Nobody wants to go to court. Well, ok, some lawyers do. But nobody else does. If it’s avoidable, disputes should be resolved without a lawsuit – they’re costly, take way too much time, and it’s just an unpleasant process top to bottom. One of the best ways to resolve disputes outside of the courtroom is through arbitration. For this reason, many construction contracts contain arbitration clauses. When such a clause is present, disputes must first go to arbitration before any lawsuit is filed. However, in California, enforcing a filed mechanics lien could result in waiving the right to compel arbitration.
Enforcing a California Mechanics Lien Could Waive Arbitration Rights
First, it’s important to recall that filing a mechanics lien and enforcing a mechanics lien are very different. Filing a mechanics lien does not require any legal action. It’s done by merely recording a document with the county. Enforcing a mechanics lien does require legal action. However, more often than not, this step is unnecessary. Mechanics lien claims are usually resolved and released prior to enforcement.
Back to the topic at hand…
To be a little more specific: Enforcing a California mechanics lien could waive the enforcing party’s right to compel arbitration unless certain steps are taken. Not very catchy, right? We didn’t think so either.
Anyway, when an arbitration clause is present in a contract, nothing is stopping one of the parties from filing a lawsuit instead of going to arbitration. However, once suit is filed, the other party to the contract can file to compel arbitration. Basically, they’re telling the court “Wait! This suit can’t go on! We have to arbitrate!” Typically, if a valid arbitration clause exists, the court will agree and send them to arbitration. However, in some situations, a party may have waived their right to demand arbitration – regardless of whether they intended to or not.
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How to Avoid Waiving The Right to Arbitration
When a mechanics lien has been filed and enforced, there are steps a claimant can take to make sure that the right to compel arbitration is not waived. To avoid waiving the right to compel arbitration, the party enforcing their lien must abide by Section 1281.5 of the California Code Code of Civil Procedure. If a claimant does either of the following, they can preserve their right to compel arbitration:
“(1) Includes an allegation in the complaint that the claimant does not intend to waive any right of arbitration, and intends to move the court, within 30 days after service of the summons and complaint, for an order to stay further proceedings in the action.
(2) At the same time that the complaint is filed, the claimant files an application that the action be stayed pending the arbitration of any issue, question, or dispute that is claimed to be arbitrable under the agreement and that is relevant to the action to enforce the claim of lien.”
Keep in Mind: Arbitration Clauses Can Create A Mechanics Lien Mess
Takeaway
Arbitration is usually preferable to litigation. When an arbitration agreement is in place, it’s a good idea not to waive the right to arbitrate. Filing a mechanics lien won’t destroy this right, and typically, claims are resolved before any lien enforcement becomes necessary. However, if enforcement does become necessary, claimants should take the above steps to preserve their right to compel arbitration.
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