They may have an estimated combined net worth of over $1 billion, but Beyonce and Jay-Z are still subjected to the powerful effect of construction liens. The new 30,000 square foot home the couple bought earlier this year just had a California construction lien filed against it by a pool builder who claims its was not paid for its work. The pool (which is the fourth pool installed at the estate), was actually constructed by Pool & Spa Builders for the prior homeowners. According to the construction lien documents, Pool & Spa Builders claim the prior owners failed to pay it $87,729.92 for work performed. After Pool & Spa Builder completed the work, the property was sold to the Carters, who are now stuck dealing with this lien.
Because of the transfer of ownership, there is a question as to whether the construction lien is valid against the property. In the normal course, a lien would be filed, and eventually the lienor would attempt to foreclose on it. But usually liens are filed before a property is sold…and if a property is sold after a lien is filed, the lienor is usually paid out of the sale proceeds. Does is seem fair then to allow a lienor to file a construction lien after a sale has taken place, subjecting the new owners to the previous owners’ misdeeds? Probably not, but some states do allow it.
For the most part, construction lien laws do not allow the foreclosure of a construction lien if it is filed after the transfer of ownership. In some states, a lienor can file a Notice when it performs work that changes this rule because the notice gives a new owner actual knowledge that someone is working on the project and may file a lien; but most states simply protect the innocent purchaser. In that case, the lienor has the right to sue the owner of the property for whom it did work, but it will not have the security of the proceeds of the sale of a property.
In Mr. & Mrs. Carter’s case, though, given that the sale is the highest recorded in Los Angeles County this year, the construction lien will probably be resolved quickly. One advantage of a construction lien is that it certainly gets the attention of property owners, and most owners work through the issue to resolve the lien.
In California, to file a construction lien you must comply with specific deadlines. If you miss these deadlines, your lien will be invalid (note that some clerks still file liens even after the deadlines, but that does not mean the lien will be determined to be valid by a court of law).
Deadlines are as follows: General Contractor: a construction lien must be filed within 60 days of notice of completion or cessation, or 90 days after the general contractor’s work is completed. Note that the time to file after the work is completed is longer, because many owner do not provide a notice of completion or cessation. Subcontractors and suppliers: liens must be filed within 30 days of notice of completion or cessation or 90 days after entire job is completed (for a subcontractor’s purposes, completion is defined as when an owner or its agent begins occupation, work is accepted by the owner, or the cessation of labor for 60 days).
When filing a California construction lien, it is important to verify property owner mailing address and legal description or property. California has strict privacy laws, so most county clerks no longer provide owner information online. For the most part, a phone call to the county clerk will help you find the correct owner information, but some clerks require that you either visit the clerk’s office, or mail a request for the information.
California also requires a preliminary notice in order for construction lien claims to be valid. A Notice to the Owner that materials or labor are being delivered to the project should be sent within 20 days of the commencement of a subcontractor or supplier’s work. That California Preliminary Notice does not need to be filed, but it must be sent to the owner. If a subcontractor or supplier serves a Notice to Owner late, then their lien is limited to the value of the labor and materials they supplied in the twenty days prior to serving the notice and anything after the notice is served. This can severely limit the amount of the lien claim is the notice is served late.
In addition to a preliminary notice, many potential lienors choose to file a Notice of Intent to file a construction lien, prior to actually filing the construction lien itself. The advantage of filing a Notice of Intent is that it gives a warning to the owner that a lien is going to be filed if the disputed claim is not paid or otherwise resolved. Notices of Intent can be very effective for this purpose, and allows the owner to get directly involved in any last ditch efforts to resolve a non-payment issue.
In California, liens filed on private property are known as Mechanic’s Liens. When a California mechanics lien is filed with regard to work performed on privately owned property, it attaches to and encumbers the fee simple ownership of property.
In most circumstances, California does not allow mechanics liens to be filed on government owned property. However, nearly every project on government owned project is required to have a payment bond in place to protect subcontractors and suppliers. Filing a claim against the payment bond secures your claim for money in a way that is similar to filing a lien claim. In addition to the payment bond, stop notices may also be filed.
Pre-lien notices are required to be served prior to filing a California mechanics’ lien claim. Within 20 days of the commencement of work on the property, subcontractors and suppliers should provide written notice to the owner, the general contractor and the construction lender that they are performing work on the property. If the notice is served late, then the claimant can claim a California construction lien for the value of the labor or materials provided in the 20 days preceding the service of the notice and thereafter.
Prime contractors must file a California claim of lien within 60 days after a notice of completion or notice of cessation is recorded, or if no recording of completion or cessation is accomplished, within 90 days after the completion of the work of improvement. Subcontractors and materialmen must file a California claim of lien within 30 days after a notice of completion or notice of cessation is recorded, or if no recording of completion or cessation is accomplished, within 90 days after the completion of the work of improvement.
Check out our web page at www.LienItNow.com for more information about state guides and our processes.
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.
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.