As a licensed contractor in California, you were diligently providing labor and materials as a subcontractor to complete a work of improvement on privately held property. As you near the end of your work, the general contractor has stopped paying you, and maybe they have even dropped out of communication and are not showing up to the job site.
As you try to collect for your unpaid work, and worry about the general filing bankruptcy, you are thankful that the Mechanic’s Lien statutes are out there to protect you in such situations and that if you can record a lien against the property, you have a much better chance of getting paid for your work.
When you start the process to record the lien, either by contacting counsel, doing it in-house or using a lien processing agency, you discover that your staff failed to send a Preliminary Notice before commencing the work and you are advised that you may not have any lien rights.
In order for a contractor to have a valid lien, stop notice or payment bond claim, a Preliminary Notice must be given to the owner or reputed owner, the direct contractor to which the claimant provides the work and any construction lenders. Cal Civil Code section 8200. The two most utilized exceptions to this requirement apply to laborers (basically, a person acting as an employee who performs labor upon a work of improvement) and to those under direct contract with the owner.
If the subcontractor in the example above was not under direct contract with the owner, all may not yet be lost. While a contractor shall give a Preliminary Notice no later than 20 days after the claimant has first furnished work, if the claimant failed to provide the Notice at that time, it can later provide the Notice but can only record a lien for work performed within 20 days prior to service of the Preliminary Notice. Civil Code section 8204.
The law related to mechanics liens, payment bonds and stop notices can be daunting. Contractors understandably can get caught up in mobilizing personnel, equipment and materials to properly perform the work, but great care should be taken to ensure you protect your valuable lien rights.