Are you are a contractor, supplier or property owner in California? You need to be aware of two recent changes to California’s mechanic’s lien law affecting the procedures followed by those providing services and materials for works of improvement on private property to be able to enforce the security for their payment against that property.
The first change is the addition of a new notice requirement that must be met in order for a contractor or supplier to claim a mechanic’s lien securing a right to payment for a work of improvement on an owner’s property. Effective January 1, 2011, any contractor or supplier who wishes to record a mechanic’s lien must also serve the owner with a “Notice of Mechanic’s Lien” as a condition of recording a mechanic’s lien against the property.
The second change is a redefinition of the term “completion” as applied to a work of improvement, to be used in determining the deadline for recording a mechanic’s lien. Effective July 1, 2012, an owner’s “acceptance” of a work of improvement is no longer one of the recognized means of establishing the date on which a work of improvement has reached completion, which include (a) the actual completion of all work on the project, (b) the occupation or use of the project, coupled with the cessation of labor, and (c) the cessation of labor for 60 continuous days (30 days if a notice of cessation is recorded); in general, a mechanic’s lien must be recorded within 30 days of completion to be enforceable.
While at first blush these changes might appear arcane or esoteric, they are of great practical importance to everyone involved in the construction of a work of improvement. Understanding how these modifications affect the enforcement of mechanic’s liens could have a major impact on the parties’ respective rights.
For contractors and suppliers, the significance of ensuring their adherence to these standards cannot be overstated. Due to strict compliance requirements of the mechanic’s lien law, any failure to comply with the obligations imposed by that law, to the letter, will result in the invalidation of the mechanic’s lien, placing their full payment in jeopardy.
For owners, knowing whether a contractor or supplier can enforce his lien against the owner’s property to compel payment is a primary factor in determining the best course of action for challenging the contractor’s claims for payment where there is a dispute.
Contractors, suppliers and property owners are all well-advised to be sure they know the precise provisions of the mechanic’s lien law in order to best protect their rights.