction liens, and the new regulatory scheme is set to take effect on January 1, 2011.   While the effective date is still more than a year away, it’s important for potential claimants to understand and prepare for the changes.

You can read the Act amending the mechanics lien laws by clicking here.

Here are some key changes to the California lien laws:

Service of the Lien Upon Owner

Previously, there were no specific provisions requiring service of a recorded lien upon the property owner.   As Porter Law Group reported on a website bulletin, “[p]roperty owners have long complained that until they receive the foreclosure lawsuit they are often entirely unaware that a mechanics lien had even been recorded on their property.”

To address the concern, California Civil Code § 3084 will be amended to provide a specific statement titled “NOTICE OF MECHANICS LIEN.”  This identical statement must be printed in at-least 10-point boldface type on the lien itself….and it must be served upon the property owner contemporaneously with the filing of the lien.

Along with the printing of this text onto the lien, § 3084 (a)(6) also states that a “proof of service affidavit” must be completed and signed, and included with the lien, by the person serving the Notice of Mechanics Lien to the owner.

If the lien is not served, § 3084(d) provides that the “mechanic’s lien [shall be] unenforceable as a matter of law.”

Additional Changes

§3146 adds the requirement of recording a “notice of pendency of proceedings” within 20 days after the filing of the mechanic’s lien foreclosure action.  §3084 also adds that reference to the user of the term “mechanics lien,” when it previously only referred to a “claim of lien.”

Express Lien is Prepared

Express Lien is prepared for the upcoming changes to California’s lien laws.  Starting January 1, 2009, the Claim of Lien document will be updated to include the new Notice of Mechanics Lien language, and service of the property owner will be made as required by the statute.

Express Lien can help your company manage the sending of these notices, record delivery and sending notifications, and record affidavits of service.

Subscribe to our blog to stay tuned to lien law changes across the country.  An alert will be posted to our blog before the change takes effect in 2011.

Mechanics Lien – Is it like a Mortgage? Yes and No.

In most states, contractors and suppliers can file “Mechanics Liens,” whereby they acquire a privilege against the construction jobsite’s property.    The liens usually work like a mortgage on the property, such that it must be satisfied before a property is sold, transferred or refinanced.

While liens act a lot like mortgages, they certainly are not identical to mortgage instruments.

First, in most states, mechanics liens themselves expire.    Most states require that the contractor file a lawsuit to “enforce” or “foreclose” on the lien within a certain time period (sometimes short), to extend the life and effectiveness of a lien.   Here are some example timeframes:

In Louisiana, liens must be enforced within 1 year from filing.  In Washington, lien foreclosure is due within 8 months of filing.  In California, you must foreclose within just 90 days of filing!

Second, depending on the state, liens are given more or less “priority.”    Lien priority effects the order the instruments are paid in the event of a property sale or foreclosure.   In other words, if a property is foreclosed upon but sold for an amount less then the sum of all liens, and there are two mortgages and a mechanics lien on record, who gets paid and who doesn’t?

The answer to this question depends on your state.   In Louisiana and Washington, liens take a junior priority to mortgages and similar instruments.  In other states, however, the rules are or, depending on circumstances, can be different.    In Virginia, mechanics liens have priority over construction loan mortgages.   In Minnesota, depending on when the respective instruments are filed, a mechanics lien can take priority over mortgage-type instruments.

Who Is Filing Your Lien? Express Lien is Licensed, Bonded, Insured and Experienced

The New York Times recently published an article titled “In a Downturn, More Act as Their Own Lawyers.”   The article, of course, discusses how courts across the country are seeing a rise in “pro se” litigants in connection with the troubling economy.

The rise in pro se litigation is just a slice of the full picture about how the legal system is changing in America.

As the Internet puts legal information on the public’s fingertips, it is becoming more and more difficult for attorneys to charge outrageous prices for drafting simple forms and performing mundane legal tasks.

In states like California, an entire new profession has emerged:  The Legal Document Assistant.

So, when its time for your company to prepare and send a preliminary notice, or prepare and file a construction lien, who do you turn to?

An attorney?   Attorneys frequently require large retainers to even begin work, and filing a mechanics lien can cost $600, $800 or more than $1000.

Do it yourself?   Lien statutes are hyper-technical and any little mistake in the filing can be fatal to your lien.  Further, preparing the document and heading to the courthouse for filing could cost hours of your time.

Express Lien is a great alternative to the expense of legal counsel and the perils of pro se filing.

We’re Licensed:   Express Lien is a licensed Legal Document Preparation company in the State of California, and is registered with Los Angeles Country with Registration # LDA-352.

Were Bonded & Insured:   We pride ourselves of producing quality work, but in the event we do mess up and cause your company damage, Express Lien carries Errors & Omissions insurance, and we have a bond held with the State of California.  Take a look at our Bond and Errors and Omissions Insurance here.

We’re Experienced:   Express Lien, Inc. has filed thousands of lien documents across the nation.

Our shareholders and directors include an experienced general contractor with a family contracting business over 50 years old and two construction attorneys practicing construction law in Louisiana and Washington, and two insurance agents who have experience writing general liability policies and bonds for contractors.

Read more about who we are here.

Good and Bad News Regarding California Public Construction Projects

Last month, we reported problems in California where the government’s spending freeze affected thousands of public construction projects, and an enormous amount of contractors and laborers.  Today, the San Francisco Chronicle has mixed news regarding this problem – as California is pumping money to salvage some of these projects, but more money is still needed.

The article states that 276 of the problem projects will be allowed to continue work (for now), because “shutting them down  would cost more than it would take to complete the jobs.”

But the problem is far from over, as the article goes on to warn:

But state officials warned that if the governor and the Legislature are unable to find a solution to California’s $42 billion budget deficit by the end of this month, the remainder of the work could end.

A full list of the affected projects can be read here:

http://www.signonsandiego.com/news/state/images/081217pmib_impact.pdf

If you and your company are working on a public project affected by this spending freeze, you will want to file a Stop Notice to preserve your rights to Get Paid for work performed.

5 Fast Facts About California Mechanic’s Liens

The Contractor’s Secret Weapon blog posted an article providing 5 fast facts about California Mechanic’s Liens.

Here they are:

1)    If you didn’t contract with the property owner, within 20 days after first providing materials or services to a project, you must deliver a Preliminary 20-Day Notice to their customer, the property owner, the general contractor and the construction lender.

2)    Failing to provide the Preliminary 20-Day Notice is grounds for disciplinary action by the Registrar of Contractors.

3)    Mechanics Liens must be recorded either:  (a) within 90 days from completion of project if Notice of Completion or Cessation is not recorded; or (b) within 30 days from completion of project if Notice of Completion or Cessation is recorded.  Prime contractors have 60 days.

4)    Your construction lien does not last forever.  You must file an action to foreclose on your lien within 90 days of its filing.

5)    If you don’t file an action to foreclose on your lien, the contractor must record a Mechanic’s Lien Release.   Failure to do so could subject the claimant to statutory penalties of up to $2000 for property owner’s legal costs in getting the lien removed.

An Owner’s Perspective on Liens

We frequently post about construction liens from a contractor’s perspective – who are clearly interested in figuring out ways to qualify for the filing of a lien.

What we rarely comment upon is an owner’s perspective, who are concerned with the opposite:  figuring out ways to condemn a lien as improperly filed.

It’s important for those who usually file mechanic’s liens to step back and consider the opposing viewpoint.   There is some value in understanding that upon receipt of a lien, an owner’s will likely have the instinct of wanting to fight it as improper or unfair.

When lien laws are drafted, they are drafted with protection for property owners in mind.  And when contractor boards and other regulatory agencies commit time to lien laws, they are usually focusing on educating the public (i.e. property owners) on what they can do to prevent liens.

A December 2008 article from the Daily Journal of Commerce in Portland, Oregon, stands as an example of this.  In the article titled “Five Questions to Ask About Liens,” the author goes through five questions owners should ask when faced with mechanic’s liens to determine their rights on proceeding forward.

This is not a rare example.   To the contrary, regulatory agencies across the nation who regulate contractors focus a great deal of effort on helping owners understand and overcome improperly filed construction liens.  See the page for Department of Labor & Industries in Washington, or the Contractors State Licensing Board in California.

If your company does wind up filing an improper mechanic’s lien and its disputed by the property owner, a loss in court could require your company to pay penalties, attorneys fees and more.

The point?   It’s important to understand the lien laws in your jurisdiction, and avoid making common errors and mistakes.

Andrea Goldman, a construction attorney in Massachusetts, publishes a great blog about this very issue titled:  Home Contractor v. Homeowner.  She frequently posts on issues that surface in home construction between the property owner and contract that results in litigation or arbitration.

With all of the work across the nation from regulatory agencies attempting to stifle improperly filed mechanics liens, Andrea notes in her blog that mechanic’s liens are so powerful of a collection tool for contractors that even an improperly filed lien can yield non-payment.

In her post the “Strength of Mechanic’s Liens,” Andrea states as follows:

Even if the lien is not done properly, one still has to file an action in court to dissolve it, which requires paying legal fees that are frequently not recoverable.

And regardless of your position on the subject (as a property owner, contractor or regulatory board), and regardless of how right or wrong your position may be, Andrea’s point is clear.   Mechanic’s liens are powerful instruments, and even when they are filed with technical defects, they cause parties to consider the debtor’s claim and contemplate a resolution.

Efforts to Change California Lien Law Dead…for now

Senate Bill 1691 went to Governor Schwarzenegger’s desk, and he vetoed the bill.   The law would have made significant changes to the California Mechanic’s Lien Law – but for the time being, the legislative efforts to make changes to the state’s laws have failed.

Considering the governor’s non-substantive veto message (which was copied and pasted to a number of different bills), it’s safe to assume that the matter will be re-examined in future legislative sessions.

For the time being, however, the California lien laws will remain unchanged.

The governor’s veto message was:

“I am returning Senate Bill 1691 without my signature.  The historic delay in passing the 2008-2009 State Budget has forced me to prioritize the bills sent to my desk at the end of the year’s legislative session.  Given the delay, I am only signing bills that are the highest priority for California.   This bill does not meet that standard and I cannot sign it at this time.”

Express Lien will monitor California’s efforts to make changes to the California mechanic’s lien law.

Can Unlicensed Contractors Lien in California?

In California, like in every state, those who perform labor or provide materials to a construction project obtain a right to lien the property.  In fact, this lien right is even built into the California constitution.

However, every state’s lien laws has complex requirements.   A question that is frequently asked is whether an unlicensed contractor has the right to file a construction or mechanics lien.

Of course, the answer to this question varies state-by-state.  Further, one must remember that in most states, the fact that a person is unlicensed is not necessarily controlling as licenses are not required in every situation.

As it regards the state of California, the question was discussed in a legal column of PressBanner.com.  Gary Redenbacher says:

But what about unlicensed contractors? By law, unlicensed contractors are not entitled to be paid — period — for anything. Even if they do a perfect job and put $300,000 of materials into your home, they will be thrown out of court if they sue to get paid. Since unlicensed contractors cannot turn to the law to be paid, any lien they record is a false lien.

Contracting without a license is a misdemeanor. Recording a false lien in an attempt to get paid might just jump an unlicensed contractor from the frying pan into the fire.

One of the most critical mistakes any contractor can make when filing a construction lien is not being qualified to file one at all.  In California, its pretty clear that unlicensed contractors are completely without lien rights.  Elsewhere, if you’re performing construction work without a license, you should be extra-cautious before filing a construction lien, as you may not be qualified.

7 Habits of Contractors Who Lose Money…and How to Break Them

The Construction Commando’s “Contractor’s Secret Weapon” published an article with this title that described seven instances when contractors lose money on a project.  While the article was drafted to an audience of California contractors, the habits apply nationwide.

It will be to any contractors’ benefit to review this article online, access which habits apply to you, and make an effort to avoid the costly mistakes.  Any progress will help increase your bottom line.

The seven habits highlighted are:

1)    The “Gentlemen’s Agreement” – A Handshake and Your Word.   Bottom line:  Get it in writing.
2)    Using Contracts that Fall Short of the Legal Requirements.
3)    Not Getting Every Change Order in Writing.
4)    Failing to invoice immediately.
5)    Failing to serve a preliminary 20-day notice (pre-lien construction notices)
6)    Don’t Worry – They Will “Take Care of You” on the Next Job
7)    It isn’t good “customer service” to record a Mechanic’s Lien