October 2018 – Law and Civil Engineering
THE LAW AND CIVIL ENGINEERING – OCTOBER 2018 NEWSLETTER
You May be Able to Record Successive Mechanic’s Liens
by Eugene Bass
The law requires that a lawsuit to foreclose a mechanic’s lien must be filed within 90 days of the date that the lien is recorded. If no lawsuit is filed, the lien becomes void and unenforceable. The presence of the old lien, however, typically causes problems with the title of the property and must be removed if the problems are to be avoided. There are court procedures by which old liens can be removed but these can involve time and expense. The most efficient means to deal with the situation is to release the old lien and to record a new lien if it is still possible. It is critical, however, that the new lien be recorded before the expiration of the original lien recording period.
The determination of the expiration of the lien recording period can be complicated and depends on a number of factors. The completion of the project and whether or not a notice of completion was recorded affects the lien recording period. Another scenario occurs where the project was never completed but construction ceased. A notice of cessation may or may not have been recorded. Still another consideration is your status in relation to the project. Your lien recording time will depend on whether you were an original contractor, subcontractor, or material supplier.
A California case addressed the issue of recording of successive liens. In the case, a lien claimant had recorded a mechanic’s lien but did not file a lawsuit to foreclose the lien within the required 90 day period following the recording of the lien. After a dispute arose over the presence of the old lien, the lien claimant recorded a release of lien that stated, in substance, that the old lien was released and discharged. There was nothing in the recorded release that stated that the obligation on which the lien had been based was ever satisfied.
The party opposing the lien claimant argued that the recording of the release of the old lien acted to release all lien rights that the claimant had in the property and that the lien claimant could not later record another lien. The appellate court disagreed with that contention.
The court held that the claimants lien rights could only be released where the release stated that the claim had been fully satisfied. The lien rights could be lost, however, where the claimant’s right to a lien, upon which the claim of lien was based, was extinguished.
Whenever an old lien is released so that a new lien can be recorded, special care should be taken to assure that the wording of the lien release does not cause the loss of any still effective lien rights.