Source: Cornerstone Title Company
The subject of mechanics liens is a complex one, as evidenced by the fact that many sections of the California Codes deal with the subject. It is not the purpose of this article to offer legal advice or even to attempt to summarize all aspects of the current laws pertaining to mechanics liens, but rather to clarify title insurance underwriting guidelines and requirements concerning these liens.
Who can file a mechanics lien in California? Any licensed person or business who provides work or materials to improve a property can file a mechanics lien. This includes direct contractors , subcontractors, material suppliers, equipment lessors, design professionals and laborers.
The priority of a mechanics lien commences when the work has begun or when the
materials are delivered. For example, if the materials are delivered before a deed of trust is recorded, a mechanics lien pertaining to the materials recorded thereafter is actually senior to that deed of trust. If the mechanics lien were to be foreclosed upon, the deed of trust would be secondary and could be eliminated. To protect the insured, when a title insurance company insures a construction loan, an inspection may be ordered on the property before recording the deed of trust to assure that there has been no work commenced or materials delivered.
A mechanics lien encumbers the property for only 90 days after filing,
unless one of the following occurs:
- An action to foreclose the lien is filed with the proper court within that
90-day period after recordation of the lien. - Credit is given (example: time payment plan). Under these circumstances,
the action to foreclose must take place within 90 days after the
expiration of the credit or extension, but in no event longer than one
year after the completion of the work of improvement.
Most title companies consider mechanics liens on a case-by-case basis for up to one year after recording of the lien, even if no notice of action to foreclose has been recorded.
Depending on the situation, some options may include requiring a bond (pursuant
to Sec. 8150 et seq. Cal. Civil Code), or requiring a secured or unsecured
indemnity agreement. Each case is evaluated separately.