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Mechanic’s Liens and How Business Owners Can Avoid Them

What is a Mechanic’s Lien

A mechanic’s lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. The lien exists for both real property and personal property.

A University Heights Story

A restaurant owner and client in the University Heights area of San Diego called me one evening concerned because he had just received a Notice of a Mechanic’s Lien. He thought this meant he was being sued in Superior Court. I alleviated his concerns right away by letting him know that this document is not a lawsuit but it essentially states that there is a problem with a potential upcoming legal dispute.

A mechanic’s lien is used mainly by contractors who are not paid for work performed in a property. The language on the notice looks intimidating. If you receive one, read it carefully and read it twice for comprehension.

A mechanic’s notice reads as follows, “Upon the recording of the enclosed MECHANICS LIEN with the county recorder’s office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanics lien is recorded. The party identified in the enclosed mechanics lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanics lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanics lien is released. BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMATION ON MECHANICS LIENS GO TO THE CONTRACTORS STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov.”

Procedural Requirements

Understand that as with other court actions, a mechanic’s liens has certain procedural requirements before a party such as a contractor can seek a lien against your property. Check out the Contractor’s State License Board to learn a bit more about the procedural requirements and changes made effective as of 2012.

Call to discuss a notice of mechanic’s lien as soon as you receive one as there are important deadlines involved in the process.  Resolution to your disputes may come quickly if immediate action is taken.

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Matters to Explore Before Signing A Shareholder Buy-Out Agreement

Issues Arising After a Shareholder-Employee Departure
 If you’re an employee in a company, you may be terminated as an employee where you’re an “at-will” employee or for other reasons when you’re in a contract. However, if you’re an employee and a shareholder of an organization, know that you cannot be terminated as a shareholder. Often in a business cycle, shareholders may reach a point where the shareholders can no longer work together. So what happens to the departing shareholder? Quite a bit. If you’re a shareholder and employee, become familiar with your shareholder agreements or buy-sell agreements in place. These documents may instruct what happens in the event a shareholder departs from the organization.  A departing shareholder-employee situation may become a bigger issue when there is no document addressing this need.
Various topics can become complicated
 This entry explores only a few items that must be explored and can become complicated after shareholder-employees separate.
  1. Employment contract – in addition to shareholder agreements and corporate documents in order, review your employment agreement to determine what your future holds with respect to benefits and/or restrictions.
  2. Unfair Competition and Trade Secrets – Unfair competition arises when a former business relationship uses deceit or insider information to gain a business advantage.
  3. Noncompete Clause – A noncompete clause may prohibit an employee from working in the same field or from working for a competitor. Various California regulations may deem these types of clauses as unenforceable.

If you find yourself in the position where you can no longer work with other shareholders in your organization, reach out to an attorney for a consultation as early as possible. Before signing a shareholder buy-out or shareholder withdrawal agreement or similar document, learn about your options that are particular to your circumstances. Published online recommendations are general in nature, therefore, know that your situation and the factors surrounding your situation.

Before signing a Shareholder Buy-Out Agreement

It is important to meet with an attorney to explore your matters. The difference between meeting with an attorney and not could mean hundreds of thousand of dollars in liabilities in the future.