Mechanic’s Lien Update: Are You a General or Subcontractor?
In deciding how and when to record a mechanic’s lien, it is important to define your status. This depends whether you will be categorized as a general contractor or a subcontractor/supplier.
The first thing to do is ignore your license status. Some people think that if you are a licensed electrical subcontractor, for example, you will always be considered a sub for purposes of the lien law. This is not true.
This is because your status is determined by who you have your contract with. Or as lawyers say, your privity of contract. Thus, if you have a direct contract, whether verbally or in writing with the owner of the property, even though you are licensed as an electrical subcontractor, you are considered a general contractor for purposes of the mechanic’s lien law. Or some statute state, the original contractor.
That makes a tremendous difference as far as the legal requirements you must meet for the lien. So for example in California, which is not unusual, subcontractors have to serve by certified mail a preliminary 20 day notice the beginning of the project, if you are a subcontractor. Thus, with this same example of the electrical subcontractor, if you have a direct contract with the homeowner, you would not have to serve that notice to perfect a mechanic’s lien.
But with that in mind, it can be tricky. You may think you have a contract with the owner, but in actuality this could be an agent or middleman for the owner. For example, you are doing work on a condominium project and are dealing with ABC Company that appears to be the owner. So you think you are a direct contractor. But in actuality, when you get to court, it is determined that ABC Company was simply the manager for the owner which is DEF Company. This means you were a subcontractor and if you did not serve the pre-lien notice, would not be entitled to a lien.
For these reasons, it is always the best idea to call national Lien Law for a free initial consultation if you are uncertain of your status.