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Extension of credit document

California

Good morning ! Our client currently owes us $750K, we are going to invoice another $700K, we will finish the job around the end of August. The client wants a payment plan of over 36 months, as you know in California we have to foreclose in 90 days after the lien was filed. If we filed an extension of credit document can we prolong our enforcement dead line to cover the 36 months ?

5 replies

Aug 2, 2022
You cannot go out 36 months. Your best option would be to file your lawsuit and enter into a settlement agreement. That way you avoid losing your lien rights.
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Aug 2, 2022
Thanks Michael, How far would an extension usually reach out ?
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Aug 3, 2022
You have a year after the project's completion. This is what Civil Code Section 8460 says: (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. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable.
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Aug 3, 2022

In addition to the prior responses (which I agree with), another option is that a separate written agreement (e.g., Extension of Credit agreement) can be entered into with the client in which the subject property is used as collateral for the payment to you.  

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Aug 3, 2022
I think you should file suit in a timely manner and enter into a written settlement of that lawsuit where they have 36 months to pay you, and if they default then a judgment of foreclosure can be entered by the Court. It sounds like your client may be in a difficult financial situation and that you may end up needing to foreclose anyway!!
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