ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Key to Understanding a Mechanic's Lien

Updated on June 11, 2014
Source

Title officers, examiners and underwriters agree: With all the changes in the way we do business today, we are faced with many opportunities as well as many challenges. Modern technology provides to us in seconds what used to take hours to obtain. Quicker turn-around times and improved customer service remain something for which we all strive, which often translates into taking short-cuts. A dangerous thing, short cuts. Any practice that causes one to stray from the basics brings with it a larger potential for claims.

Take mechanics’ liens, for example. Large development projects often require multiple transactions – from loans for land acquisition to loans for construction of off-site improvements as well as construction of the project itself, bridge financing, etc., and thus can create some complicated mechanics’ lien issues. These grand enterprises, which are designed to impress, can be easily brought down by mishandled priority issues. Remember: the priority of a mechanics’ lien is determined by the commencement of work on a particular project – and all mechanics’ liens for that project have the same priority, regardless of when they are filed or when the work was done. This is why broken priority presents such a huge risk.

Mechanics’ lien issues are not limited to development projects – they can pop up almost anywhere, and at any time. For example: A 12-story office building that was built 15 years ago is now being sold. There are 25 tenants in the building, two of whom signed leases and moved in within the past 6 months, and both of whom have hired contractors to make tenant improvements. One of these new tenants has since filed for bankruptcy and moved out of the building, leaving the contractor unpaid. The contractor recorded a mechanics’ lien. Can the title officer safely ignore the lien, since it only attaches to the lessee’s leasehold interest?

Not before the following questions are answered:

1) Were tenant improvements required
under the terms of the lease?
2) Were the improvements made without
the knowledge of the owner?
3) Did the owner of the building record a
Notice of Non-Responsibility?
4) Is the Notice of Non-Responsibility
valid?

Source

When property is subject to a lease and the lessee contracts for improvements without the
lessor's knowledge, the lien attaches only to the lessee's leasehold interest.
However, improvements constructed with the owner's knowledge are deemed to be the responsibility of the owner unless the owner gives a notice of non-responsibility. Moreover, a notice of non-responsibility is ineffective if the owner caused the work of improvement to be performed.
A tenant may be treated as an agent of the owner when the tenant is required by the lease to
make improvements, but if improvements are optional with the tenant, the notice of non-
responsibility is effective.

“It’s been over 90 days...now what?”

Although the California Code provides that no mechanics’ lien binds any property for a period longer than 90 days after recording of the claim of lien or 90 days after expiration of a credit, unless foreclosure proceedings are brought in a proper court within that time, it cannot be automatically assumed that a lien is invalid just because 90 days has passed. Extension of the time to foreclose a mechanics’ lien may result from numerous factors, e.g., legal disabilities, partial payment plus written acknowledgment of the debt, bankruptcy of the owner, or express waiver of the statute.

Simply put, there is no short-cut worth taking if it results in a loss. Title examining is just that – examining . Read the documents. Never assume. Verify information; compare recorded releases to their corresponding liens. Make sure that the names of the parties, as well as the property chains, are all run. Consider the value of a physical inspection. Ask questions. Be familiar with the transaction and the intent of the parties involved. Dig a little deeper. And don’t underestimate the value of your underwriting manual!

Keep in mind that no matter how complex the file or how user-friendly the technology, avoiding claims means we must never stray from the basics we all learned in way back when, as they are the foundation upon which everything else in our business is based. With a deep understanding of these basics, you can navigate even the most difficult closing.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://corp.maven.io/privacy-policy

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)