2011 Changes to Mechanics' Liens

New Mechanics’ Lien Laws 2011 – What you don’t know WILL hurt you

Starting January 1, 2011 the newly amended mechanics’ lien laws will take effect. These new laws provide more protection to the property owners when a lien is placed on their property, and the new laws impose strict timelines for notification of liens. If you forget or ignore the new changes, you will lose your mechanics’ lien rights. Is it too soon to start thinking about these important changes to the laws? To put it simply - no. It’s better to start thinking about them now, rather than kicking yourself later for not understanding them and putting safeguards into to your procedures to ensure compliance.

As any well informed contractor or supplier already knows, the California Constitution gives you the right to a mechanic’s lien for the value of labor and materials provided for the improvement of real property. Legislature is authorized to provide for the speedy and efficient enforcement of these liens, which leads to the laws regulating notices (such as the requirement for a 20-day preliminary notice) and timing to enforce your rights.

As a backdrop to looking at what has changed, let’s quickly look at the mechanics’ lien process. In a nutshell, this is how it works:

1. You are hired to provide work or services on a project;
2. You didn’t get paid for that work;
3. You record a mechanic’s lien against the property to act as security for the work you provided;
4. You have to file suit to “foreclose” on the mechanic’s lien, which can ultimately lead to a forced sale of the property to obtain payment for your work.

Now for some critical procedural details:

First, what hasn’t changed in the mechanic’s lien procedures:

• You must have the right to use a mechanic’s lien. If the work you did was not consumed in the improvement, or used to improve the property you won’t have a right to a mechanic’s lien. If your contractor’s license in not in strict compliance with the Contractors State License Law, your rights to a mechanic’s lien may be impacted.

• You still need to provide a 20-preliminary notice to the owner, the lender and the general contractor within 20 days of first providing labor, services or materials to the site.

• Once you have completed your work on the project and you are owed payment, you still have to record the mechanic’s lien at the county recorder’s office in the county in which the work was performed within the strict time frames required.

• The necessary information required on the recorded lien has not changed, and is as follows:

1. A statement of the claimant's demand after deducting all just credits and offsets.
2. The name of the owner or reputed owner, if known.
3. A general statement of the kind of labor, services, equipment, or materials furnished by the claimant.
4. The name of the person by whom the claimant was employed or to whom the claimant furnished the labor, services, equipment, or materials.
5. A description of the site sufficient for identification.

• Once the mechanics lien has been recorded, the next step is to file suit to foreclose on the lien (within 90 days of recording the lien) in Superior Court in the county in which the property is located.


Now, what has changed with this process?

• Prior to recording the mechanic’s lien, Civil Code, Section 3084 now requires that the mechanic’s lien as well as a “Notice of Mechanic’s Lien” be served on the owner, or if unable to do so, then on the lender or the general contractor. (See below for required wording of the notice). Failure to serve the mechanic’s lien with the required Notice of Mechanic’s Lien, shall cause the mechanic’s lien to be unenforceable as a matter of law.


• A “proof of service affidavit” is required to be recorded with the mechanic’s lien to prove that service of the lien and Notice was made. Generally, service must be done by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing, postage prepaid. No longer is a courtesy copy sent from the county recorder’s office going to be good enough to put the owner on notice.

• Also, there is a change to Civil Code, Section 3146, which applies once a lawsuit to foreclose has been filed in Superior Court. A lis pendens (notice of pendency of action) must be recorded with the county recorder within 20 days of filing the foreclosure lawsuit. Previously, recording a lis pendens was not absolutely required and the failure to record one really only caused problems if the property was transferred after the foreclosure lawsuit was filed. Now, now it is mandatory, along with a recording deadline.

As mentioned above, the Notice of Mechanic’s lien must state the following, and must be printed in at least 10-point boldface type. The last sentence must be in uppercase type and the exact wording must be used:

NOTICE OF MECHANIC’S LIEN
ATTENTION!

Upon the recording of the enclosed MECHANIC’S LIEN with the county recorder’s office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanic’s lien is recorded.

The party identified in the mechanic’s lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanic’s lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanic’s lien is released.

BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMATION ON MECHANIC’S LIENS GO TO THE CONTRACTORS’ STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov.

In summary, the main changes are

(1) the requirement for service of both the mechanic’s lien and the notice of the lien prior to recording the lien and

(2) the mandatory requirement of a lis pendens to be recorded within 20 days of filing the foreclosure lawsuit.

Because many contractors and suppliers take it upon themselves to record their own mechanics’ liens, it is advised to put a written process in place so that none of these critical requirements are missed.

 


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