What is a Mechanic’s Lien?

Posted On: March 6, 2013
By: ffdadmin

Whether you are a first time San Francisco home buyer or a seasoned pro, you might not know what a Mechanic’s Lien is and how it can affect your purchase of a home in SF.

Simply put, a mechanic’s lien is:

A security interest in the title to the property for the protection of those who have supplied labor or materials that improve the property. It is called by various names, most often a construction lien.

Under Construction. Does it have a Mechanic's lien?

Under Construction. Does it have a Mechanic’s lien?

Other Names:

  • Materialman’s lien
  • Supplier’s lien (when referring to those supplying materials)
  • Laborer’s lien  (when referring to those supplying labor)
  • Design Professional’s lien (when referring to architects or designers )

Why?

Mechanics’ Liens were created by the legislature to protect contractors and suppliers in the building business.  The construction business can be a brutal field, so these types of liens were created to give contractors and subcontractors a stronger course of action for non-payment. Instead of just suing under contract law, they can file a lien. Under CA state law, the lien is usually created by the performance of labor or the supplying of material that improves the property.  If you can think of a construction job that improves a property, they can probably file a mechanic’s lien.

The state laws that make possible a mechanics’ lien, also (usually) give them a higher priority with respect to other interests in the title (which is normally based solely on the date and time when a security interest was recorded). Some states, like California, provide priority insurance for a construction loan mortgage recorded before work visibly begins and where the lender is obligated to disburse funds.

How do they work?

Once the work has been completed and a “Notice of Completion” has been filed, the primary contractor has 60 days and a subcontractor has 30 days to file a mechanic’s lien. The lien will last of an additional three months (90 days) and is dropped unless a lis pendens or notice of extension is filed.

Mechanic’s liens can be complicated. You would discover a lien when reviewing a preliminary title report, and your escrow officer, title officer, or favorite real estate attorney would be able to advise you as to the best course of action.