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What is a mechanics lien and how can it help my business?

As we discussed in our last post, the construction industry here in Southern California has recently seen something of a renaissance with the number of new multi-family dwellings and single-family dwellings climbing steadily throughout the region’s five counties.

We also discussed how even though this trend is highly encouraging, the reality is that with more projects — both new construction and renovations — comes a greater likelihood of disputes. For example, many building outfits who provide requested services or suppliers who fill orders for building materials may see their efforts go uncompensated by general contractors overseeing these projects.

As frustrating as this reality can be, it’s important for building outfits and suppliers in this situation to understand that they have options, including a mechanics lien.

What is a mechanics lien?

At its core, a mechanics lien is a hold or legal claim filed by a subcontractor or supplier who has not been paid against a particular property that has undergone an improvement or renovation.

By way of example, consider a supplier who was not paid by a general contractor for supplying a specially made countertop for a kitchen renovation. Here, they could file a mechanics lien in the county recorder’s office.

Does it matter if the property owner already paid the general contractor?

No, it does not matter if the property owner already paid the general contractor and they, in turn, failed to use these funds to pay you.

In the hypothetical example above, the affected property owner is faced with the unenviable dilemma of essentially having to pay for the countertop twice or face foreclosure should they fail to pay the mechanics lien.

Why exactly does the law permit a subcontractor or supplier to go after the property owner?

While going after the property owner for the misdeeds of the general contractor may seem strange or perhaps even a bit unfair, the legal rationale is that between the two parties — the property owner and the subcontractor/supplier — the need of the latter to be recompensed is greater.

Furthermore, the law also recognizes that the aggrieved property owner has the ability to file their own lawsuit against the general contractor in an attempt to secure their lost money.

We’ll continue this discussion in a future post, exploring some of the ways in which property owners will attempt to avoid mechanics liens. In the meantime, if you have questions or concerns relating to this issue or another construction law matter, consider speaking with a skilled legal professional.