Mechanics liens can be the last line of defense standing between a construction participant and nonpayment. But with all of the specific, technical, and confusing rules and requirements that potential lien claimants must comply with in order to qualify for an enforceable lien, it’s possible to end up unprotected, even when the claimant has put forth a herculean effort to meet the compliance demands. One particular area that can cause significant confusion for contractors is when project work was performed in more than one location.
Working in multiple locations is common, whether surrounding work on new residential developments, pursuant to some property management contract, or just delivering materials to a bunch of different and unrelated properties for a single contractor.
There are a few factors to consider regarding the ability to lien such projects, and like most issues regarding mechanics lien law, the answer can change from state to state.
Is It Actually More Than One Property?
One of the first things to consider is whether the work was actually on more than one property. If the project is a new development with a single owner, and the work was done prior to the subdivision of the property, the general rule would be that any lien claim would be asserted against the total pre-divided parcel. After all, prior to being subdivided, it’s still one property with one owner.
On the other hand, if the property has already been subdivided, or if there are multiple owners, or if there are multiple contracts under which the work was performed, the calculation is a bit trickier.
When It’s Clearly Multiple Properties
The general rule in circumstances in which there are actually multiple properties (with or without multiple owners) is that each distinct property must have a separate lien claim (and an entirely separate lien process, i.e. preliminary notice, lien filing, lien service, foreclosure, etc.)
This makes sense because in all cases, a mechanics lien is a right against the property itself. An essential element of filing a mechanics lien is that the property owner must be made aware of it, and lumping a group of unrelated properties into a single lien and potential foreclosure proceeding is confusing.
Exceptions Do Exist
Since we’re talking about mechanics lien law, there are always going to be exceptions, and contrary to the general rule about multiple properties mentioned above, some states allow a single lien to be filed in some circumstances in which one would generally assume multiple liens must be filed.
An example of this other, “single lien” way of doing things is California, where Civil Code § 8446 states that:
“A claimant may record one claim of lien on two or more works of improvement, subject to the following conditions:
(a) The works of improvement have or are reputed to have the same owner, or the work was contracted for by the same person for the works of improvement whether or not they have the same owner.
(b) The claimant in the claim of lien designates the amount due for each work of improvement. If the claimant contracted for a lump sum payment for work provided for the works of improvement and the contract does not segregate the amount due for each work of improvement separately, the claimant may estimate an equitable distribution of the amount due for each work of improvement based on the proportionate amount of work provided for each. If the claimant does not designate the amount due for each work of improvement, the lien is subordinate to other liens.
(c) If there is a single structure on real property of different owners, the claimant need not segregate the proportion of work provided for the portion of the structure situated on real property of each owner. In the lien enforcement action the court may, if it determines it equitable to do so, designate an equitable distribution of the lien among the real property of the owners.
(d) The lien does not extend beyond the amount designated as against other creditors having liens, by judgment, mortgage, or otherwise, on either the works of improvement or the real property on which the works of improvement are situated.”
Wrapping It Up
So, if a project with multiple properties was ultimately contracted for by one party, it is technically allowable to file one lien in certain circumstances and in certain states. Although, even in these situations, with the general requirement to partition the work between the different properties, it is really only a potential way to save filing costs, not to save on preparation efforts.
Also, county recorders routinely raise issues with such liens, despite the fact that they are allowed by statute. This is because liens are indexed by property description, and it often becomes a nightmare for the county recorder to get a multi-property lien properly recorded. Finally, the notice and service requirements are not modified, such that the property owner(s) must be provided notice/lien even if there are many owners and only one lien is being attempted to be filed.
The general best practice and most “protective” measure would usually be to file a separate lien for each individual property on which work was performed. However, in certain states, that general rule may be avoided under certain circumstances, though as described above, a multi-property mechanics lien may be more trouble than it’s worth.