The Notice of Mechanic's Lien is a legal document used by laborers to inform property owners that they are placing a lien on the property due to unpaid work. This form is distinct because it is specifically intended for individuals who have worked as contractors or subcontractors and ensures that their claim for payment is formally recognized. By filing this notice, the laborer secures their right to be compensated for the labor performed on the property.
This form should be used when a laborer has not received payment for their contracted work on a property. It is particularly necessary when the laborer intends to protect their right to payment by placing a lien on the property, which may compel the owner to settle the outstanding debt to avoid further legal action.
This form is intended for:
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A lien is essentially a claim for repayment of a debt. In the construction context, a lien is of considerable importance because it offers considerable power to a subcontractor to seek payment from an owner through the property itself for a debt owed to the subcontractor by a general contractor or other third party.
If a general contractor refuses to pay his subcontractors, they can make a claim against the payment bond. The surety company will pay out the subcontractors for at least part of their money and take the contractor to court.
Legally, an unpaid contractor, subcontractor or supplier can file a lien (sometimes called a mechanic's lien) that could eventually force the sale of your home in place of compensation.Conversely, if the contractor who worked on your project does not pay for materials, a supplier could place a lien on your property.
The people who can file mechanic's liens are identified by state law. A subcontractor or supplier to a subcontractor may not be able to file a lien. Also, unlicensed contractors are often barred from filing a mechanic's lien.
Usually, anything that subcontractors would be liable for, general contractors may also be liable for (with the caveat that if the contractor has to pay for damages, the subcontractor who is legally responsible will often reimburse the general contractor).
To enforce the lien, the contractor must file a lawsuit within 90 days from the date of recording the lien. If this deadline is passed, the contractor may not be able to enforce the lien and may be required to remove the lien.
If a license is required for the work performed, an unlicensed contractor NOT ONLY cannot file a valid mechanics lien, but s/he also cannot file suit to recover, either. In California, unlicensed contractors are not entitled to be paid period for anything, and will be thrown out of court if they sue to get paid.
When a contractor files a mechanics' (construction) lien on your home, the lien makes your home into what's called security for an outstanding debt, which the contractor claims is due and unpaid for services or materials.
The simplest way to prevent liens and ensure that subcontractors and suppliers are paid is to pay with joint checks. This is when both parties endorse the check. Compare the contractor's materials or labor bill to the schedule of payments in your contract and the Preliminary Notices.