THE LAW AND CIVIL ENGINEERING – MAY 2018 NEWSLETTER
More on the Mechanic’s Liens and the Preliminary Notice
by Eugene Bass
The design professionals lien was discussed in a prior article. It is distinguished from the mechanic’s lien in that it does not require that actual work of a permanent nature occur on the ground for the lien to “attach.”. It is of specific benefit to engineers that typically will perform much of their work in the design and planning of a project and for which there will be no visible improvement at the site until their work is started. When work actually begins on the site, the design professionals lien becomes null, and void and and in order to maintain lien rights against the property, a mechanics lien must then be filed.
The mechanics lien is referred to as a “creature of statute” in the legal community and as such there must be strict conformance with the legal requirements set forth in the statutes that are specified for enforcement of the lien. The t’s must be crossed and the i’s dotted as they say. Failure to do so will be fatal to the enforcement of a lien and can result in loss of the very valuable payment remedy.
A preliminary step in the perfection of a mechanics lien is the service of a preliminary notice. The persons or entity who must be served with a preliminary notice depends upon who your contract is with. The failure to properly identify the person or entity to receive a preliminary notice can result in loss of lien rights. If your contract is with the contractor, a sub-contractor or sub sub-contractor, the notice must be served upon the original (general) contractor, or reputed original contractor, owner or reputed owner and construction lender, if any, or reputed construction lender, if any. If your contract is with the owner then the preliminary notice must only be served upon the construction lender or reputed construction lender.
The “reputed” owner, contractor or lender, person or entity is the one who is reasonably and in good faith believed to be the actual party. If the identity of the actual party could be obtained from the building permit, or a recorded construction deed of trust, the lien claimant will be held to have knowledge of the actual party. A construction lender may be identified from building department and recorder’s office records.
Timing for serving notices and taking actions required by statute for mechanics liens is critical. A design professional who has furnished services for the design of the work of improvement and who gives a preliminary notice not later than 20 days after the work of improvement has commenced shall be deemed to have complied with the legal requirements for preliminary notices with respect to the design services furnished, or to be furnished. For claimants other than design professionals, a preliminary notice must be given not later than 20 days after the claimant has first furnished work on the work of improvement. If work has been provided by a claimant who did not give a preliminary notice, that claimant shall not be precluded from giving a preliminary notice at any time thereafter. The claimant shall, however, be entitled to record a lien, give a stop payment notice, and assert a claim against a payment bond only for work performed within 20 days prior to the service of the preliminary notice, and at any time thereafter.
Mechanics liens are very effective means of enforcing payment for engineering services. They have many technical requirements, however, and the engineer should seek legal assistance early to be sure that all required procedures are followed and the valuable lien rights are not lost.
Next month’s article will continue with more information on the preliminary notice.