Dear Maintenance Men | December 1, 2009
25 January 2011
Dear Maintenance Men:
I am about to embark on a large construction project on my apartment building. I don’t really understand the mechanic’s lien issues that invariably come with large projects. I am confused as to whom they protect. Just the idea of someone putting a lien on my property is scary. Can you walk me through the process?
This is probably the most misunderstood part of dealing with building contractors. First the mechanic’s lien and other associated liens are there to protect the property owner, the workers, subcontractors and suppliers.
The lien process is there to alert you before the fact that you are entering into a contract to pay for goods and services. When you hire a prime contractor to do work on your home or apartment building, the contractor typically hires laborers and subcontractors to do some of the work. They also purchase supplies and materials to complete the job.
The property owner is ultimately responsible to pay for any labor, subcontractors or materials used on their property. A mechanic's lien is a "hold" against your property that, if unpaid, allows a foreclosure action, forcing the sale of your property.
It is recorded with the County Recorder's office by the unpaid contractor, subcontractor or supplier.
It means that any of these unpaid entities can claim a lien against the property until they are paid. Now all this does seem very scary and it is meant to be taken seriously. The prime contractor has a direct contractual agreement with the property owner.
If the contractor isn't paid, he can sue on the contract and record a mechanic's lien. But subcontractors, workers and suppliers don't have a contract with the property owner.
A problem occurs when the property owner pays the prime contractor for all or some of the work, but the prime contractor fails to pay the laborers, subcontractors and materials suppliers that were hired to do portions of the job.
If they are not paid, often their only recourse is to file a mechanic's lien on the property.
This may appear to be very one sided, but in reality, it gives you the tools to manage your project. It will let you know who will be owed money and under what time frame before, during and after the project’s completion. The best protection to avoid a lien issue is to use a reputable, established contractor.
The best place to find these contractors is through your local apartment association. Hire only licensed contractors and check their license status. Make sure your contractor hires only licensed subcontractors and check their licenses too. Get a list of all subcontractors, laborers and materials suppliers to be used by your prime contractor before the start of the job.
Be sure to read your contract carefully and ask for clarification on any item you do not understand. The contract should include a schedule that demonstrates when specific construction activities will start and end (such as the framing, sheetrock work, or painting) and the projected payments tied to the contract price of these activities.
Stay informed, ask questions and above all use a reputable contractor familiar with our industry. They are worth the money. This article does not have the room to go into all the necessary detail. Be sure to go to the California Contractors State License Board web site for more information: www.cslb.ca.gov.