Legal Question in Real Estate Law in California

Whether and when you release the mechanics lien depends on the terms of your settlement. Normally, if I were representing the owners I would arrange to record the release of the mechanics lien concurrently with recording the deed of trust. As for the priority issue, you need to know if any liens have recorded after your mechanics lien. If not, the deed of trust will have the same place in the chain of title as the mechanics lien. If there have been intervening liens, however, you are right that you would lose your position by recording the deed of trust and releasing the lien. The best way to assure your position is to have the settlement implemented through a title company escrow just like any home loan, and require an ALTA Lender's policy of title insurance issued in your favor without any intervening liens. If there is an intervening lien they won't be able to issue the policy and you can require the owner to clear them or get them to subordinate before you release the mechanics lien.

If the deed of trust is drafted correctly, then you will gain the property in event of default. For review of the deed contact me directly.