How to foreclose a mechanic’s lien
Filing a mechanic’s lien on a project if you have been unpaid is only the first step in the process. Contrary to popular belief, a recorded mechanics lien does not stay of record forever. Within a certain period of time, the contractor or supplier must bring a lawsuit for breach of contract and to foreclose the mechanic’s lien. If not, the lien will lapse and become void. The reason is that a judge must determine the exact amount owed and that involves the process of foreclosure.
Such a lawsuit is typically brought in the superior court in the county in which the project is located. Just like any other lawsuit, it is filed, served, and after various status conferences with the judge, is set for trial. A full trial is then held, with documentary evidence, testimony, witnesses, and experts.
There can also be junior liens on the property, including possibly a first or second deed of trust. They are usually joined as parties to the action, but before bringing such a lawsuit, it is common to determine whether these obligations are current. If they are not and are in default, there is the danger the property will be foreclosed by those sources which will then wipe out the mechanic’s lien. For this reason, a determination of the likelihood of success should first be determined.
If you prevail at trial, there will be a judgment for breach of contract (the money aspect) and also an order for foreclosure. This in turn will be referred to either the sheriff or marshal’s office who will schedule an actual foreclosure sale. Typically this is done in court, and is like an auction.
When the bidding starts, you will be able to credit bid the amount of your judgment. If there is a first or second deed of trust in front of you, you’ll be taking over the property subject to that encumbrance.
But the real question is how often does the foreclosure take place? We asked our attorney, and he says that after practicing almost 30 years, he has only seen two of them actually go to foreclosure sale. There is almost always a settlement before that occurs.