California Mechanics’ Lien law provides special protection for laborers, contractors, subcontractors, and suppliers who furnish labor or materials to build, repair, and remodel property. If any workers are not properly compensated for services or materials provided, the home may be subject to a mechanics’ lien and eventual sale. This can happen even where the homeowner has paid in full for the work.
A mechanics’ lien is a right given to workers and suppliers by the state to record a lien to ensure payment. This lien may be recorded when the property owner has paid the contractor, but the contractor then fails to pay the subcontractors, suppliers, and/or laborers. In the worst case, a homeowner may end up paying twice for the same work.
Why is it legal for a homeowner to be placed in this difficult position? The basic theory behind the mechanics’ lien law is that between two potentially blameless parties, the homeowner who has ordered the work is better able to shoulder the cost than the laborer or supplier who has provided work or materials. The homeowner bears the ultimate responsibility ensuring that payment has been made for services rendered. The value of the property been increased by the materials and labor, and the homeowner who has benefitted is required in return to act as the ultimate guarantor of full payment to the persons responsible for the increase in value. In practice, a homeowner faced with a valid mechanics’ lien may be compelled to pay the claimant and then pursue conventional legal proceedings against the contractor or subcontractor who received payment but did not pay their own subcontractors or laborers.
The best way to protect against these claims is for the homeowner to use reputable firms and/or require completion and payment bonding of the work. The homeowner can also issue checks payable jointly to the contractor and suppliers, and disburse funds over a period of time, based upon the percentage of completion of the project. The protection offered by mechanics’ lien releases can also be helpful.
If a mechanics’ lien is recorded against the property, the homeowner may reach a resolution without further payment, if the lien was established without following the proper procedure. Mechanics’ liens must strictly adhere to well-established legal procedure in order to be valid.
This area of the law that is very complex, and it may be worthwhile for the homeowner to consult an attorney if a mechanic’s lien has been recorded against the property. In the event that no effort has been made to enforce the lien after it was recorded, a title company may decide to ignore the lien. The homeowner should be prepared to be presented with a plan to eliminate the title problems created by this type of lien, by means of a recorded mechanics’ lien release from the individual who created the lien, or other measures that the title company may recommend.
The best way to avoid the situation entirely is to investigate the quality, integrity, and reputation of the construction firm. The homeowner should discuss their concerns about possible mechanics’ lien problems and decide a method of ensuring that they will not occur.
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