Anyone that furnishes labor or materials on a work of improvement is entitled to file a mechanics' lien on the property where the improvement is located. These rights exist whether they are contractors, subcontractors, laborers, or material suppliers.
In any business getting paid is a concern. Collecting payment for a contractor is especially difficult, as the work performed on the project is not something that can be repossessed should a customer fail to pay as agreed. In California payment in advance is not a viable option as a Contractor may not collect money in advance. If the project is for private works, such as a renovation on a home, the law does provide an effective collection device in the form of a Mechanics Lien.
Once a lien is filed on the property for the unpaid work, it becomes an encumbrance on the property. As a collection technique, this can be especially effective, especially if the owner was planning to put the property on the market or to apply for a loan. A lien may even affect the owners ability to refinance.
Often the filing of the lien can be enough to cause one who owes on a past due account to pay, in order to have the lien removed. Even if the owner does not do so, the contractor has greater options once the lien is in place. The claimant may proceed to file a claim and then move to foreclose on the encumbered property
In order to be effective, very specific requirements and procedures must be followed. Failing to follow these requirements may require that the lien be removed. Once the lien is recorded properly it becomes a powerful tool in making sure that those that provided services or labor on a project receive what they contracted for.