Two years ago, Palomar Grading & Paving, Inc. moved to foreclose on a mechanic's lien on a property whose title was held by Wells Fargo. However, the bank refused to honor the lien on multiple grounds, each of which appeared legitimate to the bank. The California Court of Appeal, aligning with a liberal understanding of mechanic's liens, rejected Wells Fargo's reasons for rejecting the lien.
For readers not experienced with construction projects, a mechanic's lien is a contractor or construction worker's right to foreclose on a property on which it has done extensive work. The right to a mechanic's lien was provided to laborers in order to ensure payment for their services. Often, the lien is negated once a contractor is paid, but until that occurs, the property is liable to be sold to pay the laborers.
The process involves a preliminary notice informing the county of a lien on the home, and the lien itself. DELETE THIS SINCE IT IS NOT ACCURATE. THE PRELIM DOES NOT HAVE TO BE SENT IN ALL CASES, IT IS SENT TO OWNERS, LENDERS AND GENERAL CONTRACTORS, AND IT DOES NOT HAVE TO BE SENT TO THE COUNTY AND RECORDED (ALTHOUGH IT CAN BE IN RARE CASES).
In the case of Palomar Grading & Paving, Inc., Wells Fargo attacked their lien on the grounds that it failed to name the current owner on the preliminary notice or lien; that it performed services after the lien was recorded; that the lien listed the wrong address; and that the foreclosure judgment was invalid since the complaintt was amended to include the owner and the lender after the fact.
The Court of Appeal, however, did not hold any of these conditions to be "fatal" to the mechanic's lien. They reasoned that the failure to name the right owner on the preliminary notice was forgivable because the current owner was not the reputed owner when the lien was recorded. Because the subcontractor had no way of knowing who truly owned the land, their lack of accuracy on the lien was also forgivable.
The court also rejected the bank's reasoning regarding services provided after the lien was recorded—these services were all still relevant to the subcontractor's work with the general contractor. As the story goes, the general contractor had already breached their contract with Palomar Grading & Paving. In order to protect their rights and themselves from an "anticipatory breach," they finished the work they were hired to do.
What Does This Mean for Los Angeles Construction Companies?
Such a generous understanding of mechanic's liens means that a construction company's ability to enforce payment is more secure than it's ever been. For the court to consider the wrong names, untimely filing, and other major administrative mistakes "non-fatal" to a mechanic's lien is a huge victory for workers in Los Angeles.
Construction law that protects laborers, designers, plumbers, electricians, or other construction workers is both good and necessary. Making sure our laborers are taken care of helps our economy as a whole, as it allows construction companies to take on projects without fear of being robbed or cheated. At the Law Office of Steven R. Lovett, we support any effort to uphold and protect the rights of construction workers in California.
If you need help enforcing your mechanic's lien, our firm has decades of experience fighting for our clients in hundreds of construction law claims. Call (888) 577-1518 for a consultation over the phone.