Most California contractors understand that filing a mechanic's lien is an effective way to guard against non-payment for work. To be effective, a mechanic's lien must be filed in the county where the work was performed within 60 days after completion of the work. Notice must also be given to the owner and to other potential lien claimants. Despite these protections, non-payment (or partial payment) for work is a common cause of contract disputes. Supposing that a contractor has complied with all of the statutory requirements necessary to create an effective lien, but still no payment is forthcoming. Now what happens?
The lien claimant must begin an action to foreclose the lien within 90 days after filing the lien notice in the county recorder's office. The action is commenced much like any other civil action. The claimant must file a complaint to foreclose the lien and serve notice of the complaint on the property owner and on any other claimants that have filed lien notices. In most cases, all parties who have filed lien notices will join their claims in a single action.
The court must then hold a hearing to resolve the claims and establish the order in which they will be paid. The order of payment is important if the property does not have sufficient value to pay the amount of all liens. If one or more claimants prevail in proving that they are entitled to payment, the court will schedule a sale of the property and will direct that the proceeds be used to pay the claims. A property owner may defend a lien foreclosure suit by proving that the work was not done according to the contract or that the amount of the lien exceeds the contract price for the work.
As might be inferred from this brief description, the foreclosure of a mechanics' lien is complex litigation, with many technical requirements that can invalidate a claim if they are not followed exactly. Many contractors are able to file and record mechanics' lien notices, but the services of a knowledgeable and experience construction attorney are essential to the success of an action to foreclose a lien and convert paper work into money.
Source: California Civil Code, Enforcement of Liens §§3143-3154, accessed on Feb. 16, 2016