California gives payment priority to properly licensed contractors and material suppliers who are not paid for the work they perform. If unpaid, they are allowed to file a mechanics' lien against the property that benefited from their work or materials. When mechanics liens are filed against associations, owners will have difficulty refinancing and/or selling their homes. Following is a general outline of the procedure for recording mechanics' liens.
Process for Recording a Lien
1. Preliminary 20-day Notice. Before recording a lien, a preliminary 20-day notice must be served on the association. The notice must be served before recording a lien and not later than 20 days after the actual date of construction begins, and must contain 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.
- Notice to Property Owner (in boldface type) of potential liens which might result from the owner's failure to pay.
2. Service of Notice. 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 building permit, or the address shown on the construction trust deed.
- If served by mail, the person filing the lien must prepare a "Proof 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 non-delivery, 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 statute, 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.
3. Claim of Lien. The claim of lien is a written statement containing the following information:
- A statement of the demand after deducting all just credits and offsets;
- The name of the association;
- A general statement of the kind of services furnished;
- A description of the site sufficient for identification.
4. Recordation. 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 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 you are in direct contract with the owner or 30 days if your 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 contracts.
Filing Suit to Foreclose/Recording Notice of Lis Pendens. No lien binds any property for longer than 90 days after the recording of the claim of lien, unless within that time an action to foreclose the lien is commenced in a proper court. As soon as the complaint to foreclose the lien is filed, you must record a notice of the pendency of the action (notice of lis pendens) with the county recorder.
Release of Lien. Once the matter has been resolved with the contractor, the mechanics' lien is removed by filing a release of lien with the county recorder's office where the original lien was filed.
Protection for Associations. The Davis-Stirling Act prohibits a mechanics lien from being filed against another owner in common interest developments unless that consent was provided or that request was made, except in the case of emergency repairs. Members can remove their units from a lien against two or more separate interests by either paying to the holder of the lien the fraction of the total sum secured by lien that is attributable to the owner’s separate interest or recording a lien release bond. The Act also deems the association to be an agent of the membership with respect to a work of improvement on a common area for all notices and claims required pursuant to existing law relating to works of improvement. (Civ. Code §4615.)
Recommendation: Whenever dealing with contractors for work in the association's common areas, boards should have a written agreement with the contractor and should have the terms reviewed by legal counsel before signing it. If a mechanics lien is recorded against the association, boards should immediately contact legal counsel.
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.