If I Released My California Mechanics Lien, Can I File a New Mechanics Lien on the Same Project? Will the New Mechanics Lien be Enforceable?
In general, the answer to the above questions is “Yes”, but only if you meet the following requirements:
- You must only release the mechanics lien itself, but not the “right” to a mechanics lien: There is an important distinction to be made between releasing a mechanics lien and releasing the right to a mechanics lien. Whether you do one or the other will depend on the specific language used in your release. In the case of Santa Clara Land Title Co. v. Nowack and Associates, Inc. (1991) 226 Cal. App.3d, 1558 a “release of mechanics lien” document was recorded TO THE County Recorder’s office which included a statement that the mechanics lien was “fully satisfied, released and discharged”. Based on this language, the court concluded that the mechanics lien claimant had waived its “right” to a further mechanics lien on the same property for the work in question. The court concluded that since the release stated that the claim was “fully satisfied” the right to mechanics lien on the project had forever been waived. The Nowak case can be distinguished from the case of Koudmani v. Ogle Enterprises, Inc., (1996) 47 Cal.App.4th 1650, where the release of mechanics lien only stated that the mechanics lien was “otherwise released and discharged” and not that it was “satisfied”. Based on the distinction drawn from the two cases, a simple mechanics lien release that only releases the mechanics lien itself, but not the “right” to a mechanics lien should be used. At the following link you will find a proper form to achieve this purpose: https://01jbd7.p3cdn1.secureserver.net/wp-content/uploads/2019/06/03PRI-Mechanics-Lien-Release.pdf
- You must still be within the proper time period to record an enforceable mechanics lien: To determine if you are within the time period to record an enforceable mechanics lien, the claimant must consider a number of factors. These include whether the claimant is a direct contractor (generally that you have a contract with the property owner), a subcontractor or a material supplier, whether the project has been completed or perhaps suspended without completion, whether a valid, timely “notice of completion” or “notice of cessation” has been recorded, and other factors. For a discussion of many of these factors see California Civil Code 8412–8414 and the following article: https://porterlaw.com/understand-how-the-mechanics-lien-deadline-depends-on-the-validity-of-the-notice-of-completion/ . Generally, though, yes, if you have released a mechanics lien without releasing the “right” to a mechanics lien on the same project, you can record a new enforceable mechanics lien on the same project if you are still within the time period for recording a mechanics lien.
- You must file a lawsuit to foreclose on the mechanics lien within ninety (90) days after the mechanics lien is recorded. The general rules on the enforcement of a mechanics lien are found in California Civil Code sections 8460–8470. The general rule is that unless a document called a “Notice of Credit” is recorded (see, Civil Code 8460(b)), a lawsuit to foreclose on the mechanics lien must be filed in superior court no later than 90 days after the mechanics lien was recorded (see, Civil Code 8460(a)). For further information on extending the mechanics lien foreclosure lawsuit, see this article: https://porterlaw.com/how-to-extend-the-life-of-a-mechanics-lien/ .
Conclusion: There are many reasons why a claimant might release a mechanics lien and then record a new one. For example, if a claimant worked on the project at an early stage and had reason to believe that payment would be forthcoming in the normal course of events, and it was still long before the project was scheduled to be completed, they might consider releasing their mechanics lien early and recording a new one later if payment does not arrive. This would avoid having to file a lawsuit after 90 days on the first mechanics lien. Another example might be if a contractor affirmatively promised payment in exchange for releasing a particular mechanics lien. It might not be too risky to release such a mechanics lien in most cases if the project was still ongoing and the opportunity to record a new mechanics lien would remain open until the project was eventually completed.
Article by William L. Porter, Esq. in 2020. Mr. Porter is a principal in The Porter Law Group, Inc. in Sacramento, California. He can be reached by phone at (916) 381-7868. Visit the firm’s website at www.porterlaw.com and www.AppliedLegal.com