Lien Early And Lose Your Lien Rights!!

WARNING:  California Appellate Court Confirms – Lien Early And Lose Your Lien Rights!!

As many California contractors know, one of the strongest remedies to secure non-payment for work performed is the constitutionally guaranteed right to record a mechanics lien on the work of improvement. One of the crucial factors in successfully enforcing a mechanics lien is ensuring that the mechanics lien was timely recorded. Most contractors, to avoid recording the mechanics lien too late, record their liens as soon as their scope of work on the project is deemed complete. However, as the recent court of appeals decision below suggests, this strategy may no longer be viable as the courts have determined that recording a mechanics lien too early may also void the contractor’s rights under the mechanics lien.

Recording a mechanics lien too early may void the contractor’s rights under the mechanics lien.

In Precision Framing Systems, Inc. v. Luzuriaga, decided September 3, 2019, the appellate court affirmed the trial court’s determination that pursuant to Civil Code Section 8414(a), a mechanics lien that was recorded before a contractor ceased all work related to the work of improvement, the mechanics lien would be considered premature, void, and unenforceable.

In summary, Precision was contracted to perform framing work, including the “supplying and installing” of the trusses on a construction project. After completing its work, Precision failed to receive full payment for its work, so Precision promptly filed a mechanics lien. However, before Precision recorded its mechanics lien, the city had issued several correction notices regarding the installed trusses. These correction notices remained outstanding when Precision completed its work as there was an ongoing dispute in determining the responsible party for performing the correctional work. A month after Precision recorded its mechanics lien, Precision returned to the project site and performed the repair work on the trusses.

Because Precision was aware of the correction notices which were substantially related to its scope of work before it recorded its mechanics lien, the Precision’s scope of work was not complete. The court found that Precision’s “cessation of work”, pursuant to the statute, was when Precision had completed the correctional work. The court noted that although Precision had ample opportunity to rerecord its mechanics lien after completing the correctional work, it failed to do so, causing its only recorded mechanics lien to be invalid.

Don’t Lose Your Lien Rights!!

The court’s decision in Precision is a stark reminder to all contractors that although the mechanics lien exists as a powerful legal instrument to secure payment, there are strict guidelines that must be followed. To avoid waiving their lien rights, contractors must take particular care when recording the mechanics lien, especially when there is correctional work that remains to be performed.

This article is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances.  Questions please contact Maria Plumtree here.