First
and foremost, the mandatory forms of conditional and unconditional waivers have
been revised and renumbered. The
governing statutes now are as follows:
1. Conditional
Waiver and Release Upon Progress Payment:
Civil Code § 8132 (formerly Civil Code § 3262(d)(1));
2. Unconditional
Waiver and Release Upon Progress Payment:
Civil Code § 8134 (formerly Civil Code § 3262(d)(2));3. Conditional Waiver and Release Upon Final Payment: Civil Code § 8136 (formerly Civil Code § 3262(d)(3)); and
4. Unconditional Waiver and Release Upon Final Payment: Civil Code § 8138 (formerly Civil Code § 3262(d)(4)).
The
revised language of these releases can literally be cut and pasted out of the statute
and into your form, or you can email the author at Kristine@MollenkopfLawGroup.com
for new forms. Legislative notes
describing the reason for these changes indicate they are being “recast for
clarity,” but should not be considered a “substantive change.” Case law interpreting the former Section 3262
will continue to be used to interpret these “new” statutes.
Next,
there are new service requirements, and changes to the language for preliminary
notices for private works of improvement.
(See Civil Code §§ 8200(a)(3) and 8202(a)(3).) Section 8200(a)(3) now requires the
subcontractor to serve not only the owner and prime contractor with the
preliminary notice, but also the construction lender, or reputed construction
lender, if any. If you have been
attending the author’s mechanic’s lien seminars, then you know she has always
recommended service upon the construction lender, so if you implemented that
advice, this new requirement should not be a substantive change for your business
office.
Section
8202 revises the “Notice to Property Owner” section of the preliminary notice. Otherwise, the preliminary notice must
continue to comply with the requirements of Section 8102 with which you are all
familiar (e.g., providing the
name and address of the owner, direct contractor, and construction lender, a
description of the site sufficient for identification, the name, address, and
relationship to the parties of the person giving the notice, a general
statement of the work provided, the name of the person to or for whom the work
is provided, and a statement or estimate of the demand, if any, after deducting
all just credits and offsets). Again, this
language can be cut and pasted out of the statutes into your form, or you can
email the author at Kristine@MollenkopfLawGroup.com
for a revised form.
Carried
over from changes that became effective over a year ago on January 1, 2011, is
the requirement that all mechanic’s liens must be accompanied by a “Notice of
Mechanic’s Lien” containing the required language giving notice to the owner of
the import of the document. The
legislature has again been very helpful, and provided the specific, required
language of that notice, which may be cut and pasted out of the statute and into
your form. Or, you guessed it…email the
author for the mechanic’s lien form and required notice to owner. The mechanic’s lien now will be rejected by
the Recorder’s Office unless also accompanied by a proof of service of the lien
upon the property owner (also part of the form), and as has always been the case,
failure to comply with the notice provisions of the statute render the lien
invalid.
On
the other hand, an error in the claim of lien (i.e., such as errors in the
demand, credits, and offsets deducted; the work provided; or the description of
the site) will not invalidate the lien, pursuant to Civil Code §
8422(a), (b), which codified existing case law.
However, these types of errors will render the lien invalid if a court
determines the claim of lien was (1) made with the intent to defraud or to
slander title, or (2) an innocent third party, without notice, became the bona
fide owner of the property after recordation of the claim of lien, and the
claim of lien was so deficient that it did not put that third party on further
inquiry of the matter. This new section
generally combined the substance of former Sections 3118 and 3261, but expanded
the bases for invalidity to include intentional slander of title.
If
a subcontractor improperly records a mechanic’s lien or it becomes stale due to
lack of perfection, but the subcontractor then refuses to voluntarily release the
lien, an owner may file a motion to expunge the lien. In the past, the owner was limited to
recovery of $2,000 worth of attorney fees toward that effort. Now, with the new Civil Code § 8488(c),
the cap on attorney fees is lifted, and a prevailing owner may recover all of
her reasonable attorney fees in connection with the action. This is further reason (in case the risk of CSLB
discipline wasn’t enough) for contractors to voluntarily withdraw expired or improperly
recorded liens.
In
this time of foreclosures and short sales, another provision to be aware of is Civil
Code § 8494. This section essentially
codified existing case law, and provides that if a claim of lien expires for
failure to file a foreclosure action, or if a court order or judgment is
recorded expunging a lien, the claim of lien does not constitute actual or
constructive notice of any of the matters contained, claimed, alleged, or
contended in the claim of lien, or create a duty of inquiry in any person
thereafter dealing with the affected property.
In other words, the subsequent purchaser does not take title subject to
the mechanic’s lien interest.
Relative
to the priority of liens, Civil Code § 8456 benefits construction
lenders, providing that as long as the total amount of optional advances does
not exceed the original amount of the construction loan, the optional advances
will relate back to the date of the recordation of the construction deed of
trust. Provided the original construction
deed of trust was recorded before the commencement of construction, then the
optional advances will also enjoy priority over (i.e., be senior to) any mechanic’s
liens.
Also
on the mechanic’s lien front, Civil Code § 8424(d) now makes lien
release bonds more affordable. The amount
of the bond required to release a lien has been reduced from 150% to 125% of
the lien amount. This harmonizes the required amount of a lien release bond
with the required amount of a stop payment notice release bond.
This
brings us to a largely nonsubstantive, vocabulary change. The term “stop notice” has been replaced with
“stop payment notice” (Civil Code § 8044). The term “original contractor” has been
replaced with “direct contractor” (Civil
Code § 8018). Finally, the term “materialman”
has been replaced with “material supplier” (Civil Code § 8028). Just when you thought you had it all figured
out.
The
legislature also redefined “completion” as it relates to private works of
improvement, with the enactment of Civil Code § 8180(a). Currently, acceptance by the owner is deemed “completion”
for purposes of establishing the deadline for recording a mechanic’s lien. The new statute has removed acceptance by the
owner as an act of completion, but maintains the other statutorily provided
completion equivalents: (1) actual completion
of the work of improvement; (2) occupation or use by the owner accompanied by
cessation of labor; (3) cessation of labor for a continuous period of 60 days; (4)
recordation of a notice of cessation after cessation of labor for a continuous
period of 30 days.
“Completion”
has not been redefined in this manner relative to public works of improvement;
therefore, a project is not deemed completed unless accepted as complete by the
public entity. However, with respect to
completion equivalents, Civil Code § 9200(b) extends the period of
continuous cessation of labor necessary to constitute completion from 30 days
to 60 days. Note this equivalent does not
apply to public works of improvement for state agencies, however.
The
period within which owners “may” record notices of completion has been extended
from 10 days to 15 days following completion, for both private and public works
of improvement. (Civil Code §§
8182(a) [private], 9204(a) [public].)
Also, for private works of improvement in which the scopes of work are
being performed under separate direct contracts with the owner, the owner may
now record individual notices of completion relative to the completion of each
scope of work. (Civil Code §
8186(a).) This is an important event to
monitor, as it will affect the contractor’s deadline relative to recordation of
its mechanic’s lien and the making of bond claims.
Now,
a few items that may make your life as a contractor a bit easier. Pursuant to Civil Code § 8210, owners
must now provide all parties who served the owner with a preliminary notice the
name and address of any construction lender who makea a post-commencement
construction loan to the project. Also,
for all construction contracts after July 1, 2012, the contract must provide a
space for the owner to identify any construction lender (excepting home
improvement or pool contracts). (Civil
Code § 8170(b).) Please note, however,
the failure to list a construction lender pursuant to this section does not
relieve the contractor from any preliminary notice requirements to that
construction lender. A contractor, as
part of his due diligence, must still search the County Recorder’s records to
identify any construction lenders of record prior to the commencement of
construction.
For
any design professionals out there, landscape architects have been added as a “design
professional” entitled to assert a design professional lien. (Civil Code § 8014.) Also, under existing law, design professional
liens were extinguished upon commencement of the work. Now, pursuant to Civil Code § 8319,
design professionals can convert their design professional liens into mechanic’s
liens if all of the conditions of the statute are met.
As always, if you
have any questions about these changes, or how they may affect your business, please
do not hesitate to call or email!
Nothing in this blog is intended to create an
attorney-client relationship. This article
is intended to provide a general overview of the current status of the law for
informational purposes only, and is not intended to constitute, or serve as a
substitute for, a professional legal consultation. Laws change every day; please consult an
attorney regarding the current status of the law, and how the law affects your
specific circumstances. Thank you.
