Legal Question in Construction Law in California

Re: Contesting a Lien

Depending on facts not mentioned in your question the preliminary notice may be totally void because it was untimely. From a practical standpoint, if you get the feeling you are caught between a dispute between a general contractor and a sub or material supplier, send a letter demanding an immediate withdrawl of the notice and futher putting the general on notice that you will look to the general to indemnify you from all legal costs or damages you suffer. Yes, a homestead does protect you but only to the extent that if your house is sold at foreclosure to satisfy a lien then the amount of your homestead protection is not reachable by the foreclosing party. As a practical matter, homesteads offer "total protection" only if timely recorded and where the amount of any prior mortgage loans plus the amount of the homestead equal or exceed the sale value of the property, thus leaving no equity for the foreclosing lien holder.

Re: Contesting a Lien

In reply to your question, let me offer the following:

The 20 Day Preliminary Notice you received is not, repeat not, a Claim of Mechanics Lien that creates a cloud on your title. The Civil Code requires subcontractors, suppliers, and such, to serve the Notice on property owners to alert the owners that a lower-tier subcontractor is performing work on the property, and if not paid by the original contractor - i.e., the entity with whom you made the contract - will have lien rights against the property.

If the flooring company doesn't pay the subcontractor, the subcontractor must then prepare a Claim of Mechanic's lien and record that claim with the county recorder's office. Then, and only then does the lien attach to your property. After a Claim of Mechanic's lien is recorded, the claimant must file suit to foreclose the claim of lien within 90 days, otherwise the lien is void, and can be removed by a petition in court. So, technically you really need do nothing until such time as the subcontractor actually records the claim of lien, then files suit to foreclose.

However you can take steps right now to protect yourself. First, you should demand that the flooring company that hired the subcontractor provide you with a Labor and Material Release from the subcontractor showing that they've been fully paid. Demand this release as a condition of paying anything more to the flooring company. If you've already paid them in full, still demand the release, including one from them as well.

Next, if the job is completely 100% finished, record a Notice of Completion with the county recorder's office. That will shorten the time in which the subcontractor may record a lien claim against the property to 30 days from the date the Notice is recorded. If you're in the southern California area, and would like help preparing the Notice of Completion, please feel free to give me a call.

Finally, I'm not sure that the homesteading your property will be all that effective in this case, as it only protects a certain % of your equity in the property. Homesteading would not preclude sale of the property in the event that the subcontractor actually recorded the lien, took the foreclosure case to trial and received a judgment of foreclosure.

Feel free to contact me with further questions or comments.

Now, the inevitable caveat: The foregoing information is provided as an accommodation only, and does not constitute specific legal advice or a legal opinion based on a comprehensive review of all relevant facts, nor can provision of such information be construed as creating an attorney-client relationship.