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California Mechanic's Lien law provides special
protection to contractors, subcontractors, laborers and suppliers who furnish
labor or materials to repair, remodel or build your home.
If any of these people are not paid for the
services or materials they have provided, your home may be subject to a
mechanic's lien and eventual sale in a legal proceeding to enforce the lien.
This result can occur even where full payment for the work of improvement has
been made by the homeowner.
The mechanic's lien is a right that California
gives to workers and suppliers to record a lien to ensure payment. This lien
may be recorded where the property owner has paid the contractor in full and
the contractor then fails to pay the subcontractors, suppliers, or laborers.
Thus, in the worst case, a homeowner may actually end up paying twice for the
same work.
Why, you may ask, can a homeowner be placed in
the impossible situation of having to pay twice for the same work? The answer
lies in the Constitution and laws of California. The overriding theory behind
the mechanic's lien law is that between two potentially blameless parties, the
homeowner who has ordered the work and made full payment of the agreed amount
and obtained the value of the work is in a better position to bear the loss
than the laborer or supplier who has provided work or materials to the job site
and has not been paid for his efforts by the contractor. It is the homeowner
who bears the ultimate responsibility for making payment for services rendered.
The theory is that the value of the property upon which the labor or materials
have been bestowed has been increased by virtue of these efforts and the
homeowner who has reaped this benefit is required in return to act as the
ultimate guarantor of full payment to the persons responsible for this increase
in value. In practice, a homeowner faced with a valid mechanic's lien may be
compelled to pay the lien claimant and then pursue conventional legal remedies
against the contractor or subcontractor who initially failed to pay the lien
claimant but who himself was paid by the homeowner. Another justification for
this result relates to the relative financial strengths of the parties to a
work of improvement. The law views the property owner as being in a better
situation to absorb the financial setback occasioned by having to pay the
amount of a valid mechanic's lien, as opposed to a laborer or material man who
is viewed as being less able to absorb the financial burdens occasioned by not
being paid for services or materials provided in connection with a work of
improvement.
The best protection against these claims is for
the homeowner to employ reputable firms with sufficient experience and capital
and/or require completion and payment bonding of the construction work. The
issuance of checks payable jointly to the contractor, material men and
suppliers is another protective measure, as is the careful disbursement of
funds in phases based upon the percentage of completion of the project at a
given point in the construction process. The protection offered by mechanic's
lien releases can also be helpful.
Even if a mechanic's lien is recorded against
your property you may be able to resolve the problem without further payment to
the lien claimant. This possibility exists where the proper procedure for
establishing the lien was not followed. While it is true that mechanic's liens
may be recorded by persons who have provided labor, services, or materials to a
job site, each is required to strictly adhere to a well-established procedure
in order to create a valid mechanic's lien.
Needless to say, this is one area of the law
that is very complex, thus it may be worthwhile to consult an attorney if you
become aware that a mechanic's lien has been recorded against your property. In
the event you discover that a lien has been recorded but no effort has been
made to enforce the lien, a title company may decide to ignore the lien.
However, be prepared to be presented with a positive plan to eliminate the
title problems created by this type of lien. This may be accomplished by means
of a recorded mechanic's lien release from the person who created the lien, or
other measures acceptable to the title company.
As in all areas of the real estate field, the
best advice is to investigate the quality, integrity, and business reputation
of the firm with whom you are dealing. Once you are satisfied you are dealing
with a reputable company and before you begin your construction project,
discuss your concerns about possible mechanic's lien problems and work out, in
advance, a method of ensuring that they will not occur.
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