Property Owners Can Avoid Mechanic's Liens By Using Joint Checks
QUESTION: “In California, can a subcontractor put a lien on property it worked on if the owner has already paid the general contractor in full?”
ANSWER: Yes, a subcontractor can place a mechanic’s lien on property even if the owner has already paid the general contractor in full, but there is a way to avoid this dilemma–keep track of notices and issue joint checks.
A Preliminary 20-Day Notice is required from the subcontractor or supplier if there is a chance that they may need to file a lien. The Notice states that the subcontractor or supplier has provided or will be providing goods and services to improve your property and could file a lien claim if they are not paid. If subcontractors and suppliers don’t provide you with the notice, they lose the right to file a lien.
YOU CAN AVOID MECHANIC’S LIENS WITH JOINT CHECKS
Save the notices, so you can keep track of who is owed money and when they are paid. Sometimes a subcontractor or supplier will give you the Preliminary Notice before delivering supplies or starting work and up to 20 days after delivering supplies or starting work.
The simplest way to prevent liens is to pay with joint checks. Compare the contractor’s bill for materials or labor, compare it to the schedule of payments in your contract and the Preliminary 20-Day Notices.
Then, make sure that work was done as described. Make out the check to both the contractor and the supplier, or subcontractor. Both parties will have to endorse the check, which will ensure that the subcontractors and suppliers get paid.
The lien release system is designed to allow property owners to track when potential lien claimants have been paid. Before making a payment, get a signed conditional release from the possible lien claimants. Get information on lien releases from the Conditional and Unconditional Waiver and Release Forms section of the Contractor’s License Board http://www.cslb.ca.gov/ . Either you or your contractor can download a copy of the release. The prime contractor is required to get this release for you from the potential lien claimants, if you ask for it.
After you pay, the contractor should get you an unconditional release signed by each of the claimants paid for the portion of the work being released. Make sure that the actual claimant signs the unconditional release. By law, you may withhold the next payment until you get the unconditional releases for the previous payment.
By filing a Notice of Completion with the County Recorder’s office after work is completed, you can reduce the amount of time a contractor, subcontractor or supplier has to record a claim. This Notice reduces the amount of time a contractor has to record a mechanic’s lien from 90 to 60 days, and reduces the time a subcontractor or materials supplier has to record a mechanic’s lien from 90 days to 30 days. The Notice of Completion form may be obtained through your County Recorder’s office or an office supply store.