Filing a mechanics lien is one of the most powerful ways to recover payment from a non-paying client. Most property owners would want to get rid of a mechanics lien, so payment claims often always get settled once a mechanics lien is recorded against a property.
Once a mechanics lien is satisfied and you finally receive your payment, the property owner or any interested party will most probably request you to formally cancel your mechanics lien. In California, construction professionals are expected to release a mechanics lien upon its satisfaction. This guide explains the steps that you must take to formally release a California mechanics lien.
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- When to release a California mechanics lien
- Why do you have to release a California mechanics lien?
- What happens if you fail to release a California mechanics lien?
- How to file a California mechanics lien release
- Best practices when releasing a California mechanics lien
When to release a California mechanics lien
A California mechanics lien is released once payment has been received and the claim has been satisfied. When you receive the payment that you were trying to claim via your mechanics lien, the implication is that the California mechanics lien no longer holds and must, therefore, be canceled accordingly.
You will most likely receive a formal written request from a property owner or any interested higher-tier party to have your California mechanics lien released. In some cases, releasing a mechanics lien becomes part of the payment negotiation. Property owners usually want an assurance that you will duly release your mechanics lien as soon as they settle your payment claim.
Why do you have to release a California mechanics lien?
A mechanics lien has to be released once satisfied because it is a burden to any property. When a mechanics lien is filed, the record of outstanding debt becomes available for potential buyers and financiers to see. These potential investors will not invest in a property that is burdened with mechanics liens, and so such claims are actually able to limit a property’s market value.
This is why a mechanics lien is highly effective in prompting property owners to pay up. It is also the same reason why a mechanics lien has to be canceled once payment is already settled. Formally canceling a mechanics lien informs potential investors that there are no more existing payment claims over a property, and it is therefore worthy of investment.
What happens if you fail to release a California mechanics lien?
Failing to release a mechanics lien in California, assuming that payment has been duly settled, could cause a lien claimant to be compelled to pay penalties and fines. When a property owner requests you to cancel or release a mechanics lien, you are obligated to cancel your mechanics lien if you want to avoid paying these unnecessary fines.
Note that property owners in California are allowed to petition in court the release of a mechanics lien that has already been satisfied. If you do not release a mechanics lien, a property owner can have it released by going through the court process. However, this could also result in your having to shoulder their attorney fees.
It is then imperative that you release a mechanics lien in California, especially when a property owner has formally requested you to do so. Ignoring a property owner’s request to cancel a satisfied mechanics lien will cost you money that you could have otherwise saved for your business.
How to file a California mechanics lien release
1. Prepare the California mechanics lien form
There is no prescribed form for a California mechanics lien release. However, when preparing your California mechanics lien release form, make sure that it includes the following information:
- Your name and address
- The name and address of the property owner
- The address of the property (e.g. street address or legal description)
- The county in which the lien was recorded
- The book and page or series number of the official records where the lien was recorded
- A statement expressing that the mechanics lien has been paid and satisfied and that you are releasing the lien
When writing down the information, make sure that the details are written properly and correctly. Always cross-check the accuracy of the page and book numbers, and avoid making spelling mistakes such as misspelled business names and addresses.
Going the extra mile to carefully verify the accuracy of the details on a California mechanics lien form is a good business practice that every construction professional must exercise.
2. Record the California mechanics lien release
Releasing your California mechanics lien follows the same process as filing it. You either visit the clerk’s office or mail your document to them. Note that your mechanics lien release document must be filed in the same clerk’s office where the original mechanics lien was recorded.
Note too that filing a mechanics lien release document is not for free. If you are mailing your California mechanics lien release form, make sure that you also include in the mail the exact amount for the lien fees. You may call the clerk’s office before mailing your document to know how much money you have to include in the mail.
You must also remember that a mechanics lien must be released when the payment has been satisfied. Expect a formal request from a property owner, and it is best practice to release a mechanics lien soon after receiving such request. Even if you do not receive a request, it is still a good idea to release a mechanics lien in California as soon as you verify that payment has been received.
Keep in mind that failing to release a California mechanics lien makes you liable to penalties. If a property owner has to go to court to petition a mechanics lien release, you may end up having to shoulder their attorney fees. To avoid complications like this, do not forget to release a California mechanics lien once you receive your payment.
Best practices when releasing a California mechanics lien
1. File a mechanics lien release even without a formal request from the property owner
It is best practice to always release a California mechanics lien regardless of whether you received a request to do so or not. Releasing a mechanics lien is usually the last step in the mechanics lien process. Even if the property owner did not formally ask you to cancel your mechanics lien, canceling a mechanics lien is still the safest way to go to avoid the possibility of having to pay unnecessary fees.
2. Verify that payment has been received before releasing a mechanics lien
You should never release a mechanics lien unless you are certain that payment has been processed. Be wary of rejected credit card transactions or bouncing cheques. Before you sign off your mechanics lien release, make sure that payment is on hand and that the money is ready for your disposal.
3. Double-check the accuracy of the information on your mechanics lien form
Using a mechanics lien release template for California is one way to speed up the process of filing a California mechanics lien release. However, you must not be complacent and must still verify the accuracy of the details that you write on the form. As with any mechanics lien-related document, avoid making spelling errors and make sure that you copy the correct page and book numbers.