Beware of Contractor’s Liens

Property owners often face major repairs at one time or another during home ownership.  Then they must hire a specialty contractor or general contractor or Winnipeg movers to fix the problem. If they want to remodel a home, they are almost compelled to hire a licensed general contractor. The hire raises the specter of a potentially dangerous and unpleasant situation: The contractor’s lien.

Of course, a home owner who is competent and himself familiar enough to tackle the job as his own contractor does not risk such a lien. The law in California allows him to do his own contracting. He can pull the necessary permits and do the subcontracting if needed. A property owner who goes on his own can potentially save a lot of money – and buy much frustration and anxiety instead.

A licensed contractor can place a lien on your house.

Whenever you hire someone to do work for you on a property, the licensed person with whom you contracted can record a lien against your property.

When can the contractor do that?

If they do not get paid in full or if there is a dispute over the scope and quality of work. The contractor can also place a lien on the home if and when the homeowner refuses to pay in full for work done and completed.

The contractor must record the lien with the county recorder before he can enforce it. For example, California law specifically states that a contractor cannot enforce the lien until “90 days after completion of the work or sixty days after the owner records a notice of completion or cessation”.

In the meantime the lien just sits there encumbering your property just like a mortgage. The problem is that your credit will take a major hit.

The contractor must follow a strict regimen of steps in order to establish and record the lien. Specifically he has to;

  • serve a preliminary 20 day notice on the property owner,
  • do so within the time frame mentioned above (90 and/or 60 days),
  • set the amount of the lien within the parameters of the law (reasonable value of services or materials or contract price),
  • follow the correct order of steps legally required.

In other words, it is a nuisance and expensive pain for both sides to establish or fight a contractor’s lien.

In most cases it is less controversial and troublesome to resolve the matter by compromise. Even better, avoid a contractor’s lien in the first place by hiring a competent, respected and responsible contractor with a good track record. Clearly spell out the scope and conditions of the contract. This is the most important. A well written contract avoids trouble later on.