2012 OVERHAUL OF MECHANICS LIEN LAW

In fall of 2010, Governor Brown signed into law SB 189, which instituted a comprehensive revision of California mechanic’s lien laws. The law takes effect July 1, 2012, and will significantly change many provisions of California law governing the creation and enforcement of mechanics liens.

Because mechanics lien law affects all manner of construction—from ground-up development to tenant improvements to renovation and remodeling—anyone having an interest in California real property or real estate development should take note of these changes. The following is a brief summary of some of the more notable changes implemented by SB 189:

Changes in Terminology.

The revision implements the following changes in the terminology of mechanics liens:

• “Mechanic’s Liens” are now “Mechanics Liens” (note that the apostrophe has been discarded)
• “Original Contractor” is now “Direct Contractor”
• “Materialman” is now “Material Supplier”
• “20-Day Preliminary Notice” is now “Preliminary Notice”
• “Stop Notice” is now “Stop Payment Notice”

Notices.

Notices may now be served by overnight delivery, but service by first-class mail is no longer allowed (Civil Code § 8110). While the advisability of allowing notices to be given electronically was debated, the legislature ultimately elected not to permit this method.

Preliminary Notices.

General contractors now must to give a preliminary notice to construction lenders for private works. The required language of these notices has been updated and is codified at new Civil Code § 8200.

Completion:

• Notices of completion may now be recorded within 15 days after completion (the deadline under prior law was 10 days after completion) (Civil Code § 8182).
• On a project with multiple direct contractors, the owner may record separate notices of completion for each separate scope of work (Civil Code § 8186).
• “Acceptance” of the work by the owner is no longer a valid basis for triggering “completion” of private works for mechanics lien purposes. The remaining basis for determining “completion”—occupation or use by the owner accompanied by a cessation of labor—continues in effect (Civil Code § 8180).
• Lien Release Forms. New forms of conditional and unconditional lien releases for progress and final payments have been created and must be used. These forms are contained in Civil Code §§ 8132-8138.

Expungement of Liens.

The existing $2,000 cap on attorneys’ fees recoverable in petitions to expunge stale liens has been removed, and the new law now provides that all “reasonable” attorney’s fees are recoverable in such an action (Civil Code § 8488).

Release Bonds.

The statutory amount for mechanics lien release bonds has been reduced from 150% of the claimed amount to 125% (Civil Code § 8424).

If you would like more information about these recent changes in mechanics lien laws, or if you would like to discuss their impact on your business or activities, please contact our office.