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.
Virginia – Strongest Liens of them All?
In the past, we’ve posted about the strength and effectiveness of construction liens. Across the nation, construction or mechanics liens can be used as a powerful collections tool by contractors, suppliers and others working on construction projects.
The state of Virginia, however, has perhaps the most powerful mechanics liens in the nation.
In most circumstances, a mechanics lien will get resolved without the property being foreclosed or the property owner filing bankruptcy. However, there are occasions (and in this economy, increasingly so) when a project falls apart, and those working on the jobsite find themselves waiting for proceeds to trickle down from foreclosure or bankruptcy proceedings.
In most states, a filed mechanics lien takes priority below the construction loan bank’s mortgage. Further, the filing of bankruptcy usually defeats any lien rights.
In Virginia, however, the opposite is true. A properly filed mechanics lien in Virginia will not get defeated in bankruptcy, and it will have priority over the construction loan bank. Earlier filed mechanics liens have priority over later filed instruments.
We’ve posted in the past on why its important for contractors to lien unpaid construction projects. This review of the powerful lien laws in Virginia stands as a reminder of how effective a mechanics lien can be, and why its important to make your claim timely & properly.
Explaining Louisiana Lien Law at AllBusiness.Com
AllBusiness.com, an online media and e-commerce company that operates one of the premier business sites on the Web, is a great tool for contractors. They self-proclaim to help business professionals save time and money by addressing real-world business questions and presenting practical solutions.
As one of its resources, the website has re-published an article written by Lloyd N. Shields, one of New Orleans’ premiere construction attorneys. The article, titled Mechanics Liens and Construction Bonds under Louisiana Law, offers a good discussion of Louisiana’s sometimes peculiar lien laws.
When doing work in a particular state – like Louisiana – it never hurts to spend time reviewing the overall lien laws in your area. Understanding and following lien laws is important for your company to avoid bad collection situations, and is increasingly important in this penny-pinching economy.
It would be a prudent start to the new year to spend some time getting familiar with the lien laws in Louisiana. You can read some basic information about Louisiana lien laws at the Construction Lien Blog here. The allbusiness.com article is also a good resource.
Also, be sure to check out the Construction Industry Center at AllBusiness.Com.
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.
Be Careful When Using Free Legal Forms
Gerard Simington with “FindAnAttorneyForMe.com” published an informative article that warns businesses about using free legal forms found on the internet.
The Internet has placed legal information and legal forms at our fingertips – and its easy to forget sometimes that the law is a very complicated subject, and legal forms are no exception. While a legal form may seem simple on its face, the blanks can carry significant legal consequences.
It’s always great to hire an attorney to draft legal documents from scratch, or to “tweak” legal forms to fit your particular need. The costs associated with legal counsel, however, are simply sometimes out of your business’ reach.
Legal Document preparation services like Express Lien are perfect for these situations. Our staffs of professionals are familiar with the forms that relate to your construction project, and we can help you draft & file your forms properly and avoid costly mistakes.
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
California Freezes Funds for Public Projects
The San Diego Union-Tribune reports that with the state nearly broke, California has frozen nearly $4 billion worth of loans for public building projects. The unprecedented move is expected to halt construction all over the state – and inevitably, leave contractors, subcontractors and suppliers bickering with one another about outstanding payments and work.
With an estimated more than 200,000 works affected by the funding freeze, it’s likely that even California laborers will find themselves with claims for unpaid wages.
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.
A full list of affected projects is available here: http://www.signonsandiego.com/news/state/images/081217pmib_impact.pdf
New Georgia Lien Laws Go In Effect April 2009
In the spring of 2008, a senate advisory committee in Georgia completed a report on the state’s lien laws, and proposed a bill to make certain substantive changes to OCGA 44-14-361 et seq., which houses Georgia’s lien laws.
The first paragraph of the report’s summary nicely explains the challenges facing legislatures when drafting and re-drafting lien laws:
The Lien Law Study Committee was born out of concern for homeowners coupled with respect to private enterprise. Indeed, there are frustrated and worried homeowners who have had liens filed against their real property despite the fact that these homeowners have paid in full for services rendered. Conversely, there exist disappointed, hard-working homebuilders, subcontractors and suppliers who have provided goods and services yet have received no payment.
The bill – which is described as a “fair and balanced lien law” by the Georgia Lien Rights Coalition, was passed by the Georgia legislature earlier in 2008.
The bill (Senate Bill 374) will become law in Georgia on March 31, 2009. It’s important that contractors, subcontractors, suppliers, property owners and all others affected understand the changes, as it can affect each’s lien rights.
Great summaries of the changes are provided by the Georgia Lien Rights Coalition on its site.
General Changes:
- Lien Deadlines are worded in days instead of months. So, for example, instead of requiring a lien to be filed within an ambiguous “3 months,” liens must now be filed 90 days from labor, services or materials last supplied to the property;
- Day Counting is now more consistent with Georgia law. If a deadline fills on a weekend or public holiday, it will be extended to the next business day. Previously, the deadline would be moved up to the preceding business day.
- Definitions are clarified.
Changes that Benefit Suppliers or Subcontractors
- Notice of Bond to Remove Lien: Previously, a property owner could bond out a lien without ever notifying the subcontractor or supplier. The new rules close this lophole by requiring property owners to notify lien claimants that the lien has been bonded off the property.
- Deadlines: All deadlines in the Georgia lien laws are made clearer by the new bill. Here are some important deadline changes:
- Liens must be filed within 90 days from labor, services or materials last supplied to the premises (previously 3 months);
- Notice of Lien filing must be sent to property owner within 2 business days from filing of claim of lien;
- Lien must be perfected within 365 days from w hen lien filed (previously 1 yr from labor, services or materials last supplied);
- Notice of lawsuit to perfect lien must be delivered to owner within 30 days (previously 14 days).
Changes that Benefit General Contractors and Homebuilders
- Prior law was inconsistent and confusing as to whether general contractors or homebuilders were required to receive copies of filed liens. The new law states that when a “Notice of Commencement” is filed on the project, the general / homebuilders must receive notice of the lien.
- The Lien Waiver Forms have been made more clear, with bold, capital letters explaining what the waiver means.
Changes that Benefit Property Owners
- New Notice of Contest: Owners can now send a “Notice of Contest” to contractors who file a claim of lien. The notice sets forth that the Owner contests the debt, and requires that a lawsuit to perfect the lien be filed within 60 days. If a suit is not filed within the 60 day period, the lien is invalidated.
- Expiration Date on Lien: The new rule requires that the Claim of Lien itself include a statement as to when it expires.
For more information about the revised law, you can view the Senate Bill 374 here, and you can read about hte new rules at the Georgia Lien Rights Coalition website.
Express Lien continues to monitor the lien law changes in Georgia, as it does in every state. When the new rules go into effect on March 31, 2009, the Express Lien, Inc. forms will be updated to meet the new requirements.
Our service prepares and files Claims of Lien for contractors, subcontractors and suppliers throughout the state of Georgia. We also send Notices of Lien to the interested parties, can prepare and send Notices of Contest for Georgia property owners, and prepare and file lawsuits to perfect your construction liens.
Save you company time and money, and ensure that your Georgia liens are filed professionally with Express Lien.
Is Seattle Recession-Proof? Good News for WA Contractors
Wolfe Law Group, construction attorneys in Washington and Louisiana, posted an interesting article about the construction market in Seattle, WA and the strength of Seattle’s economy as a whole on its construction law blog. The text is reproduced below:
In the midst of the “doom and gloom” economy predictions in the U.S., there seems to be some hope for the Seattle construction market.
Recent reports have been optimistic about the nonresidential sector of Seattle’s construction industry and about the Seattle economy in general.
Forbes Magazine has gone as far as to call Seattle one of America’s Ten “Recession-Proof Cities,” and specifically cited the growth of the city’s manufacturing industry, calling it the strongest statistical showing in the nation.
The Seattle Times jumped into the conversation this week as well, in an article about the “Tale of Two Construction Sectors.” The article discusses the a struggling home building market in the Puget Sound area, but a very robust nonresidential market. Read the article by clicking here.
Is Notice Required Before Filing a Construction Lien? Louisiana Law
It’s difficult to stress how beneficial filing a lien can be for your company when attempting to collect on a non-paying project. However, this begs the very important, and sometimes difficult to answer question: Are you legally entitled to lien?
In Louisiana, the lien statutes are drafted with a certain balance. On the one hand, the statutes were created to grant those involved with the construction of a project a privilege on the properties they build or improve. On the other hand, however, the statutes have mechanisms within to protect the property owners from being liened improperly, or otherwise without notice.
Unfortunately, the notice requirements are oftentimes confusing and technical. It is important, however, that your organization understand the notice requirements of the Private Works Act.
Contracting with the Owner / Resident
The type of notice required is called the “Notice of Lien Rights.” A copy of an example of this notice is available by clicking here.
This notice, again, is required when the following elements are present:
1) Work is being done on a residence;
2) You contracted directly with the owner of the residence. In other words, you are not subcontractor on the project;
3) The owner lives in the residence.
The Notice of Lien Rights to be sent to owners in residential projects is very important, because the law requires that it be provided before work begins, and not as a condition to your construction contract.
Lessor of Equipment or Other Movables
For example, if you lease equipment to a subcontractor, you are not required to deliver an additional copy of the lease to the subcontractor within 10 days of delivery because they will – presumably – already have a copy of the lease. However, you would be required to send a copy of the lease to the general contractor and the owner.
This puts those other parties on notice that you have leased equipment/movables to someone for the work at the jobsite, and if such notice is sent, you will have preserved your right to file a lien in the case of non-payment.
Seller of Movables / Materials / Equipment / Etc.
If the materials sold are incorporated into a commercial project, there are no notice requirements.
If the materials sold are incorporated into a residential project, and you would be liening a residence, LA RS 9:4802(G)(2)-(3) requires that you deliver a notice of nonpayment to the owner of the property at least ten (10) days before filing the lien. The notice must:
- Be served by certified mail, return receipt requested;
- Contain the name and address of the seller of movables (you);
- Contain the general description of materials / movables provided;
- Contain a description sufficient to identify the immovable property against which the lien may be placed;
- Contain a written statement of the seller’s rights (your rights) for the total amount owed, plus interest and recording fees
If you sold the materials/movables to a subcontractor on the project, the notice must be sent certified, return receipt mail to both the owner and the general contractor.
Conclusion
This blog post discusses the most important and prominent notice requirements within the Louisiana Private Works Act. If you are looking to lien a non-paying construction project, you should familiarize yourself with the Private Works Act and consult with an attorney to ensure that you meeting all the requirements to filing.
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