Contractors usually don’t record mechanics lien claims unless there is already a payment dispute. For homeowners, the dispute usually involves a remodel, perhaps a room addition or a new kitchen. Typically remodels proceed without adequate plans and specifications and without adequate contract documents. Frequently there is no clear understanding of how much the job will cost or how long it will take. Under such circumstances it is almost impossible for the job to proceed to completion without serious disagreements with the contractor.
Wherever disagreements start - for example, with unacceptable workmanship, disregard of the homeowner’s wishes, interminable delays, or something else - sooner or later the contractor will demand a payment that the homeowner will refuse to make. If no compromise proves possible, the contractor will in some cases send a notice of intent to lien. These notices are designed to cow the homeowner into paying, and they are not required under the applicable statutory law.
If a notice of intent to lien doesn’t produce a resolution, the contractor will quit the job and record a mechanics lien claimat the County Recorder’s Office. Recording is required. The Recorder will promptly send the homeowner a notice that the mechanics lien has been recorded, along with a copy of the document. The notice from the Recorder usually takes the homeowner by surprise and produces considerable consternation. If the homeowner hasn’t yet talked to an attorney about the situation, he should do so now.
Our analysis would start with the validity of the recorded mechanics lien claim. Does it contain all the required information? Was the contractor licensed during the entire time his work was performed? If he wasn’t, his claim is invalid. Did the contractor give the homeowner a preliminary 20 day notice? A contractor whose contract is directly with the homeowner, called a general contractor if subcontractors are involved, does not need to give a preliminary 20 day notice.
A contractor working for a general contractor as a subcontractor does need to give a preliminary 20 day notice. So do suppliers. Concrete suppliers invariably give preliminary 20 day notices, because they are frequently stiffed by the contractor who ordered the concrete.
Small jobs may involve only one contractor and a few laborers employed by him. In that case, a dispute would probably produce only one mechanics lien claim. Laborers also have mechanics lien rights, and they do not have to give a preliminary 20 day notice. However, it rarely makes economic sense for an unpaid laborer to pursue a lien. Therefore, a laborer’s mechanics lien is seldom seen.
Disputes over large jobs involving both a general contractor and subcontractors may produce multiple mechanics lien claims. However, subcontractors’ claims frequently prove invalid because they have not bothered to give a preliminary 20 day notice to the homeowner
Once a lien is recorded, the claim becomes a lien upon the homeowner’s real property, like a mini-mortgage. Within 90 days of the date the claim is recorded, the contractor must file a lawsuit to foreclose the mechanics lien. When small sums are at issue the contractor may not do so. However, the recorded mechanics lien claim does not disappear by itself. It stays in the public record, may lower the homeowner’s credit score, prevents sale or refinance of the property, and otherwise remains a useful bargaining chip for the contractor.
Making matters worse, the courts have held that a contractor may record a series of liens without filing suit on any of them. There is a special court proceeding to obtain a court order releasing a stale recorded lien claim, but it is neither as simple, quick, nor inexpensive as it ought to be.
When contractors actually file lawsuits to foreclose, the cases typically prove unexpectedly difficult and expensive to resolve favorably for the homeowner. Contractors are typically stubborn and contentious, and refuse to admit that they have done anything wrong. Dispositive industry standards for remodels are hard to find. If the issue is carelessness, the legal standard of care is the care most contractors in the area take doing similar work. In Southern California this seems to be a low standard, and whatever it is, the homeowner will have to prove it by expert testimony.
These difficulties are compounded by the factors we started with - sketches rather than blueprints, little or no specification of materials or fixtures, and only a vague idea of how long the job is supposed to take and what it is supposed to cost. The legislature has attempted to ameliorate this unfortunate situation by prescribing a form for home improvement contracts, but even if it is used, it does not solve most of the problems we have described. The only silver bullet available to the homeowner is a relatively recent law requiring unlicensed contractors to return any money paid to them, regardless of the quality of their work.
Although it is generally unpalatable to a homeowner in the early stages of a mechanics lien foreclosure case, settlement is in most instances the only rational way to get rid of the contractor and his mechanics lien. Not only is winning never guaranteed, it is furiously expensive to get to and through trials of these cases.The best defense a homeowner has against a mechanics lien claim is not to get one in the first place. This isn’t cheap or easy either. Getting the job done right - even a small job - requires an architect, a complete and detailed set of plans, a civil engineer if a room addition or a second story addition is involved, preselection of all materials and fixtures, a clear contract (which does not have to be long if the other requirements are met), an honest and experienced contractor who does not use pick-up labor, the discipline not to make changes as the work proceeds, and acceptance of the proposition that the project will cost considerably more than the homeowner hoped it would cost.
San Diego Attorney Stanley D. Prowse is a Civil Litigation Attorney specializing in California Construction Law.