The most significant changes to California construction law in decades will became law on July 1, 2012. Owners, builders, developers, design professionals, contractors, subcontractors, suppliers and laborers rely on california mechanics liens, stop notices and/or bond claims to preserve their rights to payment. The changes attempt to simplify the legal rules and procedures for utilizing these remedies.
New Definitions, New Rules, New Procedures
Most important, all mechanics liens, stop notices and bond claims recorded after July 1, 2012 must use the new standardized forms and follow the new definitions, notice prerequisites and statutory release form language. The main substantive changes were meant to make it easier to understand the requirements, standardizing notice requirements and forms, and updating key terminology to reflect actual use of terminology, parties and documents.
Designed to Simplify the Old Statutes
Beyond renumbering, reorganizing and relocating the previous statutes governing mechanics liens, stop notices and bond claims, many of the changes to the overall scheme are not substantive, and are primarily designed to simplify the old statutes. Thus case law interpreting such language under the old statutes should continue to apply.
The new statutes governing mechanics liens, stop notices and bond claims can be found in California Civil Code Sections 8000-9566. There are three distinct groups within the statutory scheme:
For a more detailed explanation of the changes, take a look at LienItNow.com‘s prior blog posintg regarding Calfornia Mechanics Lien Changes – 2012.
How California’s Changing Lien Law Affects You
As of 7/1/12, the existing California statutes for mechanic’s liens, stop notices, and bond claims will be replaced by updated statutes. It is important to understand these changes, as they could determine whether or not your lien filing is valid.
Preliminary Notices: Under the current laws, the 20-Day Notice must be served by all subontractors and lower tier contractors or suppliers. On July 1st, this will simply be called a “Preliminary Notice.” Subcontractors and lower tier Claimants must serve the notice on the owner and prime contractor, however laborers are not required to serve this notice. The prime contractor is now required to serve the notice on the lender, if any. The Preliminary Notice must be served within 20 days of first furnishing labor or material. If it is served after this point, your lien claim may be limited to 20 days before the notice was served along with everything done after service. Aside from a slightly altered Notice to Owner section on the document, the required job information is identical to the 20-Day Notice.
Terminology: Under the new statutes, some of the terminology has been changed. A Stop Notice is now called a Stop Payment Notice. The term original contractor will become Direct Contractor. Materialman has been replaced with material supplier. Completion now means the following: (1) actual completion of the work of improvement; (2) occupation or use by the owner accompanied by cessation of labor; (3) cessation of labor for a continuous period of 60 days; or (4) recordation of a notice of cessation after cessation of labor for a continuous period of 30 days. “Completion” has not been redefined on public works and a project will not be deemed completed unless accepted as complete by the public entity.
Who Can File: Design professionals will be able to file liens once the changes take effect.
Deadlines: The deadline for service of a Stop Notice is currently 90 days from completion. Under the new laws, completion will be at 60 days of job cessation rather than 30 days.
Mechanic’s Lien Filing: In California, the unfiled lien must be served upon the owner along with a Notice of Mechanic’s Lien before it can be filed with the clerk. Under the new statutes, a mechanic’s lien may not be recorded unless it has been accompanied by a proof of service of the lien and the Notice of Mechanic’s Lien on the property owner.
Mechanics liens are great ways for a supplier, subcontractor, or even a contractor to take a step to ensure compensation for the work they perform on a construction Project. Usually, after the mechanics lien has been filed, the lien claimant can file a lawsuit to foreclose on the property. The mechanics lien filing and the subsequent foreclosure proceedings can be a huge surprise to owners who may not have know of any payment issues until receiving the mechanics lien.
To avoid the surprise, California, and many other states, have instituted prelien notice filing or serving requirements. These recent changes to the mechanics lien law are generally billed as “consumer friendly” legislation because they aim to take some of the “surprise” out of the mechanics lien filing process.
In California in particular, the mechanics lien law requires that the lien claimant do the following:
Lien claimants must comply with all existing procedures, such as the service of a California preliminary notice.