• California is a "full price lien" state.
  • Claimant of Mechanic's Lien is entitled to full amount owed from owner regardless of payments made to Direct Contractor (California's name for General Contractor)(§8430).
• Contractors, Direct or Remote, who are not duly licensed under California Business and Professional Code §7031, are barred from enforcing any action including Mechanic's Liens, Stop Payment Notices or Payment Bond actions to recover amounts due for their work (§7031). Supplying materials to an unlicensed contractor does not negate the supplier's lien rights.
• Suppliers who provide installation services in conjunction with materials may be considered Subcontractors subject to §7031 and would need to be licensed (§7052, Steinbrenner v. J. A. Waterbury Const. Co., 212 Cal.App.2d 661, 28 Cal. Rptr. 204).

Notice Speed Bumps

• The "Preliminary Notice" must be filed within 20 days of first furnishing of work or materials. A Mechanic's Lien, Stop Payment Notice or Claim against bond may only be made for work performed or material provided within the 20 day window prior to the date of the Preliminary Notice (§8204(a)).
• If a claimant provides work for contract with more than one subcontractor, the claimant must give preliminary notice under each contract (§8204(b)).
• Failure to provide Preliminary Notice for any work or materials greater than $400 in value may be grounds for disciplinary action under California's state licensing laws (§8216).
• To Claim a Mechanic's Lien on any of the following parties, Preliminary Notice must have been given (§8200).
  • Owner or reputed owner.
  • Direct Contractor or reputed Direct Contractor whether work is provided through a contract directly with the Direct Contractor or through a Subcontractor.
  • Construction Lender or Reputed Construction Lender, if any.
    • Claimant seeking a Lien or Stop Payment Notice has a duty to investigate the existence of a Construction Lender. Lack of actual or constructive knowledge will not relieve Claimant from notice requirement.

• A Preliminary Notice made by a subcontractor who has not paid all compensation due to laborers must include the names and addresses of all laborers who are still due money (§8202).

• If the amount stated on the Preliminary Notice is going to be exceeded by greater than 10%, a new Preliminary Notice including only amounts in excess of the original stated amount should be sent to all applicable parties. This will not prevent you from recovering the full amount with one claim (§8200).

Mechanic’s Lien Speed Bumps

• Case Law Koudmani v. Ogle Enterprises, Inc. (1996) allows a lien claimant to file a second lien after the original lien has been voluntarily released. Release should not state claimant’s claim for materials was satisfied. The second lien to be valid must be filed timely per statute.

• A Claimant who is the Direct Contractor must record a Claim of Lien after the contract is complete and before the earlier of the following (§8412):

• 90 days after completion of the work of improvement.
• 60 days after the owner records a Notice of Completion or Cessation.

• A Claimant other than a Direct Contractor must record a Claim of Lien after the Claimant ceases to provide work, and before the earlier of the following times (§8414):
  • 90 days after completion of the work of improvement or,
  • 30 days after the owner records a Notice of Completion or Cessation.

• Completion of a work of improvement occurs upon (§8180):

  • Actual completion.
  • Occupation or use of the property and cessation of labor.
  • Cessation of labor for a continuous period of 60 days.
  • The Recording of a Notice of Cessation after cessation of labor for a continuous period of 30 days.
  • The recording by the Owner of a Notice of Completion on or within 15 days after the date of completion of a work of improvement that is signed and verified by the owner (§8182).
  • Acceptance only, if the work of improvement is subject to acceptance by a public entity.

• Owner may release property from the lien by posting a bond of 125% of the amount of the Claim of Mechanic's Lien. The bond replaces the property as security for the Claim (§8424).

• A Claim of Mechanic's Lien may be made for the lesser of (§8430):
  
  • The reasonable value of the work or supplies provided by Claimant.
  • The price agreed to by the Claimant and the person who contracted for the work.

This does not preclude making a Claim based on written modifications or the result of rescission or abandonment or breach of contract.

• Lien does not extend to work, whether or not authorized by Direct or Subcontractor, if the work is not included in the Direct Contract or a modification of the Direct Contract the Claimant had actual or constructive knowledge of before providing work (§8432).

California, AB-534  Sections 4620, 6660 and 8819 relates to common interest developments, which include condominiums, planned developments and stock cooperatives.

Changes to existing law include:

• Prohibits, in a common interest development, a mechanics lien from being filed against another owner in the common interest development unless that consent was provided or that request was made, except in the case of emergency repairs.
• Authorizes the owner of a separate interest in a common interest development to remove the separate interest from a lien against two or more separate interests by either paying to the holder of the lien the fraction of the total sum secured by lien that is attributable to the owner’s separate interest or recording a lien release bond, as specified.
• Deems the governing association of a common interest development to be an agent of the owners of separate interests in the common interest development with respect to a work of improvement on a common area for all notices and claims required pursuant to existing law relating to works of improvement.

 

Stop Payment Notice Speed Bumps

• NACM recommends pursuing a Stop Payment Notice on all public jobs. Serving the Preliminary Notice compels the withholding of funds. Bond claim remedies can be simultaneously pursued by serving a timely notice to the principal and surety. All MBLS next-action emails on public projects will recommend "Attorney Stop Notice" as the next action.

• The Stop Notice will only be valid if (§8508):

  • Claimant gave valid Preliminary Notice.

  • Claimant gave the Stop Payment Notice before the expiration of the time that a lien must be recorded.

• When the Stop Payment Notice is made, Owner must withhold from the Direct Contractor a sufficient amount due or to become due to the Direct Contractor to pay the claim stated in the Stop Payment Notice (§8522).

• For the Claimant to receive funds from the Stop Payment Notice claim, he or she must post a Release Bond given by an admitted surety insurer equal to 125% of the amount of the claim. Once this bond is posted, the funds obtained through Stop Payment Notice must be released by the Owner (§8510).

• A Stop Payment Notice may also be given to the Construction Lender. The same conditions apply as to owner (§8530).

• Claimant must wait 10 days to sue to enforce the Stop Payment Notice, but must do so within 90 days. If Claimant does not prevail, costs and damages no greater than the amount of the required bond will be assessed against Claimant (§8550).

• Labor or materials for the drilling or operating of oil or gas wells give rise to liens on the leasehold and appurtenances, all materials and fixtures owned by the lessee, all oil and gas produced, and the proceeds thereof. Lien is claimed by filing verified statement in the office of the County Recorder for the county where property is located within six months after the date on which labor was performed or material furnished and extends for six months after recording.  Statutory Citation-Civil Code §§3081.1 through and including 3267

• There are no Mechanic's Lien rights when working on a Public Works Project. The only remedies available are the Stop Payment Notice and an action against the Payment Bond (§9000).

• All Direct Contractors for a Public Works Project are required to post a Payment Bond equal to 100% of the total amount payable under a Public Works Contract. Successful Claimants against a Payment Bond will be awarded reasonable attorney's fees (§9554).

• Requirements of Subcontractor or Supplier for preliminary notice are unchanged except that the notice must be given to the Public Entity and the Direct Contractor. If the Public Works Contract is for work by the California Department of Public Works, or the Department of General Services, Preliminary Notice must also be given to the disbursing officer of the department contracting the work (§9302).

• Stop Payment Notice is not effective unless given before the expiration of (§9356):

  • 30 days after the recording of the notice of completion, acceptance or cessation.

  • 90 days after cessation or completion, if none of those is recorded.

• If payment of $10 is made to Public Entity with Stop Payment Notice, Public Entity must within 10 days give notice to Claimant of the time within which a suit must be brought (§9358).

• Commencing action on the payment bond can be done any time after the Claimant ceases to provide work or materials. It must be commenced no later than five months after the period in which a Stop Payment Notice may be given (§9558).

• Even if Preliminary Notice was not given, a Claimant entitled to payment can give written notice meeting the requirements of a Preliminary Notice to the surety and bond principal within 15 days after recording of a notice of completion or if one isn't recorded 75 days after completion of the work of improvement and still have a claim against the bond. Preliminary Notice should ALWAYS be given, but this remedy can save a Claimant who has failed to do so (§9560).