Changes to the California Lien Laws
by Carolyn D'Albora of Levy • von Beck & Associates P.S.

You may have heard that important changes were recently made to the California lien laws, which can affect your filing deadlines. Hopefully the following explanation will bring you up-to-date, and answer any questions you might have.

QUESTION: I know that Owners have always been able to file a Notice of Completion or Notice of Cessation (NOC). Why would they choose to do so?

ANSWER: An Owner is never required to file a Notice of Completion or Notice of Cessation, but they could always choose to do so. When the Owner files an NOC, this establishes a clear date for a claimant to file its Stop Notice or Mechanic’s Lien. The deadline for filing these Notices is calculated based on the date the Owner files its NOC. The benefit to the Owner if it files an NOC is that it shortens potential claimants’ deadlines for filing a Stop Notice or Mechanic’s Lien by 30-60 days. It also makes it completely clear what is the final date for a claimant to file its notice. The downside for the Owner is that it’s one more form to fill out and keep track of.

QUESTION: How did the changes in the lien law affect the Owner’s obligation to send a Notice of Completion or Notice of Cessation?

ANSWER: In the past, the Owner was required to file the NOC, but was not required to give anyone else a copy of it. Now, if the claimant timely gives the Owner a preliminary 20-day notice, including the lines recently added to the form, the Owner is required to give the claimant a copy of the NOC within 10 days after it has been recorded.

QUESTION: How does the Owner have to give the claimant the NOC?

ANSWER: It must be sent via registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing.

QUESTION: Do the changes apply to all private works projects?

ANSWER: No, the changes only apply where the project in question is NOT residential, or if it IS residential, it is a project involving 5 or more residential units.

QUESTION: What is the effect of the Owner sending the NOC to the Claimant?

ANSWER: If the Owner timely sends the Claimant a copy of the NOC, then the Claimant must give its Stop Notice within 30 days after the filing of the NOC, or its Bonded Stop Notice within 60 days after filing of the NOC. If the Owner files an NOC but fails to timely give the Claimant a copy of it, then the Stop Notice or Bonded Stop Notice must be filed within 90 days after the filing of the NOC. As to a Mechanic’s Lien, if the Owner timely sends the Claimant a copy of the NOC, then the Claimant must file its Mechanic’s Lien within 60 days after the filing of the NOC. If the Owner files an NOC but fails to timely give the Claimant a copy of it, then the Mechanic’s Lien must be filed within 90 days after the filing of the NOC.

QUESTION: What if the Owner doesn’t file an NOC?

ANSWER: If the Owner does not file an NOC, then the filing deadline for all Stop Notices (including Bonded Stop Notices) and Mechanic’s Liens is 90 days after completion or cessation of the project.

QUESTION: What does a potential claimant need to do or be aware of if they receive an NOC?

ANSWER: The claimant needs to keep track of deadlines, and if they have not been paid, they need to be sure to file their Mechanic’s Lien or, if appropriate, their Stop Notice, within the appropriate time frame. Otherwise they will lose their lien rights.

QUESTION: Do the changes to the statute require potential claimants to do anything differently?

ANSWER: Yes, the changes now require an additional couple of lines in the “Notice to Property Owner” section of the Preliminary 20-day Notice. That warning is in bold, and right after the sentence ending “…appropriate under the circumstances”, the following must be added, still in boldface type: “Other than residential homeowners of dwellings containing fewer than five units, private project owners must notify the original contractor and any lien claimant who has provided the owner with a preliminary 20-day lien notice in accordance with Section 3097 of the Civil Code that a notice of completion or notice of cessation has been recorded within 10 days of its recordation. Notice shall be by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing. Failure to notify will extend the deadlines to record a lien.”

QUESTION: What if a claimant is working on a new custom home, and timely sends a Preliminary 20-day Notice, with the new information?

ANSWER: In that case, the Owner is not required to give the claimant notice of the filing of the NOC, even though the claimant has notified the owner. Thus it is extremely important in that case to keep track of the progress of the project, and timely file one’s Mechanic’s Lien or Stop Notice to preserve the claimant’s rights. In this situation, all the old rules apply; it is not affected by the changes to the statute.

Hopefully this explanation clarifies the changes, and gives you guidance as to how to continue to supply projects in California, while closely protecting your own interests.

Please Note: This article is provided as a service and NOT as legal advice, please consult with an attorney for more specific information.