Special Advisory: New Mechanics Lien Act in California

by Sheppard Mullin Richter & Hampton LLP
Contact

[authors: Edward Lozowicki and Scott Vignos]

In 2010, the California Legislature enacted Senate Bill ("SB") 189 to reorganize and simplify the laws governing works of improvement. The bill completely re-writes the statutes which provide for mechanics liens, stop notices and certain construction bonds. These revisions took effect on July 1, 2012. In addition to this reorganization, some substantive changes to the laws governing mechanics' liens, construction bonds, and stop notices were made. As a result, all of the forms commonly used in the industry, such as the 20-Day Preliminary Notice, Notice of Completion, and Progress/Retention Payment Releases must be changed.

Case law interpreting the previous construction remedy laws is intended to survive. Legislative history accompanying SB 189 provides that cases construing provisions of the former statutes that are continued and restated in the new statutes will remain in force. However, SB 189 also made several substantive changes to the construction remedy laws that are essential to understand. The most notable of these changes include:

New Definitions and Terminology

The new portions of the Civil Code governing works of improvement now contain a distinct and separate definitions section. Civil Code section 8000 et seq. provides operative definitions applying to the works of improvement statutes, generally. Included are definitions for common terms previously omitted from the statutes like "contract price" and "admitted surety insurer." The definition of "design professional" was also expanded to include licensed landscape architects, who by their inclusion, will now be entitled to record mechanics' liens. The new statutes also recast several definitions. The term "direct contractor" replaces the term "original contractor" as used in the previous statutes and also encompasses the term "prime contractor." Additionally, "stop notices" are now known as "stop payment notices" to more accurately describe their function.

New Notice Section

Perhaps the most important addition to the new construction remedy statutes are the standardized notice provisions governing all works of improvement. Civil Code section 8100 et seq. provides standardized rules for the contents of notice, acceptable manners of giving notice, and sufficient methods of proving notice has been given. Due to their broad application, many of the standard notice-type forms used by contractors and owners should be changed to comply with the new Act.

The new statutes also describe proof sufficient to demonstrate notice was given, a frequent point of disagreement among parties. If notice was given in person, Civil Code section 8118 provides for a "proof of notice declaration" as sufficient proof. If notice was given by mail, the statute provides for several acceptable forms of documentary proof.

New Preliminary Notice Section

SB 189 also created a separate preliminary notice section governing private works of improvement. While largely consolidating the previous preliminary notice requirements from the old statutes, Civil Code section 8200 now requires that a claimant with a direct contractual relationship with an owner (including prime contractors) must provide preliminary notice but only to the construction lender. The new provisions also note that only "laborers," as defined in Civil Code section 8024, are not required to provide preliminary notice in order to enforce a mechanics' lien.

Changes Regarding Completion

The various components of the existing mechanics' liens statutes governing completion of private works projects have been consolidated and simplified within the new statutes. While largely unaltered in substance, several changes are important to note. Civil Code section 8180 deletes "acceptance by the owner" as an acceptable form of completion that previously existed in Civil Code section 3086. Civil Code section 8182 also lengthens the period of time in which an owner must record a notice of completion from 10 to 15 days.

Changes to Mechanics' Liens Procedures

In reorganizing the rules related to mechanics' liens, the drafters of SB 189 were focused primarily on simplifying the prior version of the statutes. As a result, the substance of new Civil Code section 8400 et seq. will be largely familiar to practitioners. However, several changes are noteworthy.

Civil Code section 8416 makes an adjustment to the required contents of a mechanic's lien claim, providing that the claim must now include the claimant's address. Further, Civil Code section 8424 now requires a release bond be in the amount of 125% of the claim of lien, where previously 150% of the amount was required.

Release of Lien Changes

Many of SB 189's changes to the mechanic's liens statutes concern procedures for the release of liens. Civil Code sections 8480 though 8488 now govern the summary court procedure for release of expired liens. Pursuant to Civil Code section 8482, an owner must demand that a claimant release its lien at least 10 days before filing a petition to release his or her property after the expiration of the 90 day period to file an enforcement action. Previously, no demand was necessary. Civil Code section 8488 also makes burden of proof and production assignments within the summary procedure where previously these burdens were unarticulated.

Tips

Sheppard Mullin has published a new edition of its Mechanics' Liens, Stop Notices and Payment Bonds book incorporating these statutory changes, as well as recent case law, to provide lawyers, owners, and contractors the most current overview of laws affecting their day-to-day operations. To purchase a copy ($65), contact Megan Bennett, E-mail: mbennett@sheppardmullin.com.

The new Mechanics Lien Act changes all of the forms used by Owners and Contractors as of July 1, 2012. Members of the industry are cautioned to replace their old forms with new forms that comply with the new Mechanics Lien Act.

Authors: Edward Lozowicki is a partner in Sheppard Mullin's San Francisco office and specializes in construction and energy law. Scott Vignos is an associate in that office and member of the Firm's Construction Industry Team.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sheppard Mullin Richter & Hampton LLP | Attorney Advertising

Written by:

Sheppard Mullin Richter & Hampton LLP
Contact
more
less

Sheppard Mullin Richter & Hampton 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!