Foreclosure of Mechanics Liens
The Firm maintains a mechanics lien practice which focuses primarily on the representation of general contractors and subcontractors in an effort to recover monies due them. Provided that all prerequisites have been met for the recordation of a valid mechanics lien, the Firm will file suit to foreclose on that lien.
Word of Warning: By law, the suit must be filed within 90 days of the recordation of the lien; otherwise, the lien becomes stale and must be voluntarily removed by the claimant. The penalty for refusing to remove a stale lien can be the imposition of attorneys’ fees incurred by the property owner in obtaining expungement of the lien.
We encourage our lien claimant clients to move quickly and file for foreclosure within 20 days after recordation.
If the lien is not valid, or the contractor cannot for whatever reason make a lien claim, then we will represent the contractor in a suit for breach of contract and, where appropriate, unjust enrichment.
Here's how contractors can help protect themselves from non-payment:
- Timely serve 20 Day Preliminary Notices, where applicable. Generally, when the contractor is not under direct contract with the property owner, he must serve a 20 Day Preliminary Notice on the owner (or reputed owner), the general contractor (or reputed general contractor - if there is one), and the lender (or reputed lender - if there is one). The law requires that the 20 Day Preliminary Notice be in a certain form. Failure to use the correct form and/or failure to serve the Notice as required by law is generally an absolute bar to maintaining a lien claim. Late notices are sometimes permitted, but the lien rights will only relate back 20 days.
- Timely record the lien claim. There are many technical rules regarding timely filing. The contractor is encouraged to retain a lien filing service, as an additional step to ensure that the statutory filing requirements are met. The lien must be recorded in the Recorder’s Office of the County in which the real property subject to the work of improvement is located.
- Timely file suit to foreclose. Absent certain facts, suit must be filed within 90 days of recordation of the lien. Many contractors erroneously calculate the time frame as “three months,” but in fact, it’s a strict 90 days, which is often one or two days less than “three months”.
The only way to foreclose on a mechanics lien is through a lawsuit filed in Superior Court. It cannot be enforced in arbitration, nor can it be enforced in Small Claims Court. The contractor may be able to file the lawsuit himself, but if the contractor is a corporation, limited partnership, or limited liability company, then the law requires that the foreclosure lawsuit be filed by an attorney.
Many lien claimants are unaware of the technical requirements regarding the time periods in which to record the lien:
- Upon recordation of a "Notice of Completion," an original contractor has 60 days to record his/her lien; all others have 30 days.
- After 30 days of the recordation of a "Notice of Cessation," an original contractor has 60 days to record his/her lien; all others have 30 days.
- If neither a "Notice of Completion" or "Notice of Cessation" is recorded, then all lien claimants have 90 days after completion of the work of improvement to record their liens.
- "Completion" of the work of improvement is defined by statute.
- If the owner records a “Notice of Non-Responsibility,” this will generally protect the owner from liens.
If an owner desires to sell or refinance property that is subject to a valid mechanics lien, the owner can “bond around” the lien by posting cash or a bond for 150% of the face amount of the lien. The bond remains in place to satisfy the lien.