THE LAW AND CIVIL ENGINEERING – MARCH 2018 NEWSLETTER
The Design Professional’s Lien
by Eugene Bass
Contractors and design professionals may record mechanic’s liens against real property that their efforts have improved. A requirement for the perfection of a mechanic’s lien is that there must have been some actual work of improvement on the ground before the mechanics lien will “attach.” The design professional’s lien provides for a lien before any work on the ground has commenced.
The design professional’s lien is a special lien that was designed to provide lien rights against real property that has been improved by a design professional but where the improvements were never constructed. The logic behind the design professional’s lien derives from the fact that the efforts of the design professional, performed for the owner, enhanced the value of the property and the design professional should be able to look to the property for payment similar to a contractor whose efforts improved the property.
To obtain a design professional’s lien there must be a written contract with the owner of the property and the owner must own the property at the time that the lien is recorded. In addition, the project must have progressed to a point where a building permit or “other governmental approval in furtherance of the work of improvement” had been obtained in connection with or utilizing the services rendered by the design professional.
The landowner with whom the design professional contracted must have defaulted in any payment required by the written contract and must have refused to pay upon the demand of the design professional given less than 10 days prior to recording the design professional’s lien. t\The written demand must state that a default of the contract has occurred and the amount of the default. The lien cannot be used on a project for a single family, owner occupied residence where the construction costs are less than $100,000.
The design professional’s lien must be recorded within 90 days after the design professional knows or has reason to know that the landowner is not going to commence the work of improvement. The lien must be recorded in the county in which the property is located.
The priority of a design professional’s lien is determined by the date when it is recorded. However, if a construction loan is obtained for the project and a construction deed of trust was recoeded, that will have priority over the design professional’s lien. The design professional’s lien automatically expires and becomes null and void and of no further force or effect if the work of improvement for which the design professional furnished services at the request of the landowner is commenced. At that point, the design professional must proceed to record a mechanic’s lien in order to forclose on a lien against the property.
The design professional’s lien can be an effective means for a design professional to secure payment for a project that stops short of actual construction. There are special procedural requirements, however, that must be met to avoid loss of the valuable lien rights.