May 19, 2022
About Mechanics Lien:
The California law, your risk as the homeowner and how BuildWiz helps protect you
What is a Mechanics Lien?
By California law anyone who helps improve your property, but who is not paid, may record what is called a mechanics lien on your property. A mechanics lien is a claim, like a mortgage or home equity loan, made against your property and recorded with the county recorder.
Even if you pay your contractor in full, unpaid subcontractors, suppliers, and laborers who helped to improve your property may record mechanics liens and sue you in court to foreclose the lien. If a court finds the lien is valid, you could be forced to pay twice or have a court officer sell your home to pay the lien. Liens can also affect your credit.
To preserve their right to record a lien, each subcontractor and material supplier must provide you with a document called a ‘Preliminary Notice.’ This notice is not a lien. The purpose of the notice is to let you know that the person who sends you the notice has the right to record a lien on your property if he or she is not paid.
BE CAREFUL. The Preliminary Notice can be sent up to 20 days after the subcontractor starts work or the supplier provides material. This can be a big problem if you pay your contractor before you have received the Preliminary Notices.
You will not get Preliminary Notices from your prime contractor or from laborers who work on your project. The law assumes that you already know they are improving your property.
REMEMBER, IF YOU DO NOTHING, YOU RISK HAVING A LIEN PLACED ON YOUR HOME. This can mean that you may have to pay twice, or face the forced sale of your home to pay what you owe.
How does BuildWiz help protect you?
As a contractor writes you a bid, we ask them to provide information about trades associated with each project milestone. As the contractor completes a milestone, we ask them to add a “conditional lien release” document from the material and labor trades, associated with the milestone.
As the customer, you should check that there is a trade name and address specified on the bid for any vendor delivering materials and sub doing any work in your property. In case that a subcontractor shows up, or material is delivered from a vendor that doesn’t show up on your trades list, you should ask your contractor to add them as trades.
We also make the final milestone dollar amount at least 20% of the project cost, and we let the homeowner withhold the final milestone’s payment for 20 days, so that a ‘Preliminary Notice’ would be delivered by your contractor’s trades, and the homeowner may require conditional lien release from those trades, prior to final payment.
Few simple steps to keep everybody safe!
The BuildWiz Team