Homework About Liens
If you are planning to add a room to your house or do any other substantial remodeling, you should know a little about the law of mechanic’s liens.
One legal treatise describes a mechanic’s lien as “a claim against the real property on which the claimant has bestowed labor or furnished material for the value of the labor done or material furnished.”
If you can’t understand that legalese, don’t worry about it. Essentially, what it means is that someone who improves your home can record a lien against your property if you don’t pay.
It is a shortcut legal method to seek payment, by asserting a legal claim against the property itself. A lien is a claim recorded at the county recorder’s office, just like a mortgage, and can be the basis for a foreclosure if payment is not made.
And the most frightening thing about mechanic’s liens, from the perspective of homeowners, is that you might have to pay twice.
First, you pay the general contractor for all the work done. You blithely assume that he will pay the subcontractors, such as the electricians and plumbers.
But what if he doesn’t pay them? What if he has financial problems or leaves town? You would think that because the general contractor was the person you retained, and because you’ve paid him, that the others would have no recourse.
But you may soon find to your dismay that you’ll have to pay again--this time directly to the subcontractors, or else they can file a lien against your property and even force a foreclosure and sale if necessary to get paid. (The lien applies against the property, not any other assets you may have.)
Created by statute, mechanic’s liens have been around a long time. The first such U.S. law was passed in Maryland in 1791, and California has had mechanic’s liens since 1850.
They were intended to provide ordinary working men and women a means to enforce payment against delinquent landowners without having to retain legal counsel. But the procedures required to “perfect” a claim and foreclosure are, in the words of one legal scholar, “a labyrinth of mysterious procedural demands and substantive inconsistencies.”
May Need a Lawyer
So if you are in the construction business, you probably need a lawyer to pursue your claim. And because there are very strict time deadlines that must be met, you should consult a lawyer generally to draft the appropriate forms and advise you long before you begin any work.
On the other hand, if you are a homeowner about to embark on what all agree is a perilous course--hiring a building contractor to improve your home--you can take steps to avoid being hit with a mechanic’s lien by a subcontractor.
Your contractor, assuming he is licensed, is required by state law to provide you with a notice in clear language explaining your rights and responsibilities under the mechanic’s law.
Most important, as payments are made, you or your contractor should have the subcontractors sign the proper waiver and release forms, thus giving up their right to file a mechanic’s lien. If you have a contract with your general contractor, it should require him to obtain such signed releases.
In 1984, the state Legislature amended state law to explicitly provide the different forms that should be used. They can be found in Section 3262 of the Civil Code, in a local law library. And many stationery stores sell the forms.
The law says you must use these particular forms in order to be assured of the effectiveness of a release and waiver. A receipt is not sufficient. The forms are self-explanatory, believe it or not. (But remember, that’s a lawyer talking.)
There is not much you can do to avoid the almost-inevitable problems during construction. But getting the right forms signed by subcontractors will, at least, avoid the threat of somebody saying later that he or she hasn’t been paid.
Attorney Jeffrey S. Klein, The Times’ senior staff counsel, cannot answer mail personally but will respond in this column to questions of general interest about the law. Do not telephone. Write to Jeffrey S. Klein, Legal View, The Times, Times Mirror Square, Los Angeles 90053.
