Two recent California real estate cases illustrate procedural complications tied to collecting on a mechanic's lien. When notice is not provided as required by statute, it may be impossible to perfect a lien. When seeking to enforce a California mechanic's lien against property owners not parties to a construction contract the value of the contract may come into play.
In the first case, a tree farm contracted to sell shade trees to the developers of a sports, entertainment and restaurant complex. The tree farm only received a small portion of the amount it was owed. It then filed a "materialman's" lien against the developer. The project struggled and the bank foreclosed on its construction loan. Following foreclosure, the bank sought to remove the tree farm's lien. The bank argued that the lien was not valid because of service deficiencies.
California law requires that a mechanic's lien for furnishing goods be served within 20 days after materials were delivered to the jobsite. The question was whether service on the bank was required. The court found that the tree farm had a direct contract and had furnished materials. Thus, it was required to give the bank notice. Because it failed to do so, it could not enforce its lien.
Property owners not parties to the contract
The second case dealt with a condominium project. The developer entered a contract with a building company in Los Angeles. There were many change orders. At the end of the project, the developer refused to pay the additional costs tied to the change orders. The builder recorded a mechanic's lien for those costs. The builder later sought to foreclose on the mechanic's lien against the developer and those who had purchased condominium units in the building.
The builder and contractor reached a settlement. The unit owners wanted to submit evidence related to the value of the construction contract. The district court did not allow the evidence, because it did not relate to the "reasonable value" of the work completed. On appeal, the appellate court did not find such a limitation when enforcing a lien against someone not a party to the contract. The value of the contract could be considered when determining the value of the mechanic's lien.
These cases both demonstrate the complexities of mechanic's lien law in California. Many pitfalls exist and case law interpretations of statutory language are common. It is important to seek the advice of a California construction lawyer who is up-to-date on changes in the field.
When payment is not forthcoming after your company performs work on a construction job or furnishes materials, contact an experienced construction law office. Remedies are available pursuant to California law, such as a mechanic's lien. The procedure for filing and enforcing the lien are complicated and a missed step may invalidate a claim. The assistance of an experienced attorney is one way to ensure you receive payment.