Preliminary Notices and Mechanics' Liens: The Cash-Recovery Tool Most New Contractors Never Use

A few months into the license, you finish a kitchen remodel. The last payment is $9,000, and the homeowner stops returning calls. Or they tell you the deposit should come back because they were not happy with the tile. You pull out your contract, and there is nothing in it that helps.

California built a tool for exactly this moment. It is called a mechanics lien, and most new contractors do not learn how it works until the window to use it has already closed.

What a lien actually is

A mechanics lien is a claim against the property you worked on, recorded with the county, for the value of work you did and were not paid for. It does not depend on the owner's goodwill. It depends on you doing a few things on time.

That is the whole catch. Lien rights run on deadlines, and the clock starts before you know you have a problem.

Step one: the 20-day notice, and who gets it depends on who hired you

Before you can record a lien, the law generally requires a "preliminary notice," which everyone in the trades calls the 20-day notice. Who you send it to depends on your role on the job.

That second rule is the one new contractors get wrong in both directions. Some mail notices nobody required. Others assume that because they signed with the owner, there is nothing to send, and then find out there was a lender financing the job.

The timing: the notice goes out within 20 days of when you first start work or deliver materials. If you send it late, it only protects work from 20 days before the notice forward. Cal. Civ. Code § 8204(a)

And if you are a licensed subcontractor on a job where your contract is over $400, failing to give the notice can also be grounds for discipline by the Contractors State License Board. Cal. Civ. Code § 8216

The three clocks

Once you have the notice right, three deadlines decide whether your lien holds up.

1. Clock one: the 20-day notice.

   Covered above.

2. Clock two: recording the lien.

   If the homeowner hired you directly, you record after you finish your contract, and before the earlier of 90 days after the whole project is complete or 60 days after the owner records a notice of completion or cessation. Cal. Civ. Code § 8412

   Subcontractors and suppliers generally have 90 days after completion, or 30 days after a recorded notice. Cal. Civ. Code § 8414

3. Clock three: enforcing it.

   After you record, you have 90 days to file a lawsuit to enforce the lien. Miss that, and the lien expires and cannot be enforced. Cal. Civ. Code § 8460(a)

Many deposit disputes start with the contract

Now the part that is less comfortable.

After the down payment, you cannot ask for or accept payment that gets ahead of the work actually done or the materials actually delivered. Cal. Bus. & Prof. Code § 7159.5(a)(5) Taking too much up front can be a misdemeanor.

So when a new contractor tells us they have a "deposit dispute," the first question is how big the deposit was. If it was over the cap, the homeowner may have leverage before the argument even starts.

Here is the practical takeaway. Because the rules keep your payments slightly behind the work, you will almost always have unpaid work on the job at some point. Lien rights are the backstop for that gap. It is exactly why they are worth setting up correctly.

What a lien can and cannot do

• It covers work you actually did. The amount is generally limited to the reasonable value of the work or the contract price, whichever is less.
• You need a valid license for the work, the whole time. An unlicensed contractor generally cannot sue to collect at all. Cal. Bus. & Prof. Code § 7031
• The paperwork has to be right. The lien has to be recorded with the county and served on the owner with the required notice. The wrong amount, the wrong owner name, or a missed step can undo it.
• It is leverage, not a check. A recorded lien sits on the property's title, which gives the owner a strong reason to resolve it. It still has to be enforced on time if they do not.

Build it in before the job starts

1. Use a home improvement contract with the required terms, including the Mechanics Lien Warning. Cal. Bus. & Prof. Code § 7159
2. Keep the down payment at or under the cap, and tie progress payments to real, defined milestones in dollars.
3. At signing, ask whether a lender is financing the work. If yes, send that lender the 20-day notice.
4. On every job where you are a sub or supplier, send the 20-day notice within 20 days. Every job, not just the ones that feel risky.
5. Put the dates on a calendar: your completion date, the project's completion date, and a reminder to check county records for a notice of completion.
6. When a payment goes late, act inside the window. Waiting to see what happens is how the window closes.

The bottom line

Most contractors think of liens as something you do when a job goes bad. By then, it is often too late. The contractors who get paid treat the 20-day notice and the calendar like pulling a permit: routine paperwork on every job.

Set it up once, correctly, and it runs in the background on every job after. Skip it, and the first unpaid invoice teaches you the rules the expensive way.

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The information in this document is for information and educational purposes only and does not establish an attorney-client relationship, nor is it intended to be legal advice. You should contact an attorney for advice regarding your individual situation.