Understanding Notice of Credit and Lien Extensions in California

In California, a mechanics lien will expire 90 days after its filing date unless a lien foreclosure action is filed to enforce the claim. Frequently claimants wonder if they can simply “extend” the lien.

There is a provision in California to extend the validity period for a mechanics lien, but the provision is rarely used. It’s uncommon to extend California liens simply because the extension requirements are hard to meet as all lien extensions must be signed by the property owner and indicate the property owner’s consent to the extension.  Yes, the proeprty owner must agree to extend the validity of the mechanics lien against their own property.

Why would any property owner agree to do this?

The only reason a property owner would agree to such a lien extension is if they agreed to the amount due, promised to pay the claim, but wanted a “credit agreement” with the claimant to pay the claim over time. In this scenario, the claimant and the property owner could agree to an extended payment plan and allow the lien to get extended to avoid the costs of a foreclosure action. If the lien isn’t extended by agreement, the foreclosure would otherwise be necessary.

When this magical scenario occurs, the parties file what is commonly referred to as a “Lien Extension.”  I believe the more formal name for the document, however, is a “Notice of Credit.”  It is provided for by California Civil Code §8460:

(a) The claimant shall commence an action to enforce a lien within 90 days after recordation of the claim of lien. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable. (b) Subdivision (a) does not apply if the claimant and owner agree to extend credit, and notice of the fact and terms of the extension of credit is recorded (1) within 90 days after recordation of the claim of lien or (2) more than 90 days after recordation of the claim of lien but before a purchaser or encumbrancer for value and in good faith acquires rights in the property. In that event the claimant shall commence an action to enforce the lien within 90 days after the expiration of the credit, but in no case later than one year after completion of the work of improvement.

Here are some key things to know about Lien Extensions / Notices of Credit in California:

1. No matter what, you cannot extend the mechanics lien to be effective for any longer than 1 year after completion of the work of the improvement.
2. You must get the owner to agree to terms and include those terms (and the owner’s signature) within the notice.