Your Mechanic’s Lien Was Recorded Too Early
By Larry Lubka
I just finished reading the court’s opinion from Precision Framing Systems v Luzuriaga and it opens a very large window to attack mechanic’s liens by voiding the liens because they were recorded prematurely. I must admit, I don’t agree with the ruling.
Precision Framing was a subcontractor on a commercial project. It hired Inland Empire Truss as a subcontractor to provide trusses. It is not clear to me that Inland was really a subcontractor as they simply fabricated and delivered the trusses. Precision Framing recorded a lien. The court ruled the lien was filed prematurely and was void.
In this case the timeline is quite important:
|August||Trusses are installed by Precision, after Inland delivers the trusses.|
|Late August||Some repairs to the trusses are carried out.|
|December 9||The city sends a second correction notice regarding the trusses that does not get to Precision.|
|December 23||“The general contractor found that Precision’s work was complete and fully in compliance with the plans and specifications. At that point, according to both Mears and the general contractor, Precision had completed its scope of work. The city approved Precision’s framing work.”|
|January 2||Precision records a mechanic’s lien.|
|January 2 or later||The owner changes the locks on the building.|
|Late January||Precision becomes aware of the December 9 correction notice.|
|February 2||Precision locked out and can’t determine scope of issue.|
|February 12||Precision expresses continued willingness to perform repairs.|
|February 12 or 13||Inland allowed to make repairs and completes repair in two or three hours.|
Notably, the decision does not say when or if the owner had accepted the project, usually a critical event in any contract.
A mechanic’s lien cannot be recorded until the work is complete. The court in Precision discusses what is completion at length. It concludes “Thus, a work of improvement, as a whole, can include both construction and repairs.” There is no detailed analysis of what constitutes a repair.
Issues were raised if the “repairs” related to the architect’s design. The court stated “First, even assuming the architect did design the trusses, the contract called for Precision to supply the trusses necessary to complete the project, not merely trusses in conformity with the plans.” (Emphasis in the opinion.) The court concludes that even if there were design issues “the repairs constituted “substantial work necessary to the completion of the contract…”
Lastly, the court states as to Precision’s lack of knowledge regarding the city’s correction notice at the time it recorded its lien “[h]owever, we have not found any case law suggesting that a claimant’s subjective knowledge or belief as to whether it has ceased to provide work is relevant.” In short, it doesn’t matter what you think or have been told, you may not be done.
The court held that Precision’s mechanic’s lien was premature and thus void. By the time the court ruled, it was far too late to record a new lien.
Where does the Precision case leave contractors and subcontractors? It may be that you can’t ever really know if your lien is premature. A sly owner can now find “necessary repairs” and then declare the lien is premature. This is particularly problematic since the work is not limited to a punchlist of incomplete items, to which acceptance is usually subject. Completion now requires that all repairs, known and unknown be completed for a lien to be valid. This raises other questions. Can a warranty claim, particularly one in the first 90 days after completion also subvert a mechanic’s lien?
This is a ruling that begs for an appeal. Contractors and subcontractors are entitled to a system where they can reliably know when to record a lien. Now they are squeezed between worrying the line is premature or that it is too late. Is the foreclosure period now 90 days after the last necessary repair is done (perhaps that could redeem the decision for contractors)? The window for recording a mechanic’s lien is now unclear, if not opaque.
I have serious concerns about this opinion.
Laurence P. Lubka
Lubka & White LLP
Tel: (626) 301-0700