The Importance of a Notice of Completion to Contractors, Subcontractors and Suppliers

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The recording of a valid “Notice of Completion” with the County Recorder is an event of significance to owners, contractors, subcontractors and suppliers alike. The recording of a Notice of Completion is one of several methods used to trigger the time period for the recording of mechanics liens and service of stop payment notices. Although the recording of a Notice of Completion is not absolutely required on any given project, all those working in the construction industry should understand its significance.

Where a valid Notice of Completion is not recorded in relation to a construction project, a contractor, subcontractor, or supplier might from ninety to one hundred fifty days after completion of the project to record a mechanics lien or file a stop payment notice to secure payment for their services on the project, depending on the facts. However, if a valid Notice of Completion is recorded, then the deadline under most circumstances accelerates and subcontractors and suppliers must record a mechanics lien or file a stop payment notice within only thirty days thereafter. Under the same circumstances, a prime contractor has only sixty days after the recording of a valid Notice of Completion to record a mechanics’ lien. Failure to meet these deadlines often results in loss of the right to a mechanics lien or stop payment notice. There are limited exceptions to these general deadlines, depending on the facts. If you believe you may have missed an important deadline to seek collection of a construction debt, you should consult with a construction attorney immediately to secure your avenues of collection, including the mechanics lien and stop payment notice remedies.

Through the proper use of a valid “Notice of Completion” owners can protect themselves by accelerating the date for filing of mechanics liens and stop payment notices. Contractors, subcontractors and suppliers must remain vigilant to ensure they become aware of the date a Notice of Completion is recorded. The common result of the owner accelerating these deadlines by recording a valid Notice of Completion is that any contractors, subcontractors or suppliers who are not vigilant will lose their rights to a mechanics’ lien, stop payment notice or bond claim. This result greatly benefits the owner because it cuts off the rights of subcontractors and suppliers to bring direct legal action against the owner or the owner’s real property. Those who miss the mechanics lien and stop payment notice deadlines will generally be limited to a breach of contract action against the prime contractor with whom they contracted and will generally have no direct legal right directly against the owner.

Unfortunately, except for certain private projects, owners and prime contractors are under no legal obligation to notify suppliers and subcontractors that a Notice of Completion has been recorded. One way for subcontractors and suppliers can help ensure they will be given a copy of the Notice of Completion after it is recorded is through the use of the procedures set forth in California Civil Code section 3097(o). Under that section a potential claimant who files a properly completed Preliminary Notice with the County Recorder of the County where the property is located should receive a copy of the Notice of Completion from the County Recorder after the Notice of Completion is recorded.

One drawback to this procedure is that there is no apparent penalty against the County Recorder’s office for failing to fulfill the obligation to notify the claimant that a Notice of Completion has been recorded. If a claimant fails to timely record a mechanics lien or serve a stop payment notice in reliance on the County Recorder providing a section 3097(o) notice, and the County Recorder in fact fails to send a copy of the recorded Notice of Completion to the claimant who properly followed the procedure in section 3097(o), the claimant will have no recourse against the County Recorder if the claimant misses the deadline for filing a lien or stop payment notice.

Most County Recorder’s offices usually responsibly send out Notices of Completion to those who use the procedures specified in Civil Code section 3097(o). However, a wise supplier or subcontractor should consider the propriety of recording a mechanics’ lien or serving a stop payment notice at the earliest legal opportunity, consistent with good business judgment and depending on the situation. Suppliers and subcontractors would also do well to at least consult with other trusted subcontractors or suppliers on the job to determine when the job is completed and a Notice of Completion might be recorded. If the deadline is missed, the opportunity for a mechanics lien or stop payment notice is generally lost forever. Good calendaring procedures and diligent attention to job site status are the keys to avoid missing your collection remedy deadlines.

Article written by William L. Porter, Esq. and revised in 2014. Mr. Porter is a principal in The Porter Law Group, Inc. in Sacramento, California. He can be reached by phone at (916) 381-7868.

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