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California Mechanics Liens and Contractor Licenses

In a prior post, I went over the Preliminary Notice (aka “20-Day Notice”) as the first step in pursuing a Mechanics Lien in California. In another post, I went over the importance of having a construction contractor’s license in California. If you don’t have such a license, you’re forbidden from suing if a client doesn’t pay you. You’re also vulnerable to being sued for disgorgement of all compensation you earned while unlicensed. In this post, I’m going to address a question posed by a hybrid of these two posts: can you pursue a mechanics lien if you’re a construction contractor working without the required license?

The short answer here is no. If you work in the construction trades and you don’t have the license that California requires you to have, you cannot pursue a mechanics lien against a client/customer who doesn’t pay you. The reason is the same statute I went over in my prior post, section 7031 of California’s Business and Professions Code. Section 7031(a) says:

“Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.”

This entire section is important, but I’ve bolded and underlined the part that I think is particularly important: you cannot bring a case of any kind in any California court for compensation for construction-related work, unless you allege and subsequently prove that you were licensed at the time the work was done. In California, merely placing a mechanics lien on a piece of real property doesn’t yield you any payment. The payment you’re due comes when you file a lawsuit to foreclose on said lien. In order to file such a lawsuit, however, you would — per Section 7031(a) above — have to allege and subsequently prove that you were duly licensed at the time the work was done.

In short, in the vast majority of cases, in order to pursue a mechanics lien, you are going to need to be properly licensed for the type of construction work you do. In the vast majority of cases, not having the proper license will prevent you from pursuing payment via, for instance, a mechanics lien.

But….

There’s a longer answer to this question also and that’s “possibly”. Even if you don’t have a current and active license, it still might be possible for you to pursue a mechanics lien for non-payment if you can show you “substantially complied” with the licensing provisions under section 7031(e) of California’s Business and Professions Code. As I’ve previously explained, you’ll probably have a difficult time showing substantial compliance if you’ve never had the proper license in California for the work you’re doing. On the other hand, if you’ve previously had the correct license, acted in a reasonable and diligent way to maintain that license, and/or acted quickly to correct the licensing problem when you, for example, learned your license had expired, then claiming substantial compliance might be much easier.

Even though substantial compliance is a way to rescue yourself and still have a way of getting paid, it’s by no means certain. To have a court conclude that you’ve substantially complied and, thus, have the right to pursue payment is by no means a guarantee. It will probably involve a lot of work and also cost you substantial amount of time and money also. In my opinion, it is still much easier to have a current version of the correct license from the outset and not have to worry about Section 7031 in the first place.

As always, I hope this post helped. This was not meant to be a comprehensive or exhaustive discussion of how contractor’s licenses affect mechanics liens. If you’re going to rely on this post for a case, please do your own research because it is entirely possible that the legal authority I mention above could have changed in the time between when I wrote this post and when you’re reading it. If you do have a case involving a mechanic’s lien and a licensing problem and you want to know, for example, if you can claim substantial compliance, I encourage you to find an attorney in your area with whom you can discuss your case.

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Andy Chen

Andy I. Chen is a lawyer licensed to practice law in California and New York. Andy maintains offices in Los Altos, California and Modesto, California. Under the New York Court of Appeals' 2015 decision in Schoenefeld v. State of New York, Andy does not accept cases from those in New York state. He does, however, know many lawyers in New York state and would be happy to make a referral.

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