New California Mechanic Lien Requirements for 2011

Guy W. Bluff,  Esq. (06-Feb-2011)

Effective, 01-Jan-2011, California Civil Code sections 3084 and 3146 require two additional notices relating to mechanic’s liens: the “Notice of Mechanic’s Lien” and the “Notice of Pendency of Action.”  For those construction attorneys practicing in Arizona, the Notice of Pendency of Action (Notice of Lis Pendens) requirements should not pose a problem.  Arizona requires such notice to be recorded within 5 days of the filing of the suit to foreclose.  California Civil Code § 3146 requires that the same document be recorded within 20 days.

The New Notice of Mechanic’s Lien requirement was added in response to numerous complaints from property owners who were unaware that a mechanic’s lien had been recorded against their property until after a lawsuit was filed to foreclose the lien.  In Arizona, a party recording a Mechanic’s Lien is required to provide a “duplicate” copy of the same sent by certified mail to the property owner and all other interested parties “within a reasonable time” after recording and provide proof of such service only after the civil suit to foreclose was commenced..

The substantive change to California’s law is that the Notice of Mechanic’s Lien document has to be served on the property owner PRIOR to the actual recording of the lien.  An Affidavit of Service of the Notice of Mechanic’s Lien must be included with the Notice and Claim of Lien at the time of recording.

Under existing California law, most contractors and material suppliers on private construction projects are required to serve a preliminary 20-day notice either prior to the start of work or within the first 20 days of working on the project – just as with Arizona. The 20-day preliminary notice must be served on the owners, contractors and lenders as a pre-condition to later asserting mechanic lien claims.  In California, those in a direct contractual relationship with the project owner (prime contractors) are exempt from the 20-day preliminary notice requirement (however most practitioners recommend to their clients that a preliminary notice be sent out in every instance).  Previously, in California, there were no additional requirements to notify a property owner once the mechanic’s lien was actually recorded.  The new laws now require two additional notices relating to the enforcement of mechanic’s lien claims.

Notice of Mechanic’s Lien

California Civil Code §3084 requires that a Notice of Mechanic’s Lien and a copy of the mechanic’s lien, be served on the property owner via registered mail, certified mail or first-class mail BEFORE a mechanic’s lien can be recorded. The notice and mechanic’s lien must be sent to the owner’s residence or business address, the address shown on the building permit, or as provided by other statutes. The lien claimant must also prepare and sign a sworn proof of service affidavit, (certificate of service) which must be included in the mechanic’s lien at the time of recording. If service on the owner is not possible, the lien claimant may fulfill the notice requirement by serving the notice on the construction lender or the prime contractor using the same methods.

The new law further provides that beginning 01-Jan-2011, an otherwise proper mechanic’s lien will be unenforceable as a matter of law if the Notice of Mechanic’s Lien was not properly served before the mechanic’s lien was recorded.

The new notice requirements (in minimum 10 pt font) are set forth in the Statute:

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.

Notice of Pendency of Action (Lis Pendens)

The filing of the Notice of Pendency of Action (Notice of Lis Pendens), which was simply “good practice,” by California practitioners is now legally mandatory effective 01-Jan-2011 California Civil Code § 3146.  The lis pendens must be recorded within 20 days after a suit to foreclose on a mechanic’s lien is filed. Previously, a lis pendens was permitted but not required.  Best practices still dictate that counsel should record it immediately after the action is filed to preserve priority.

The new section 3146 provides that subsequent purchasers and encumbrancers are deemed to have constructive notice of the mechanic’s lien foreclosure action only from the time the lis pendens is filed and recorded.

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Posted in Arizona, California, Lis Pendens, Mechanic Liens, Preliminary Notices