What Are Mechanic’s Liens and How Do They Affect San Diego Property Owners

San Diego County’s landscape is one of constant renewal, from new commercial developments rising downtown to extensive home remodels in neighborhoods like La Jolla, North Park, and Encinitas. This level of construction activity fuels the local economy but also carries significant risks for property owners. One of the most potent, and often surprising, of these risks is the mechanic’s lien. An owner may pay their direct contractor in full, only to later discover that a subcontractor or material supplier has filed a lien against the property, claiming they were never paid.

This places the owner in the difficult position of potentially having to pay twice or, in the worst-case scenario, face a foreclosure lawsuit. For developers, investors, and homeowners in the San Diego area, knowing the mechanics of California’s lien laws is a vital component of risk management.

What Exactly Is a Mechanic’s Lien in California?

A mechanic’s lien is a legal claim or “encumbrance” placed on a piece of real property by someone who has provided labor, services, materials, or equipment for a “work of improvement” on that property but has not been paid.

It is a powerful tool for construction professionals, and its rights are enshrined in the California Constitution. The lien acts as a “cloud on title,” meaning it attaches to the property itself, not just the owner who ordered the work. This makes it difficult, if not impossible, for the owner to sell, finance, or refinance the property until the lien is resolved and removed.

Who Has the Right to File a Mechanic’s Lien?

California’s mechanic’s lien laws are broad and grant rights to nearly anyone who contributes to a work of improvement. The right is not limited to the “direct contractor” (also known as the “general contractor” or “prime contractor”) who has a contract directly with the property owner.

Parties who may have lien rights include:

• Direct Contractors: The party that contracts directly with the owner.
• Subcontractors: Plumbers, electricians, roofers, painters, and other tradespeople hired by the direct contractor.
• Material Suppliers: Companies that provide lumber, concrete, piping, wiring, fixtures, and other materials to the job site.
• Equipment Lessors: Companies that rent cranes, scaffolding, bulldozers, or other heavy equipment for the project.
• Laborers: Individual workers on the project site.
• Design Professionals: Architects, engineers, and land surveyors who provide services for the project.

The Critical First Step: The California Preliminary Notice (20-Day Notice)

Before most parties can record a valid mechanic’s lien, they must first serve a “Preliminary Notice,” often called a “20-Day Notice.”

• What It Is: This is a formal document that a subcontractor, material supplier, or other non-direct contractor sends to the property owner, the direct contractor, and the construction lender (if any).
• Its Purpose: The notice informs the owner and lender of who is working on their project and who is supplying materials. It is a prerequisite for preserving the right to file a lien later if they go unpaid.
• The Timeline: The notice must be sent within 20 days of first furnishing labor, services, or materials to the project.
• What San Diego Owners Should Do: When you receive a Preliminary Notice, do not panic. It is a standard part of the construction process. You should, however, keep a meticulous file of every notice received. This creates a list of all parties you will need to get lien waivers from before you make final payments.

How Is a Mechanic’s Lien Formally Recorded in San Diego County?

A mechanic’s lien is not valid just because a contractor claims you owe them money. To become a “perfected” and enforceable encumbrance, the lien claimant must follow a strict legal process.

• Record the Lien: The claimant must prepare a “Claim of Lien” document. This document must contain specific information, including the claimant’s name, the amount owed, the name of the owner, a description of the labor/materials provided, and a legal description of the property.
• Record at the County Recorder’s Office: The claimant must take this document to the San Diego County Recorder’s Office to have it officially recorded in the county’s property records. This is what attaches the lien to your property’s title.
• Serve the Owner: After recording, the claimant must serve a copy of the recorded lien on the property owner.

California courts require “strict compliance” with these rules. An error in the amount, the property description, or the deadlines can render the entire lien invalid.

What Are the Strict Deadlines for Recording a Lien?

The deadlines for recording a mechanic’s lien are short, complex, and depend entirely on whether the property owner has recorded a “Notice of Completion” or “Notice of Cessation.”

Scenario 1: If the Owner Records a Notice of Completion or Cessation
A Notice of Completion is a document that the owner records with the San Diego County Recorder’s Office after the project is finished. This is a very smart move for owners as it significantly shortens the time claimants have to file liens.

• Direct Contractors: Must record their lien within 60 days of the date the Notice of Completion was recorded.
• Subcontractors and Suppliers: Must record their lien within 30 days of the date the Notice of Completion was recorded.

Scenario 2: If the Owner Does NOT Record a Notice of Completion or Cessation
If no notice is recorded, all parties have a much longer window.

• All Claimants (Direct and Sub): Must record their lien within 90 days after the “completion” of the entire work of improvement.

Defining “completion” can be tricky. Under California law, it can mean the date of final inspection, the date the owner occupies or begins using the improvement, or a cessation of all labor for a continuous 60-day period.

What Happens After the Lien Is Recorded? The Lawsuit to Foreclose

Recording the lien is not the final step. It is the step that enables the final step: a foreclosure lawsuit.

A mechanic’s lien is not valid forever. The claimant must file a formal lawsuit to foreclose on the lien within 90 days from the date the lien was recorded at the San Diego County Recorder’s Office.

If the claimant fails to file a lawsuit in the San Diego Superior Court system within that 90-day window, the lien automatically becomes void and unenforceable. It may still appear on a title report, but it has no legal power, and an attorney can help you have it removed.

If a lawsuit is filed, the claimant will ask the court to issue a judgment for the amount owed and to order the property be sold at a public auction to pay the debt. The property owner will have the opportunity to defend against the lawsuit.

How Can a Mechanic’s Lien Impact a San Diego Property Owner?

The consequences of a valid mechanic’s lien are serious and can go far beyond a simple payment dispute.

• Cloud on Title: As mentioned, the lien prevents the sale or refinancing of the property.
• Lender Issues: If the project is financed, a mechanic’s lien can be a default under the terms of your construction loan. The lender may stop disbursing funds until the lien is cleared.
• Risk of Foreclosure: This is the most severe risk. If the claimant wins their foreclosure lawsuit, a San Diego County court can order your property to be sold.
• Double Payment Risk: The most common problem. You pay your direct contractor the full amount, but they fail to pay their subcontractor. That subcontractor then files a lien, and to clear your title, you may have to pay that subcontractor directly. You have now paid twice for the same work.
• Legal Costs: You will need to retain legal counsel to defend your property, negotiate a resolution, or challenge an invalid lien, adding to the total cost.

What Is a “Notice of Non-Responsibility” and When Is It Used?

This is a key tool for a specific group: property owners who are not the ones ordering the construction. This is most common for commercial landlords in San Diego whose tenants are performing improvements (a “tenant build-out”).

• What It Is: A Notice of Non-Responsibility is a legal document that an owner posts on the property and records with the San Diego County Recorder’s Office.
• Its Purpose: It formally states that the property owner is not responsible for the costs of the construction being performed by their tenant.
• The Timeline: The owner must post and record this notice within 10 days of acquiring knowledge of the construction.
• Its Effect: If done correctly and on time, it can protect the owner’s interest in the property from being subject to a mechanic’s lien for the tenant’s unpaid bills.

How Can San Diego Property Owners Proactively Protect Themselves from Liens?

The best way to deal with a mechanic’s lien is to prevent it from ever being filed. Proactive management is essential.

Investigate Your Direct Contractor: Before signing anything, verify their license and disciplinary history with the Contractors State License Board (CSLB). Check their references in the San Diego area.

Use a Clear Contract: Your construction contract should have a clear payment schedule, a description of the work, and provisions for lien releases.

Track All Preliminary Notices: Keep that file of all 20-Day Notices you receive. This is your master list of everyone who must be paid.

Use Joint Checks: When paying the direct contractor, consider issuing checks payable to both the direct contractor and the subcontractor or material supplier. This ensures the money gets to the right party.

Demand Lien Waivers: This is your most important defense. A lien waiver (or “lien release”) is a receipt. It is a document signed by the contractor, sub, or supplier stating they have been paid and are waiving their future lien rights for that payment.

• Conditional Waivers: Used for progress payments. They state, “Once this check clears, I waive my lien rights for this amount.”
• Unconditional Waivers: Used for final payment. They state, “I have been paid in full and I unconditionally waive all lien rights on this project.”
• Best Practice: Never make a payment without receiving a corresponding conditional waiver. Never make a final payment without receiving unconditional waivers from the direct contractor and every single party that sent you a Preliminary Notice.

Record a Notice of Completion: As soon as the project is finished, record a Notice of Completion with the San Diego County Recorder’s Office to shorten the lien-filing window.

Consider a Payment Bond: For larger projects, you can require the direct contractor to obtain a “payment bond.” This bond acts as a source of funds for unpaid subs and suppliers, effectively insulating your property from liens.

What Should You Do If a Lien Is Filed Against Your Property?

If you discover a mechanic’s lien has been recorded, take immediate action.

• Do Not Ignore It: The 90-day clock for a foreclosure lawsuit starts ticking the moment the lien is recorded.
• Review the Lien for Validity: Examine the document closely, preferably with an attorney. Is the amount correct? Is the property description accurate? Most importantly, were the deadlines met? Was a Preliminary Notice sent? Was the lien recorded within the 30/60/90-day window? Was the foreclosure lawsuit filed within 90 days? Many liens are invalid on their face.
• Contact the Claimant: A direct call to the claimant or their attorney may reveal a simple misunderstanding that can be resolved.
• Demand Removal If Invalid: If the lien is clearly invalid (e.g., the 90-day lawsuit deadline passed), your attorney can send a formal demand letter to the claimant to release the lien. If they refuse, you can file a “petition to quiet title” to have a court forcibly remove it.
• Negotiate a Settlement: If the lien appears valid, you or your attorney can negotiate a reduced payment in exchange for an immediate lien release.
• Purchase a Lien Release Bond: This is an effective tool to clear your title quickly. You can “bond around the lien” by purchasing a bond for 125% of the lien amount. This does not make the dispute go away, but it removes the lien from your property and attaches it to the bond. This frees up your property so you can sell or refinance it while you fight the underlying claim.

Distinguishing Mechanic’s Liens from Stop Payment Notices

It is important to know about a related tool: the “Stop Payment Notice” (or “Stop Notice”).

• Mechanic’s Lien: A claim on the real property.
• Stop Payment Notice: A claim on the unpaid construction funds.

A subcontractor or supplier who hasn’t been paid can serve a Stop Payment Notice on the construction lender or, in some cases, on the property owner. This notice demands that the lender/owner withhold the amount claimed from any future payments to the direct contractor. It is another way to intercept project money and is often used in addition to a mechanic’s lien.

Protecting Your San Diego Property Investment

California’s mechanic’s lien laws are famously complex, with strict deadlines and procedures that must be followed precisely. For San Diego property owners, a single misstep by a contractor can jeopardize their title and financial security. The attorneys at Garmo & Garmo are prepared to help you evaluate your options, protect your property rights, and respond to any claims that may arise. We focus on providing the clear direction needed to navigate California’s intricate real estate and construction laws.

Contact us at (619) 441-2500 for a consultation to discuss your specific needs and ensure your property is protected.