[co-author: Zachary Stewart]*
How can a contractor, subcontractor or supplier guarantee payment for their work? One solution is to file a mechanic’s lien against the ownership of a project.
Lien laws vary widely from state to state and from time to time as contractors and subcontractors frequently seek to change them – California is no exception. A particularly important rule is that a subcontractor must send a pre-lien notice to the property owner, general contractor and construction lender within 20 days of the start of the work. Assuming the sub-contractor or sub-contractor files their notice of pre-lien, a contractor or sub-contractor will want to ask their legal counsel what can be claimed in a notice of lien.
In California, a lien claimant may recover the reasonable value of its labor, services, equipment or materials furnished or the price of the contract of employment. Additionally, the amount of a lien may exceed the contract price – modification-based costs are permitted, via written agreement or one person’s word (and a firm handshake).
However, a lien claimant cannot include damages for delay or attorneys’ fees.
In Lambert v. Superior Court, the California Court of Appeals held that damages for delay are not permitted in a mechanic’s lien, whether or not the contract describes them as overtime work. He argued that these were a form of “consequential damages” outside the scope of a lien and that allowing them would give plaintiffs unfair leverage to argue over who breached the contract. You might be thinking, “Isn’t overtime costing the same ‘hour’ as normal labor costs, despite being paid at time and a half?” While this is true, California state courts and federal courts have firmly ruled that damages for delay are not permitted in a mechanic’s lien.
Likewise, California courts do not allow attorney’s fees in a mechanic’s lien because they do not add to the value of the property.
However, if a lien claimant includes unauthorized material, they do not lose the entire lien (according to the California Court of Appeals at Basic Modular Facilities, Inc. vs. Ehsanipour). Instead, a court will reduce the lien to its appropriate amount unless a plaintiff voluntarily includes items that they did not actually provide.
A mechanic’s lien is a useful tool to secure payment. But a plaintiff should register its claim for damages for delay and attorneys’ fees for a breach of contract action rather than a mechanic’s lien.
*Zachary Stewart is a 2L law student who works as a summer associate at Bradley. He is not a licensed attorney.