Penalty for Failure to Release Expired Liens
I was recently contacted by a commercial building owner in the process of trying to sell the building. Two years prior to this, a subcontractor had recorded a mechanics’ lien with the local County Recorder’s office in relation to the owner’s property. The subcontractor recorded the mechanics lien after the subcontractor was not paid by a prime contractor for work the subcontractor had performed on the property. Unfortunately for the subcontractor, the subcontractor then failed to file a lawsuit to foreclose on the lien within the requisite ninety (90) day time period for filing a lawsuit to foreclose on the mechanics’ lien. Since the subcontractor missed this 90 day deadline to file the mechanics lien foreclosure lawsuit, the mechanics lien expired.
Subject to certain exceptions, under California Civil Code Section 8460, a lawsuit to foreclose on a mechanics lien must be filed within ninety (90) days after the mechanics lien is recorded or the mechanics lien expires. Although the mechanics lien had expired, the title company and intended purchaser of the building and property were perhaps understandably insistent that the mechanics lien constituted a cloud on title to the property and must be removed from the official records for the property. The prospective purchaser would not buy the property unless the mechanics’ lien was removed.
At my client’s request, I sent a letter to the subcontractor who recorded the mechanics lien, explaining the problem and requesting he remove the lien. I even drafted and sent an official mechanics’ lien release form to conveniently assist in achieving the task. All the contractor had to do was sign the document before a notary and return it. I even offered to pay the notary fee.
The subcontractor though was still upset with the contractor and with the owner, so he ignored my request. As a consequence, I invoked a seldom used California Civil Code section that not only removed the mechanics’ lien, but also caused the contractor to pay all the attorney fees I incurred in seeking a court order to remove the mechanics lien from the property.
Under California Civil Code Sections 8480-8494, an aggrieved owner may petition the court to remove an expired mechanics lien from the county records. A court hearing will take place as early as ten (10) days and no later than thirty (30) days after the petition is filed and served on the one who recorded the mechanics lien. The court will then issue an order “expunging” (legally releasing) the mechanics lien and also awarding reasonable attorney fees and court costs to the prevailing owner.
As a result of the court hearing, the mechanics lien was released by the judge and the owner sold his property. The process only took two weeks. The only unhappy party was the stubborn subcontractor who was dragged to court and ended up paying several thousand dollars in attorney’s fees and several hundred dollars in court costs.
The lessons are two-fold. First, if a mechanics lien has expired, it must be released within a reasonable amount of time. Second, if a contractor, subcontractor or supplier does not release an expired lien, a judge just may release it for him and issue a judgment against the contractor for reasonable attorney fees and court costs for the trouble caused by the contractor’s stubborn refusal to release the expired mechanics lien.
Article revised by William L. Porter, Esq. in 2014. Mr. Porter is a principal in The Porter Law Group, Inc. in Sacramento, California. He can be reached by phone at (916) 381-7868.