Under laws which took effect on January 1, 2011, claimants who seek to obtain payment for construction related debts through the California mechanic’s lien procedure must follow new rules and use new forms. Failure to do so will likely result in an unenforceable mechanics lien. There are a number of reasons that the law was changed. For example, until this change, there was no requirement that a mechanic’s lien claimant actually inform the property owner that the claimant has recorded a mechanic’s lien on the owner’s property. There was also no requirement that a mechanic’s lien claimant inform an owner of exactly what a mechanic’s lien is or that the owner may be sued within 90 days to foreclose on the mechanic’s lien and sell the owner’s property to pay the unpaid debt. Property owners had long complained that, until they received the mechanic’s lien foreclosure lawsuit, they were often entirely unaware that a mechanics lien had even been recorded on their property. The owner asserted that if he/she had known that a mechanic’s lien had been recorded, he/she could have acted to resolve the matter before a lawsuit became necessary. This was a particularly common complaint in the residential construction industry where homeowners are generally unaware of the entire concept of a mechanic’s lien.
In order to address these longstanding issues the California Contractor’s State License Board, Assemblyman Bill Monning (D-Monterey) and a number of California construction attorneys drafted and introduced Assembly Bill 457 which was passed by the legislature and signed into law on August 5, 2009.
Under the new law, beginning on January 1, 2011, California Civil Code sections 3084 and 3146 (now 8414 and 8461) were amended to require the actual service of a mechanic’s lien on the owner of the property at the time the mechanic’s lien is recorded. If for some reason the owner cannot be served with the mechanic’s lien then the original contractor or the construction lender can instead be served. This new process provides owners with notice that a mechanic’s lien has been recorded on their property and it gives them an opportunity to quickly address the situation and avoid a lawsuit. The form of the mechanic’s lien document itself was also changed to include a “Notice of Mechanic’s Lien” which provides a brief explanation of the nature of a mechanic’s lien and options the property owner might pursue to address the situation. Finally, where a lawsuit is filed to foreclose on the mechanic’s lien a “Notice of Pending Action” must be recorded at the local County Recorder’s Office within 20 days after the filing of the mechanic’s lien foreclosure lawsuit. The Notice of Pending Action provides notice to potential property purchasers, lenders and others that a lawsuit has been filed in relation to the property and that the property may be sold in foreclosure to pay the underlying debt.
The full text of the new law is attached. A form of the new mechanic’s lien document can be found free of charge here. A copy of the new mechanic’s lien is attached as well. The new law provides the property owner with advance notice and an opportunity to remedy a pressing situation. Lawsuits can be avoided by early attention. Based on the premise that more information is better than less and fewer lawsuits are better than more, this legislation beneficially serves the public interest. It remedies longstanding problems without significant cost or inconvenience. The new law took effect on January 1, 2011. Potential claimants should educate themselves on the new law and begin using the new procedures and new mechanic’s lien form immediately.
Article written by William L. Porter, Esq. Mr. Porter is a shareholder in Porter Law Group, Inc. of Sacramento, California. Mr. Porter worked with Assemblyman Bill Monning (D-Monterey), Michael Brown of the California Contractor’s State License Board and attorneys John Boze of Sacramento on the legislation which is the subject of this article. Article revised in 2014.