A Change in the Law

Something that I have advocated for a long time has become law. Now a simple procedure, a courtesy letter really, will become an official document with official legal wording that is required to be recorded along with additional recording fees and mailing fees and the timing of the letter will be a core argument challenging the validity of future claims for years to come.

Whenever I have the opportunity to speak in seminars about the Mechanic’s lien law of California I would urge the students to send a letter to the owner and general contractor a letter warning them that a Mechanic’s lien is imminent unless payment is received post haste. Frequently, this warning alone results in payment making the lien filing unnecessary.

The letter is very simple. I’d identify the myself and that my company had supplied material at a specific location and that it was charged the account of the specified customer and that I’d sent a Preliminary Notice on a specific date and that if I did not receive payment within ten days I was going to file a Mechanic’s Lien on said property. I’d send the letter to the owner certified return receipt requested and I’d send a copy to the general contractor. Then I’d sit back and wait for the proverbial caca to hit the fan. Very often it did, because while I had not received payment from my customer / contractor, the general or the property owner already had sent payment to my customer / contractor. I was not usually privy to the yelling and screaming and admonitions and threats that went on between my customer who was supposed to pay for materials but didn’t and the owner or general contractor who assumed he would. However, very often, assuming there was money remaining to be paid, my customer was quick to make payment, albeit sheepishly.

This point was driven home after I had filed a $13,000 lien. Sometime afterwards a representative of the general contractor called me. He was furious, not because I had filed the lien; I had a deadline after all, but that I failed to notify him that I was going to. He had to find out about the lien from his client the property owner and he had no idea I had not received payment from my customer, his subcontractor. To make matters worse, had I notified him earlier, there was still money in the contract. At this late date the money had all been spent. What upset this representative was his belief that as a material supplier, entitled to lien, I could do so without consideration of the consequences and with a little more effort, I could have received payment much earlier. Now I was facing the likelihood of an expensive lawsuit.

One of the problems with this early warning notification is too often the lien claimant waits until the last minute to file the lien in the first place and does not have time to warn anyone. Now that it is law, a courtesy phone call will not be enough. When the law takes effect in January 2011, the lien claimant will be required to send to the owner of the property being improved a Notice of Mechanic’s Lien along with a copy of the intended lien sometime before the lien is filed. No more last minute e-mails or phone calls. Additionally, the notice must contain the following language:

NOTICE OF MECHANIC'S LIEN
ATTENTION!

Upon the recording of the enclosed MECHANIC'S LIEN with the county recorder's office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanic's lien is recorded.

The party identified in the mechanic's lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanic's lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanic's lien is released.


BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMATION ON MECHANIC'S LIENS GO TO THE CONTRACTORS' STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov.

Should the lien be filed, a copy of this notice and its proof of service affidavit must be filed along with it. Each additional page carries its own recording fees. If this procedure is not followed, your lien will be unenforceable. That’s right, in little more than a year from now, if you fail to send this notice, your lien rights go down the drain.

One of the real hardships with a law like this is that it affects companies who are already ill equipped or ignorant of the lien laws as they presently stand. I see companies who have their attorneys file liens for them and therefore, are hesitant to file liens in the first place. I see companies file Preliminary Notices routinely but fail to enforce them. I see companies prepare Preliminary Notices but fail to mail them properly. While there are several providers of Mechanic Lien Law seminars, it is very difficult to attend and for many, vacating an already lean credit department to participate is not always an option. This is where Strategic Credit Management Solutions can help. We know lien law. We’ve had over thirty years experience with it. Now is a good time to implement a procedure that will follow the law in 2011. Not only will it collect more money, it will secure your lien rights and it’ll be part of your routine. See our website at http://powerscredit.com/. You can e-mail us at patrickpowers@sbcglobal.net. Your comments are welcome.