Mechanics Lien Upheld Despite Lack of Notice to Senior Construction Lender

John Mark Goodman | BuildSmart

In an unpublished opinion, a California appeals court has upheld a subcontractor’s mechanics lien claim despite the subcontractor’s failure to strictly follow the procedural requirements set forth in the mechanics lien statute (see Ram Concrete v. Montecito, 2024 WL 1879352 (Cal. Ct. Appeal)). In Ram Concrete, the trial court entered judgment for the subcontractor on its breach of contract and mechanics lien claim. On appeal, the owner contended that the mechanics lien was invalid under the California lien statute because the subcontractor failed to give preliminary notice of its lien claim to the owner’s construction lender. The owner also contended that the senior secured interest of the construction lender prevented the subcontractor from foreclosing on the lien. 

The appeals court rejected both arguments. As to the notice argument, the court recognized that the mechanics lien statute is remedial legislation and as such should be liberally construed for the protection of laborers and materialman. It reasoned that “[t]o construe the preliminary notice statute strictly would require us to invalidate a lien against an owner who received notice because someone else did not receive notice. That strict statutory construction would allow a party who received the required notice to be insulated from liability because another party did not receive notice. We do not believe that the statute’s purpose should, or does, lead to this aridly formalistic result.”   

The court also rejected the owner’s argument that the senior secured interest of the construction lender defeated the contractor’s lien foreclosure claim. The owner could not point to any provision of the mechanic’s lien statute requiring a mechanics lien holder to hold the senior lien interest on a property in order to foreclose. To the contrary, California law provides that a junior lienholder may enforce its lien by foreclosure, however its purchase of the property would remain subject to any senior liens. The court therefore found no merit in the owner’s contention that the mechanics lien could not be enforced by foreclosure because there was allegedly a senior security interest on that property.

A copy of the Court’s decision is available here.

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