by John R. Schneider

Q. We just had our kitchen and family room remodeled, and have been having problems with the contractor finishing the job and correcting several items. Our general contractor refused to return to finish the job until we give him the final payment of $7,500.00, which was due at the completion of the job. We were afraid to do that because it would cost us more than that to finish the job if we have to bring in another contractor. Yesterday we received a notice that the contractor placed a lien on the property. Can he legally do that if he has not finished the job? Does not he have to notify us first? Is there any way for us to remove it? Do we have to pay him the final payment? M.W. Union City

A. Under most circumstances, a general or prime contractor working with a home owner, is not allowed to file a lien until the job is completed. However, once the job is completed, a contractor can have up to 90 days to record a Claim of Lien. In order to protect his or her rights to file a lien, a contractor must inform the consumer of these rights before they enter into a home improvement contract with them.

The California Business and Professions Code (Section 7018.5) requires all licensed contractors to provide the owner they are contracting with, a notification called “Notice to Owner”. This notice basically states that under the “California Mechanics Lien Law”, any contractor, subcontractor, laborer or material supplier, has a right to place a lien on your home, land or property where the work was performed, in order to secure their payment or any monies that are owed to them.

This notice is required to be in the original contract that you signed with your prime contractor. Sub contractors and material suppliers that are not directly contracted by you are required to provide you with a “Preliminary Notice”. This is basically the same information as in the “Notice to Owner” and they are required to provide this form to the owner within 20 days of the start of the job.

Generally, the maximum time allowed for a contractor to file a lien is within 90 days of the substantial completion of the job. Once the lien is filed, the contractor has another 90 days to file a Lien Forclosure Action, which will allow the property to be forclosed upon and sold to satisfy any outstanding payments owed to the contractor.

I spoke with Jim Price, a Walnut Creek attorney specializing in real estate and construction law, and asked his opinion of the legitimaticy of this particular lien.

“Filing a lien on someone’s property can be a serious matter for both the contractor and the consumer. If the contractor does not have a legitimate reason for filing a lien, or if he or she did not protect their rights by having a proper contract or providing the home owner with the Notice to Owner, they could be exposed to both legal and disciplinary action”, began Jim.

“ For the home owner, a lien can prevent the refinance or reconveyance of a piece of property until it is settled” Price continued. “If the contractor has filed a lien and does not file a complaint to forclose on the property within 90 days, the lien is then void. However, if the contractor does file a forclosure action, the home owner will have to file a cross complaint to justify their position. The frustrating part is that the contractor has up to two years to bring this action to trial. This can waste a lot of time and money for the home owner if it is not a legitimate claim”

Jim stated that if the home owners won the case they would be entitled to recover some of their attronies fees. His best practicle advice is to make sure that you have everything documented that supports your claim that you do not owe the contractor the money. Any time that a lien is involved, one of the most critical supporting documents is the contract that you signed with the contractor. Your contract will contain the agreed upon payment schedule, and a description of work to be completed, two of the most important pieces of information to determine the legitimacy of the claim.

Your contract should include a start and finish date, a detailed description of the work to be done, a down payment amount and a schedule of when a payment was to be made.

Jim......I need two or three more paragraphs so if you want to add anything, please, feel free to do so. Would you need an attorney to remove the lien?

Any other advice to the readers? Would you like them to call you if they needed more information?

John R. Schneider is a licensed general building contractor and a certified residential code specialist. He is president of All About Homes, a residential inspection company, and has been performing code and construction consultations since 1985. Readers may address their comments to John Schneider, 24326 Mission Blvd. Suite 7, Hayward, Ca 94544. Fax number: 510 537-8666. Please include your phone number. Schneider will answer questions of general interest in the paper. He reserves the right to edit the letter for brevity and clarity. Readers are encouraged to contact a competent contractor or code consultant for specific information regarding questions they may have about their homes.

Copyright 2001, John R. Schneider, all rights reserved