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The Property Lien and Equipment Rental Companies

Can an equipment rental company file a property lien (mechanic's lien) on your property?

QUESTION:

Dave, we recently had 2 trees removed from our property and the contractor that I hired rented a piece of equipment from an equipment rental company that lifted him up and down to cut this tree.

The equipment worked fine and he finished the job without problems. Now apparently the place where he rented it from is saying that there is something wrong with the pump on this piece of equipment and that the contractor that did this work was the one that broke it.

The contractor is denying that he did anything wrong and that it must have been a defective pump, because everything was working fine the two days they were here doing the job.

The equipment rental company has just served me a Preliminary 20-day notice, or what I gather is also known as a mechanic's lien.

I did not sign a contract or rental agreement with this Co. why would I be responsible for this piece of equipment? This should be between them and the guy that signed the rental agreement.

I am not sure at this point but I also believe it has been over 20 days since the work has been done, what exactly does that mean? What should I do to protect myself, or how can I help this rental Co. get paid from the contractor?

Jay, Homeowner

ANSWER:

A company that supplies equipment used by a contractor to improve property may properly record a mechanic's lien (aka property lien) if, within 20 days of the date on which the equipment is first used, the company serves a 20-day preliminary notice on the property owner.

The property lien must then be recorded by a deadline that will never be earlier than the date 30 days after completion of the work of improvement.

The lien amount cannot be based upon damaged equipment. The property lien is an equitable claim against property based upon the improvement to the property resulting from the equipment.

That amount is almost always going to be the rental value of the equipment while it was used on the property.

So, in this instance, it appears that the lien is appropriate if it meets the deadlines listed above. If no preliminary notice was timely served, the equipment rental company should be challenged with a letter IF the company records a lien.

A preliminary notice is not recorded. It's just a notice to the owner that, again, is a prerequisite to a lien for a company that provides equipment to a contractor. It might be smart to write to the company now to advise them that their preliminary notice was late and that if a lien is recorded, it will be invalid.

If a property lien is recorded, unfortunately there is nothing that can be done to remove the lien except for an "abuse of process" lawsuit, which would cost money and which would only be successful if it can be shown that the company recorded the lien knowing that it would be invalid.

The threat of that abuse of process lawsuit might be adequate to scare the company from recording the lien.

Note that a property lien doesn't mean anything by itself. A lien is merely notice of a lien claim that might be made. A lien claim only gets made when a lawsuit is filed to enforce the lien. However, while the mechanic's lien is on title, no sale or refinancing of the property can occur unless the lien is released or a bond is obtained by the owner.

There are many other subtle factors at play here, but that is the gist of it. The appropriate step probably is to write to the company to point out that its preliminary notice was late and that any lien will therefore be invalid. This would make it more risky for the company to record the lien. If a lien is still recorded, more specific attention to the circumstances should be given with a construction attorney involved that can advise on the specific rules affecting liens and the rights of the owner.

--
Thank you to Dave Barnier for the above information. :) Mr. Barnier is a practicing litigation attorney in San Diego CA and can be reached at 619.682.4842.

The information in this article is based upon California law current at the time of writing and is provided for general information, only. The information provided illustrates laws and legal principals in general. Any information or analysis presented in this article is intended solely to educate the reader on general issues. A comprehensive review of facts, documents, and applicable laws is always required before any attorney can competently provide any legal advice regarding any particular situation. In short: Please do not rely on any part of this article when analyzing any specific situation affecting you or your business.

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