Pacific Reserve Studies
The law provides rights to licensed contractors and material suppliers who are not paid for the work they perform or the materials they have supplied. They are permitted to file a mechanics' lien against the property that benefited from their work or materials. Hiring licensed contractors and not paying them creates potential liability for homeowner associations.
When mechanic's liens are filed against associations, owners will have difficulty refinancing and/or selling their homes. There are some limitations to filing a lien against an association. Following is a summary of the procedure for recording mechanic's liens.
Before recording a lien, a preliminary 20-day notice must be served on the association by the licensed contractor or material supplier. The notice must be served before recording the mechanics lien and not later than 20 days after the actual date construction starts. The notice must contain all of the following information:
- A general description of the labor, services, and equipment to be furnished;
- The name and address of the person providing the services;
- The name of the person who contracted for the purchase of the materials or services;
- A description of the job site sufficient for identification; and
- Notice to the property owner (in boldface type) of potential liens which might result from the owner's failure to pay.
The notice may be served by delivering the notice personally or by first class registered or certified mail to the association's management office, address shown on the building permit, or the address shown on the construction loan deed of trust if applicable.
- If served by mail, the person filing the lien must prepare a "Poof of Service" accompanied by either the return receipt of certified or registered mail, or by a photocopy of the record of delivery and receipt maintained by the post office, showing the date of delivery and to whom delivered, or, in the event of nondelivery, by the returned envelope.
- If served personally, the person filing the lien must prepare a "Proof of Service" showing the time, place, and manner of service, facts showing that service was made in accordance with the statue, and the name, and address of the person on whom a copy of the preliminary notice was served and, if appropriate, the title or capacity in which he or she was served.
The lien is a written statement that must contain all of the following information:
- A statement of the demand after deducting all credits and offsets,
- The name of the association,
- A general statement of the type of services furnished; and
- A description of the site sufficient for identification.
A lien may be recorded in the office of the county recorder where the property is located after furnishing services and before the expiration of:
- 90 days after the completion of the work of improvement if no notice of completion or cessation has been recorded;
- 60 days after a notice of completion or notice of cessation has been recorded if the contractor or material supplier is in direct contract with the owner or 30 days if the contract is with someone other than the owner; or
- 10 days after a notice of completion if the work of improvement is accomplished through the use of two or more original contacts.
A lien binds the property for 90 days after the recording of the claim of lien, unless within that time an action to foreclose the lien is commenced. As soon as the complaint to foreclose the lien is filed, the contractor or material supplier must record a notice of the pendency of the action (notice of lis pendens) with the county recorder.
Once the matter has been resolved with the contractor, the mechanic's lien is removed by filing a release of lien with the county recorder's office where the original lien was filed.
Pacific Reserve Studies