What Happens After I Record My Lien? How Do I Get Paid? - California - Webinar

In this blog, presented by SunRay Construction Solutions and William L Porter, Founder & President, Porter Law Group, find out in in detail about the key deadlines that you need to meet and various tasks that you must perform to ensure that your lien results in successful payment.  

What is the Mechanic’s Lien Lawsuit Deadline?

Once you have recorded your mechanic’s lien, one of the most important things that you need to do is look at the date in the upper right of the mechanic’s lien. This is the date when the mechanic’s lien was recorded at your County Recorder’s office. You have to calculate 90 calendar dates from this date.

• The 90^th day is the date when you must file your lawsuit.
• If you fail to file your lawsuit as per this deadline, then your lien will expire.
• You may also include other claims as part of your lawsuit. For example, breach of contract, bond claims, stop payment notice, open book account, account stated, etc.)
• These claims may also have their own specific deadline for filing a lawsuit; however, the shortest deadline for filing a lawsuit is the mechanic’s lien deadline. So, as long as you adhere to this 90-day deadline, you should be okay on the deadline for all the other claims.  
• Another key item to remember is to reach out to your attorney at least 2-3 weeks before you reach the 90-day mark. This will allow you to provide as much information as possible to your attorney, so that they can file the lawsuit accordingly.

Mechanic’s lien are quite common in construction projects, and it is also quite common for people to not go ahead with a lawsuit after filing their lien claim. In some cases, the owner or whoever is responsible for making the payment, try to wait and see if you miss the 90-day deadline. This is because, as mentioned earlier, if you miss the deadline, then your lien is considered invalid.

• However, what you can do is proactively inform the owner, general contractor, subcontractor, or whoever is responsible for paying you that you are well aware of the 90-day deadline; and that you are not going to miss it.
• You can also have a discussion with them and ask them to resolve the issue before you file a lawsuit because if you do file the lawsuit, then they may end up not only losing their property, but also paying their attorney fees as well as your attorney fees.
• So, the best course of action would be to use the time between the time you record the mechanic’s lien and you file a lawsuit, to avoid going the long and expensive route and resolving the issue as soon as possible.

If the owner agrees to resolve the payment issue, make sure that you get the amount in your bank irreversibly. Once you are paid, you can release the lawsuit.  

Caution to Note

Here are some things that you need to take into consideration.

Penalty for False or Inflated Mechanic’s Lien

• If you willfully inflate your mechanic’s lien, and if the other party can prove that you have inflated it, then you will lose your entire mechanic’s lien.  
• Remember that they will not adjust it down to the proper number, rather, you will just lose the entire lien.
• So, before you go ahead and file your lawsuit, make sure that the amount that you have mentioned is correct.
• Also, the amount of your lien should be the principal amount that you are owed. Do not add in any extra amount, such as interest on your attorney fees, etc.

Obligation to record a “Notice of Pendency of Action”

• Once the lawsuit is filed, you need to remind your attorney to file the Notice of Pendency of Action within 20 days (about 3 weeks) after the lawsuit is filed. This Notice has to be recorded at the County Recorder’s office.  
• If your attorney fails to file this notice, then the owner can sell their property free and clear of your lien.
• What this notice does is, it informs anybody who is looking at the property that there is a lawsuit against it, and if the property is sold, then it will include your mechanics lien as part of the sale.

Note Regarding Extensions of Lawsuit Deadline (“Notice of Credit”)

• The only way to extend your 90-day deadline is by filing a Notice of Credit.
• This is a document which must be signed by the owner before a notary and recorded at the Country Recorder’s office before the 90-day deadline.
• Most attorneys do not recommend a Notice of credit unless there is a very reliable reason to wait a bit longer to get paid.

Release of Mechanics Lien Upon Payment

It is very important to release your mechanics lien upon payment.

• If you don’t release your mechanics lien, then the person who has the lien on their property can go to court and the judge will make a judgment against you, the lien claimant, for not releasing the lien after you have been paid.
• You must release your lien not only upon payment, but also if you miss the 90-day deadline.
• If you fail to release the lien, it can result in extreme measures, such as suspension of your contractor’s license.

Another key item to pay notice to is the “Relation Back” effect of mechanics lien.

• All the mechanics lien will relate back to when someone first began working on the project. It doesn’t have to be you; it can be anyone.
• For example, you have to sell the property and there is a deed of trust for who gets paid first. The rule is that all the mechanics liens relate back in their priority to when some person first started working on the project.
• Based on the ‘relation back’ effect, the mechanics liens of claimants should be paid in full before the deed of trust obligation is funded.

Know more: California Statutory Construction Releases

What is the Stop Payment Notice Lawsuit Deadline?

A stop payment notice basically stops the money from flowing from the owner to the GC or from the bank to the GC, so that you have a source of money to get paid from.

• You can file a lawsuit to enforce a Stop Payment Notice after 10 days from the date the Stop Payment Notice was served, but no later than 90 days following the expiration of the period within which Stop Payment Notices must be served.
• In short, the last day to file a lawsuit on a Stop Payment Notice claim will be either 180 days from the day the project was completed, or 120 days from the day a valid “Notice of Completion” or a “Notice of Cessation” was recorded.
• Once the claimant receives the payment, they need to release the Stop Payment Notice. The claimant can either use the form “Release of Stop Payment Notice” or in case of partial payment, they can use the form “Partial Release of Stop Payment Notice”.

What is the Payment Bond Lawsuit Deadline?

• If there is a payment bond and it is recorded, then the claimant will have to file a lawsuit within six months after completion of the work improvement.
• If the payment bond is not recorded, then you have up to four years to record your lawsuit.

Key Takeaway

To sum up, make sure that you record your mechanics lien lawsuit within the 90-day deadline, talk to your attorney at least 2-3 weeks in advance, so that they have enough time to gather all the required information, and once you get paid irreversibly, then make sure to release your mechanics lien, stop payment notice, or payment bond claim.  

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