Christopher Ng recently posted an interesting article concerning the waiver of a general contractor's priority for its mechanic's lien rights through a subordination agreement with the project lender under California law.
General contractors are often asked (or required) to subordinate their lien claims by owners and lenders before commencing work on a construction project. It may not come as a surprise to these contractors that such a subordination agreement may be enforceable in most states. In California, however, where the mechanics lien is a constitutional right under the California Constitution, the question of enforceability of such a subordination agreement against a general contractor was not as certain.
In
Moorefield Construction, Inc. v. Intervest-Mortgage Investment Company (September 30, 2014), the California Court of Appeals held that, despite the constitutional protection and priority rights accorded to mechanics liens, a general contractor could waive its mechanics lien rights through a subordination agreement with a construction lender.
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