Designer’s dilemma: How does a professional
Question: I am an architect and I drafted
plans for the re-design of an existing restaurant in downtown
San Diego. I entered into a contract with the owner of the
property and completed my end of the contract, although
I have not yet been paid. The city has issued all the necessary
project permits. Construction is set to begin in the next
few weeks, however, with the recent filing of bankruptcy
by major financial institutions, I am extremely concerned
that the construction lender will decide not to commit and
the project will be scrapped.
I heard that there is something
called a design professional’s lien that is different
from a mechanic’s lien. How does it work?
Answer: You have a very valid concern considering
the current state of the economy and the negative impact
it may be having on the construction industry. However,
you do have a way of protecting yourself if the owner does
not pay you. You are right — there is a potential
solution by using a design professional’s lien. The
California Legislature has established this lien remedy
exclusively for licensed design professionals in cases where
no actual construction of the planned work of improvement
This remedy is found in the Civil Code starting with section
3081.1. One major difference between a design lien and a
mechanic’s lien is that a mechanic’s lien only
applies to labor, materials and services actually used in
the project to improve the property and, thus, requires
that the project actually commences, whereas a design professional’s
lien is used when the construction never commences.
first things first — who is considered to be a design
professional and in what type of project is a lien available?
Under the Civil Code, a design professional is defined as
any certified architect, registered professional engineer
or licensed land surveyor who furnishes services under written
contract with a landowner for the design, engineering or
planning of a work of improvement. One exception is that
the design lien cannot be used for design of a singlefamily,
owner-occupied residence with construction costs of less
than $100,000 in value.
Also, there are some limitations to a design lien:
1) it attaches only to the land, and
2) it may not be recorded
unless a building permit or other governmental approval
in furtherance of the work of improvement has been obtained
in connection with the design professional’s services.
There is another significant constraint on the right to
record a design lien — the lien can’t be recorded
unless the design professional knows, or has reason to know,
that the owner is not going to build the project. Consequently,
a defense to the lien could be that the owner is going to
build the project.
In your case, while your concern that the construction lender
may pull out is valid, it may not yet be a strong enough
indication that the project won’t go forward unless
that really happens. Another important difference between
a mechanic’s lien and a design professional’s
lien is the timing, deadlines and required notice. For example,
the time to file a mechanic’s lien begins when the
claimant’s contract or work is completed with the
deadline for recording tied to the completion of the entire
work of improvement.
But, the time to record a design lien
begins when the owner fails to pay under the terms of that
contract, and the deadline is 90 days after the design professional
knows or has reason to know that the planned improvement
is not going to commence. But, even if these criteria are
met, a design lien cannot be recorded unless at least 10
days before recording the lien, the design professional
gives written notice to the owner, by registered or certified
mail, that the owner is in default under the contract.
notice must include the amount owed. A claimant trying to
record a mechanic’s lien does not need to give any
such notice. The lien’s priority over other liens
and encumbrances is another significant difference between
a design professional’s lien and a mechanic’s
lien. With a mechanic’s lien, the lien is deemed to
have attached when the lien claimant first provided materials,
labor or services to the project regardless of the fact
that the mechanic’s lien itself may not be recorded
until months, sometimes years, later.
But, a design lien does not relate back to the time when
the design professional rendered services to the proposed
project. Instead, the lien is effective from the date of
recording it with the county recorder’s office. Also,
the design lien is only valid if the contracting owner is
also the owner of the property at the time the design lien
is recorded. This is not the case for mechanics’ liens.
For both a mechanic’s lien and a design lien, the
failure to file a lawsuit to foreclose on the lien within
90 days of recording the lien will render the lien null
and void. A design lien also becomes null and void if the
work of improvement actually does commence.
But, the design professional is not out of luck if his or
her lien becomes void due to the project commencing. This
is because once the project commences, the design professional
now has a right to a mechanic’s lien under the same
rules as any other clamant who has provided labor, materials,
services or equipment to the project. The key to perfecting
your design lien is to keep tabs on the financing situation
to see whether the current construction lender is going
to back out. If it does, you need to investigate whether
or not the owner has a viable funding source alternative
lined up to confirm whether the project is scrubbed. If
you know that it won’t go forward, then go ahead with
your design lien keeping in mind the various deadlines and
notice requirements. And, good luck to you in this time
of financial uncertainty.
Do you have a construction question?
Send it to: firstname.lastname@example.org
Disclaimer The information
in this article is based upon California law and is for
general information only. Any information or analysis presented
here is intended solely to inform and educate the reader
on general issues. Nothing presented or referenced to, regarding
facts, documents or applicable laws, constitutes legal advice.
Before acting or r elying on any information, including
any information presented here, consult with a qualified
attorney for your specific situation. Scholefield holds
an active PE license in Colorado, an undergraduate engineering
degree from the University of Florida, and received her
JD from the University of San Diego. Source Code: 20081003tca
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