Significant Changes to California's Mechanics Lien Law Coming July 1, 2012

by Pillsbury Winthrop Shaw Pittman LLP
Contact

[authors: Chris R. Rodriguez, John S. Poulos, William S. Hale, P.E., Robert A. James, Amy L. Pierce]

Effective July 1, all of the existing statutes governing mechanics liens, stop notices and payment bonds in California will be repealed and replaced by updated statutes.

In September 2010, Governor Edmund G. Brown, Jr. signed into law SB 189, which makes a number of significant changes to the laws governing the creation and enforcement of mechanics liens in California (the "Mechanics Lien Law"). The law will also result in new statutes governing stop notices (on both public and private works), payment bonds and related claims.

While SB 189 relocates and renumbers the Mechanics Lien Law, many of the provisions are substantively the same. Among these are two provisions that were modified as part of 2009's A.B. 457 and went into effect in January 2011: a change in the required form of mechanics lien claim and method of service (Civ. Code § 3084) and the new requirement that claimants record a lis pendens within 20 days after filing an action to foreclose on mechanics liens (Civ. Code § 3146). Pillsbury alerted clients here in April 2009 to earlier proposed versions of these changes.

The remaining changes take effect on July 1, 2012. The most sweeping change is that all of the statutes making up the Mechanics Lien Law (currently Civil Code sections 3082 through 3267), including the law governing stop notices and payment bonds, will be repealed and replaced with new statutes (Civil Code sections 8000 through 8848 and 9000 to 9566). Lawyers and clients familiar with the old statutory scheme will need to retool for the new layout. A chart showing key provisions under the current law, and the locations of the corresponding provisions after July 1, 2012, is attached.

Despite the statutory upheaval, many of the provisions of the Mechanics Lien Law will remain substantively unchanged. The substantive changes taking effect on July 1, 2012 include the following:

Definition of Completion. The deadline for recording a mechanics lien is generally triggered by the "completion" of a work of improvement. Under current law, acceptance by the owner is one of the things deemed to constitute "completion." Under new section 8180, that is no longer the case. The remainder of circumstances that constitute "completion"—i.e., actual completion of all work on the project, occupation or use coupled with cessation of labor, a cessation of labor for 60 continuous days (or for 30 days after recording of a notice of cessation), acceptance by a public entity—remain unchanged. The former provision for acceptance by a private owner was recommended for deletion by the California Law Revision Commission because it was ambiguous, in that it did not identify a particular manner of acceptance or how that acceptance should be communicated to interested parties.

Time for Recording Notice of Completion. Under current law, owners must record notices of completion within a window of 10 days after actual completion of the project. Under the new law (section 8182), that time period is extended to 15 days.

Preliminary Notice. Under existing law, a "Preliminary 20-Day Notice" must be served by most types of lien claimants at the outset of their work, to preserve their lien claim, payment bond, and stop notice rights. Under the new law, this notice is referred to simply as a "Preliminary Notice." The required language for the Preliminary Notice has been changed. Also, section 8200 eliminates ambiguity in the current law and makes clear that contractors in direct contract with the project owner need only provide a Preliminary Notice to construction lenders and reputed construction lenders, if any.

Waiver and Release of Lien Rights. In order to ensure that a "downstream" subcontractor has validly released its right to assert lien, stop notice, or payment bond rights, the law requires that specific waiver and release language be used. Under the new law (sections 8132, et seq.), the required language has been changed slightly; one should be careful to utilize the form current as of the day the release is executed. The form utilized for progress payments (as opposed to final payment) does not cover certain disputed or extra work items, or claims based on breach of contract, so “upstream” parties may want to supplement the statutory form with additional releases.

Release Bond. Under the new law (section 8424), the amount of the bond required to release property from a lien has been reduced from 150 percent to 125 percent of the lien amount.

Attorney's Fees on Petition to Expunge Lien. The new law removes the current $2,000 limit on the amount of attorney's fees that are recoverable on petitions to expunge stale liens; under the new law, all "reasonable" fees will be recoverable to the prevailing party. This will create a stronger incentive for lien claimants that did not foreclose upon their liens to make sure that their liens are formally released. The new law also adds a requirement that an owner must first make a demand that the lien claimant withdraw the lien at least 10 days before initiating a petition to expunge.

The statute governing the transition to the changed features of the Mechanics Lien Law, Civil Code section 8052, provides that the validity of an "action taken" for purposes of the lien law is governed by the laws in place at the time of that action. This provision is not entirely clear, but best practice for contractors will be to use the forms required under current law through June 30, 2012 and then switch over to the new forms on July 1, 2012.
 

Written by:

Pillsbury Winthrop Shaw Pittman LLP
Contact
more
less

Pillsbury Winthrop Shaw Pittman LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!