Changes
to the California Lien Laws
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.
Important: The article
below is provided as a service and NOT as
legal advice and is not intended to be an exhaustive
summary of the changes.
Please contact
our law firm at 206-626-5444 or consult with your
attorney for more specific information. |
