Beware Attorney Charging Liens On California Real Property

Law360, New York (March 23, 2015, 8:28 PM EDT) -- California fee contracts between an attorney and client often include provisions that provide the attorney with a "charging lien", i.e., a lien upon property owned by the client to insure the payment of fees. Charging liens are valid provisions of a fee contract in California, and such "secret" liens take effect and are perfected upon execution of the contract creating the lien. See Carroll v. Interstate Brands Corp., 99 Cal. App. 4th 1168, 1175 (2002). Although charging liens are "perfected" under state law upon execution of the contract, after filing a notice of charging lien — and especially if the attorney asserts the lien against the client's real property — attorneys should file and record the notice in the county in which the property is located, although such recordation is not required to perfect the lien. In the context of a bankruptcy case, which this article will examine, a Chapter 7 trustee plays a prominent role in the ultimate treatment of the lien with respect to property of the bankruptcy estate. Indeed, a Chapter 7 trustee can sell free and clear of secret liens on real property under 11 USC § 544....

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