Articles > Construction law in California

$2000 Penalty for Failure to Release Expired Liens

by William L. Porter, Attorney at Law

A short time ago, I was contacted by a commercial building owner in the process of trying to sell the building. Two years prior, a subcontractor had recorded a mechanics’ lien with the local County Recorder’s office in relation to work on the property for which the subcontractor had not been paid. The owner had paid the contractor in full, but the contractor did not pay the subcontractor. The subcontractor then recorded a mechanics’ lien on the property in order to secure payment directly from the owner. However, he failed to file a lawsuit to foreclose on the lien within the requisite 90- day time period. Since the contractor missed this 90 day deadline, the lien expired.

Subject to certain exceptions, under California Civil Code Section 3144, a lawsuit to foreclose on a mechanics’ lien must be filed within 90 days after the lien is filed or the lien expires. Although the lien had expired, the title company and intended purchaser of the building and property were perhaps understandably insistent that the mechanics’ lien constituted a cloud on title to the property and must be removed from the official records for the property. The prospective purchaser would not buy the property unless the mechanics’ lien was removed.

At my client’s request, I sent a letter to the subcontractor who recorded the lien, explaining the problem and requesting he remove the lien. I drafted and sent an official mechanics’ lien release to make it as convenient as possible. All the contractor had to do was sign the document before a notary and return it. I even offered to pay the notary fee.

The subcontractor was still upset with the contractor, so he ignored my request. Consequently, I invoked a California Civil Code section that not only removed the mechanics’ lien, but also caused the contractor to pay all my attorney fees for doing so.

Under California Civil Code Section 3154, an aggrieved owner may petition the court to remove an expired mechanic’s lien from the county records. A court hearing will take place as early as 10 days and no later than 30 days after the petition is filed and served on the one who recorded the mechanics’ lien. The court will then issue an order expunging (legally releasing) the mechanics’ lien and also awarding attorney fees of up to $2,000 plus court costs to the prevailing owner.

As a result of the court hearing, the mechanics’ lien was released by the judge and the owner sold his property. The process only took two weeks. The only unhappy party was the stubborn contractor who was dragged to court and ended up paying $2,000 in attorney’s fees and several hundred dollars in court costs.

The lessons are two-fold. First, if a lien has expired, it must be released within a reasonable amount of time. Second, if a contractor does not release an expired lien, the judge just may release it for him and issue a judgment against the contractor for up to $2,000 plus court costs for the trouble caused by the contractor’s stubborn refusal.

William L. Porter is a principal in Porter Law Group, Inc. in Sacramento, California.
He can be reached at (916) 381-7868.