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.
The internet is full of long explanations regarding mechanics liens. From Wikipedia to About.com, Once of the best explanations we’ve found (outside our own FAQs about California mechanics liens) is from the Sacramento County Public Law Library website. Mechanics liens and their requirements are all laid out in an easy to understand format there. If you don’t want to take the time to go to their site, you can take a look below at what they have to say about mechanics liens, preliminary notices, stop notices, and removing a lien or stop notice.
A Mechanics’ Lien is an effective remedy for contractors, subcontractors, and others involved in the construction or improvement of real estate to resolve payment problems. If a service or materials provider records a Mechanics’ Lien against the real estate being improved, the owner can not easily sell or refinance the property without first paying off the debt secured by the lien. A Mechanics’ Lien motivates the owner to make sure the contractors get paid, and is a prerequisite to filing a foreclosure action on the property.
Handling Mechanics’ Liens and Related Remedies (Private Works) KFC 229 .H86
This CEB Action Guide describes the rights and remedies, including Mechanics’ Liens, stop notices, and bonds of the principal parties involved in a private work of improvement.
Preparing And Recording Your California Mechanics’ Lien: On Private Works Of Improvement
KFC 229. Z9 S74
This title assists contractors in preparing their Mechanics’ Liens and bonded stop notices on private works of improvement located within the state of California and includes completed sample forms.
California Mechanics’ Liens and Related Construction Remedies
This CEB practice guide simplifies the procedural maze of Mechanics’ Liens, stop notices, and bond remedies.
In California, the construction lien law is very specific. In addition to simply filing a construction lien, a claimant needs to make sure that it complied with all the pre-requisites that the mechanics’ lien law requires.
Liens filed on private property or on funds relating to a public project are known as Mechanic’s Liens. When a lien is filed with regard to work performed on privately owned property, it attaches to and encumbers the fee simple ownership of property. On a private project, the mechanics’ lien places an encumbrance on the property that makes it difficult to resell or re-finance the property without first removing the lien.
Contractors, as well as subcontractors, design professionals, sub-subcontractors and material suppliers can file a lien. If a company supplies material to a material supplier, they are not eligible to file a lien claim.
In California, in order to file a lien, some claimants must fulfill some prerequisites. 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 lien for the value of the labor or materials provided in the 20 days preceding the service of the notice and thereafter. Pre-notices are required to be served prior to filing a mechanics’ lien claim.
With regard to the lien filing itself, there are timing restrictions. Prime contractors must file a 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 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.
California does not require that, in order to file a lien, a claimant have a written contract. Oral contracts are sufficient if the lienor has sufficient documentation to show the existence of an agreement or that it performed the work for which it is filing a construction lien.
Another effective tool to collect receivables on a construction project, in addition to a lien, is a Stop Notice. A Stop Notice can be filed on both public and private projects, and is a notification that has the ability to enhance the effectiveness of a mechanic’s lien. A Stop Notice, or a notice to withhold funds, is sent to the company that is financing or funding the construction funds for a project. Once that company receives the Stop Notice, that company has notice that it should withhold sufficient money to satisfy the stop notice claim. The purpose of the Stop Notice is to provide the lender, financiers or funders of the construction project notice that there is money owed to a contractor, subcontractor or supplier so that an inquiry can be made as to why that money is not being paid. The 20 day pre-notice is required to be eligible to file a Stop Notice.
For more information on filing a California Construction Lien, a California Mechanics Lien, or a California pre-lien notice, please visit http://www.lienitnow.com/california-faq.asp.