1. TRUST DEEDS AND MORTGAGES (Loans WHICH ARE CALLED LIENS).
2. MECHANIC’S LIENS are recorded documents placed by someone who did physical work on a property. This individual or company is called a mechanic. This can be as simple as a housekeeper or as involved as a builder/contractor hired to remodel or build a structure. The “mechanic” is attempting to get paid through the court system.
3. JUDGMENTS AND ATTACHMENTS. A judgment is a court decision requiring payment. An attachment is where the court “attaches” a property through a legal process which keeps a property from being sold or transferred in any way until the lawsuit has been decided.
4. TAX LIENS AND SPECIAL ASSESSMENTS. A tax lien is a lien placed against a property for any legal taxable reason. Property taxes that are not paid will automatically become a lien and at some point the property can be sold to pay the taxes. Other taxes can be attached as well. Unpaid income taxes can become a lien, special assessments are a lien. Any legal governmental agency that has the authority to tax has the ability to place a lien against the property.

A LIEN IS a document that uses property to secure a debt. It is usually recorded at the local House of Records or Recorder’s Office.

C. “Trust Deeds”. These are not really a deed in the normal sense. It is a document that is used to create collateral for a loan. It gives a party the right to foreclose and sell the property if the borrower doesn’t pay for the loan in full. The trust deed is recorded to tell “constructive notice” others that the current owner has a lien on the property that must be paid before the ownership (title) can be transferred unless the buyer assumes responsibility for the loan with permission from the lender. Along with a trust deed is a note (I.O.U.) that is the evidence of a debt. The trust deed is evidence that a note exists. The note has the full terms of the debt. The trust deed is the instrument that allows the bank to foreclose if the debt has not been paid.

D. A Mortgage is another way to secure a loan. It is rarely used in California and will be discussed at a later time.

E. “Mechanic’s Liens”. A mechanic’s lien is filed against a property because a person or company was not paid for furnishing work or materials for construction or other work on a property. This is lien against the property itself giving the mechanic the right to file a lawsuit and foreclose on the property if the mechanic wins the lawsuit. Unfortunately, the owner of the property is in a difficult situation when a mechanic’s lien is filed. At times the owner hires a contractor and the contractor hires others to actually do the work. These “others” are referred to as subcontractors (subs). The contractor is paid but doesn’t pay the subs. The subcontractor(s) file a mechanic’s lien(s). They may actually go to court with a lawsuit against the owner. If the subs win they either get paid by the owner or the mechanic enforces the judgment by the court and forecloses and sells the property and keeps from the proceeds the appropriate money to get paid. This seems unfair to the owner because he or she has to pay twice but the law protects the worker and suppliers. The mechanics deserve to be paid for their work and supplies. The owner only has one method of recourse. Pay the debt twice and then find and sue the original contractor for the money.

THERE ARE VERY SPECIFIC RULES AND TIME LINES THAT MUST BE FOLLOWED BY A MECHANIC.

1. A Preliminary notice must be given within 20 days of supplying materials or commencing work. Supplying materials can be as simple as delivering any supplies to the worksite.
2. It is extremely important to determine when delivery or work starts.
3. A “Notice of Completion” is very important as it sets the day the work is completed.
i. A notice of completion should be recorded at the appropriate agency (Recorder’s office, Hall of Records).
ii. If a Notice of completion is recorded the main general contractor has 60 days from completion and subcontractors have 30 days to file a claim (start a lawsuit).
iii. If a notice of completion HAS NOT been recorded, all contractors and suppliers have

90 days to file a claim.
iv. Work is considered completed if one of these alternatives occur:
1. Occupation after stopping labor. Owner uses improvement completed by contractor
2. Acceptance of work by owner
3. Cessation (stopping) of labor for 60 continuous days
4. Cessation of labor if the owner files (records) a “Notice of Cessation” with the appropriate recording officer.

E. Mechanic’s liens do not take priority of any liens filed (recorded) prior to the mechanic’s liens. But, they do take priority over any filed after the mechanic’s lien. If the owner has an existing first trust deed and obtains a second trust deed or home improvement loan and the lender of the second trust deed (loan) or home improvement loan doesn’t record the loan before materials are delivered or work starts, the second trust deed will fall into third place and become a third trust deed behind the mechanics’ lien
That is why the timeline above is so important! It determines order of priority!
Timelines to file a lawsuit are: 30 days for subcontractors, 60 days for general contractors, 90 days if no notice of completion is filed.

If an owner of property drives by his/her property (usually a rental property) and discovers work being done, it is imperative that the owner post (place) and record a

“Notice of Non-responsibility” on the property within 10 days of discovering the work.
This notifies the mechanic that the owner is not responsible for payment of the work and the mechanic CAN NOT FILE a mechanic’s lien on the property. The tenant or whomever hired the mechanic is responsible for the debt, not the owner of the property.

It is extremely important to remember that Mechanic’s Liens are recorded against a Propery, NOT against the owner.

F. TAX LIENS:

If any governmental real estate related tax has not been paid the taxing agency will place a lien upon a property. An owner cannot transfer (sell, give away) a property without paying the lien and penalties in full. If the owner does not pay for the lien in a reasonable period of time the taxing agency could sell the property to satisfy (pay it off) the debt.

G. SPECIAL ASSESSMENTS
Assessment districts are usually created by a local governmental agency. They are assessments charged to property owners in a specific area (district) and for a specific purpose. Streets, roads, sewers, lighting are the most common reasons for property owners in a selected area to be charged. The governmental agency (cities and counties are the usual entities to do this) borrows money to do construction work and then charges the specific properties that benefit from the improvement.

H. JUDGEMENTS
Judgments are decisions by a judge in a court of law. If the one who charges (plaintiff) wins a decision from another (defendant), the court allows the plaintiff to record a document that gives notice to all of the defendants future creditiors that the judgment exists. This document is called an Abstract of Judgment. This document attaches to an individual and all of the property owned this person. In order to transfer a clear title, the judgment must be paid.

I. TERMINATION OF A JUDGMENT LIEN
A judgment is considered satisfied when it is paid. A notice that the judgment has been paid should be filed with the court and then recorded in the County records.

J. ATTACHMENT
The court assumes custody (takes control) of property until a decision is made in a lawsuit. This keeps the defendant from selling the property or properties until a judgment is given. This assures that there will be property available to give the plaintiff some opportunity to possibly force a sale of it and collect the judgment.

K. LIS PENDENS
This is a Latin term meaning potential or pending lien on real property. This is usually recorded by an attorney when filing a lawsuit. It prevents real property from being sold until the lawsuit is completed. Title companies will not issue title insurance when there is a lis pendens. This creates a cloud on the title.

L. SHERIFF’S SALE
As the result of a lawsuit, the court (judge) issues a Writ of Execution. A writ is instructions to the sheriff, or other local official, to sell a parcel of real estate to pay off a judgment. This can be any judgment. A normal lawsuit, a mechanics lawsuit, anything the court deems appropriate regarding real estate.

M. INJUNCTION
The court can order someone to stop doing something. This is referred to as an injunction.

ALL OF THE ABOVE A through M, ARE FOR MONEY. THEY ARE REFERRED TO AS LIENS. THEY ENCUMBER REAL ESTATE FOR MONEY REASONS.