|May 16, 2013|
Previously published on May 9, 2013
The California statutes governing mechanics liens were repealed and replaced effective July 1, 2012. Even though such changes were made nearly a year ago, we still occasionally find that contractors are not complying with the claim requirements and owners are not requiring the new lien waiver and release forms. Although the majority of the procedures and requirements remain the same as before, the revisions have changed the numbering of the statutes and the language or attachments required in preliminary notices, mechanic’s liens and waivers and releases. Following is a very brief summary of certain provisions of California’s Mechanic’s Lien Law.
I. Determining Whether Lien Rights Exist.
Contractors, subcontractors, material suppliers, equipment lessors, laborers and design professionals (“Contractors and Suppliers”) that provide work authorized for a work of improvement may claim liens in that work of improvement and the real property in which it is situated. Civil Code Section 8400. A work of improvement includes construction, alteration, repair, demolition or removal, seeding, sodding, planting, filling, leveling or grading. Civil Code Section 8050. Contractors and Suppliers must have the right to use a mechanic’s lien. If the applicable work performed or material supplied was not consumed in the improvement, or used to improve the property, the applicable Contractors and Suppliers will not have a right to a mechanic’s lien. If a California contractor’s license is not in strict compliance with the Contractor State License Law, its rights to a mechanic’s lien will be impacted and possibly eliminated.
II. Lien and Stop Notice Rights Must Be Preserved by Serving a Preliminary Notice.
A contractor claimant, other than a general contractor, must provide a Preliminary Notice (formerly called a 20-day Preliminary Notice) to the owner, direct contractor and construction lender within 20 days of first furnishing work or materials. Civil Code Section 8200, et seq. A general contractor should provide the Preliminary Notice to the lender, but does not need to provide the Preliminary Notice to the owner. Contractors may give the Preliminary Notice at any time before work starts or products are delivered, and up to 20 days after. If such notice is given more than 20 days after work or delivery, a contractor’s lien rights only apply to the work or products provided 20 days before the Preliminary Notice was given, and any time thereafter. The Preliminary Notice should be delivered in person or by certified, registered or express mail, or overnight delivery, with receipt of the mailing or delivery as proof.
III. Serving and Recording the New Form of Mechanic’s Lien.
A claim of mechanic’s lien must be recorded after the claimant completes its contract and on or before 90 days after completion of the work of improvement. If the owner files a valid Notice of Completion, a direct contractor must record its lien (and mail a copy to the owner) within 60 days after recording of the Notice of Completion, and any other claimant must record its lien (and mail a copy to the owner) within 30 days after the recording of the Notice of Completion. Civil Code Section 8412, 8414. “Completion” occurs upon (a) actual completion of all work on the project, (b) occupation or use coupled with cessation of labor, (c) a cessation of labor for 60 continuous days, or 30 days after recordation of a Notice of Cessation, or (d) acceptance by a public entity in some cases. Owners can shorten the period for the recording of liens by recording a Notice of Completion within a window of 15 days after actual “completion.” Civil Code Sections 8180, 8182, 8184, 8186 and 8190. A claim of mechanic’s lien must be signed, verified and recorded in the county where the work was performed at the project. Note that Contractors and Suppliers must deliver the mechanic’s lien to the property owner before they file it, and they must attach the proof of delivery with the lien they are recording. The copy of the lien must be sent by certified mail, and Contractors and Suppliers should keep a record of their mailing on an affidavit swearing that they sent it on the day it was sent and in the matter in which it was sent. Attach the affidavit of delivery and the proof of mailing with the mechanic’s lien when sending it for recording. The claim of mechanic’s lien must include (a) a statement of the amount owed, (b) the name of the owner, (c) a description of the work furnished, (d) the name of the person who contracted with the claimant for the work, (e) a description of the property (i.e., address or assessor’s parcel number), (f) the claimant’s address, (g) a proof of service of the claim, and (h) a statement containing language specified in the statute. Civil Code Section 8416. There is not a statutory form of mechanic’s lien.
Note that a claimant must generally sue to enforce its lien within 90 days after recording the mechanic’s lien. Civil Code Section 8460. After the 90-day period following the recording of the mechanic’s lien, the lien will expire and will be of absolutely no effect unless the Contractor or Supplier: (i) extends the lien for an additional 90-day period; or (ii) files a lawsuit to foreclose on the lien. Extending the lien may be difficult, because it requires the property owner to sign a written consent to such extension.
IV. New Form Waiver and Releases.
Note that the required forms for obtaining conditional or unconditional waiver and releases for progress and final payments have changed. They are provided in Civil Code Sections 8132-8138.