It is now a known fact that home improvement projects have significantly increased during the Covid-19 lockdown. The Consumer Specialists and the Home Projects Council recently examined that 57 percent of homeowners focused on home improvement projects during the first three (3) months of COVID-19. It is not surprising that the U.S. Census Bureau report has identified a 22.6 percent increase in sales for home centers, hardware stores, garden centers and building materials suppliers. The unfortunate pandemic has offered a window for creative and necessary home improvement projects.
As a homeowner in California, are you aware of your rights and the duties of your contractor? For instance, imagine you embark on an extensive home improvement project costing $10,000 (material and labor). You enter a contract with a licensed contractor and are happy with your new floor and walls. Upon completion of the work, you write a check of $10,000 to your contractor. However, a week later you receive a letter that a Mechanic’s Lien has been filed against your home for $4,000 by a tile and floor company. You are confused because you never had a contract with this specific tile and floor company. In fact, you have never heard of this company.
Upon further investigation, you find that the tile and floor company was a sub-contractor that had entered into a contract with your Contractor. Your Contractor failed to make a timely payment to the floor and tile company. As a result, the floor and tile company now wants to recover the amount from you, even though you have paid in full the contract amount of $10,000 to the Contractor. To do so, the subcontractor can wait for you to make the payment of $4,000 or they may foreclose on the lien by filing a lawsuit and even possibly forcing the sale of your home.
Yes, this is legal under California Law. A subcontractor can initiate a Mechanic’s lien or a legal claim against your home to recover the amount due to the subcontractor and unpaid by the contractor. To avoid a foreclosure or sale of your home, you will be required to pay this amount to the subcontractor even though you do not have a direct contractual relationship with the subcontractor. As a homeowner, you want to remove and/or avoid any liens on your home as a lien will make it difficult to refinance or sell your home. Not to forget the possibility of a forced sale of your home.
Can you avoid a Mechanic’s Lien by a subcontractor? Yes, this is possible under a process known as the “Release of the Mechanic’s Lien”. While negotiating your contract with the Contractor, please make sure that you have a clause in your contract that requires the Contractor to provide Mechanic’s Lien release showing that the subcontractor unconditionally releases any Mechanic’s Lien claims for work done or materials supplied. Before you pay them, require the contractor to furnish a release by any subcontractors and suppliers of the subcontractor. It is advisable that the prime contractor establish a roster of all subcontractors and their subcontractors and suppliers, to be certain that all appropriate Mechanic’s Lien releases have been received. If your home improvement project requires progress payments or payments to be made at different stages of the work, then you must require a Mechanic’s Lien release for a previous payment and before you make the next progress payment.
If you are facing a Lien on your property, please reach out to us. There are multiple time sensitive deadlines. The best recourse is of course at the time you are negotiating your contract with the contractor to provide contract provisions to avoid Mechanic’s Lien. Please consult with us if you are looking to contract on a home improvement project to avoid the risk of a Mechanic’s Lien on your home.
Disclaimer: Please do not treat this opinion as legal advice as your matter may have other aspects and issues that must be considered by an attorney. To discuss your case, please reach out to us at [email protected] or [email protected].