California’s New Mechanic’s Lien Law took effect July 1, 2012

Janice Carpi is the National Underwriting Counsel for GRS Group

New portions of California’s new Mechanic’s Lien Law (SB 189), dealing with mechanic’s liens, stop payment notices, payment bonds and related remedies for both private and public works, take effect this week.  Anyone involved in construction in California, whether that construction has already commenced or not, should be aware of the new obligations and procedures adopted by the new law.  The full text of the law can be found in California Statutes 2010, Chapter 697, and a summary of the law can be found at http://www.leginfo.ca.gov/statute.html, where you can enter the statute (697) and the year (2010).

Continuing Education of the Bar (“CEB”), a California CLE provider, has published a short summary of the July 1st changes at the following site:  http://ceb.com/lawalerts/newmechl.asp.   According to CEB, here is a short summary of the changes:

The term “stop notice” will become “stop payment notice,” and the term “original contractor” will become “direct contractor.” They retain the same functions as before the amendments effective July 1.

A design professional may record a mechanics’ lien for providing work authorized for a work of improvement, subject to specified conditions. Also under SB 424 (adding CC §8319; see Stats 2011, ch 127), also effective July 1, 2012, a design professional may convert a recorded design professional lien to a mechanics’ lien if certain requirements are met.

Under CC §8200(e)(2), any claimant who has a direct contractual relationship with the project owner must give a preliminary notice to the construction lender. This claimant class includes the prime or general contractor.

Under CC §9200(b), if work has ceased continuously for a 60-day period (rather than a 30-day period under the former law), the deadline for calculating service of a stop notice to a public entity is calculated from the 60th day rather than the 30th day.

CC §3149 will be repealed and joinder of plaintiffs, as well as coordination and consolidation of civil court actions to enforce mechanics’ liens will be governed under the more general provisions in CCP §§378, 403, 404, and 1048.

As a condition to obtaining, reinstating, or renewing a license, or continued use of an existing license, a limited liability company must post a contractor’s surety bond in the amount of $100,000. Bus & P C §7071.6.5.

Although California courts of appeal have disagreed about whether a prevailing party may recover attorney fees in litigation over progress payments owing to the contractor, under CC §8800(c) (replacing CC §3260.1(b), effective July 1, 2012), the prevailing party on claims for wrongful withholding of progress payments is entitled to costs and reasonable attorney fees.

Under CC §8064, an owner may give a notice or execute or file a document under the mechanics’ lien law on behalf of a co-owner if the owner acts on the co-owner’s behalf and includes in the notice or document the name and address of the co-owner on whose behalf the owner acts.

CEB has also made available a free 10 minute podcast that can be accessed here:  http://ceb.com/lawalerts/mechllaw.asp?goback=%2Egde_2635853_member_128199306

For additional information, CEB has updated their publication California Mechanic’s Liens and Related Construction Remedies (4th ed Cal CEB 2012) that is available through their website, http://ceb.com.

Leave a Reply

You must be logged in to post a comment.