By Diane Dennis
(with contribution from California Attorney David J Barnier, Esq.)
Learn the right way to preserve, maintain, and enforce your California mechanic's lien rights.
Miss just 1 of these 3 requirements and you could lose your right to lien *and* find yourself being SUED for having placed the lien.
The California Preliminary Notice (previously known as the "California 20-Day Preliminary Notice") preserves a lien claimant’s* lien rights on a construction project when that notice is timely served by the lien claimant.
*A lien claimant is the person or entity who claims the mechanic’s lien.
The notice MUST be served by the lien claimant or representative - or the lien claimant will not have any lien rights.
If you are a Subcontractor you must serve the notice to your Direct/Prime Contractor, the (reputed) Owner of the Project, and any (reputed) Lender(s).
Direct/Prime Contractors must serve any and all reputed Lenders on the project if there are any.
The notice should be served no later than 20 days after the lien claimant first provides any benefit to the property, because the notice preserves lien rights for no more than 20 days prior to the date the notice is served through the completion of the contract.
If the 20-day deadline is not met, the preliminary notice should still be served as soon as possible thereafter; the preliminary notice will still preserve lien rights for all benefits provided starting with the day that fell 20 days prior to the date of service of the preliminary notice.
The notice can be served prior to starting work on the project however if you end up not doing the project for whatever reason you'll still have to do at minimum a #4 Final Waiver and Release Upon Progress Payment to release your preliminary notice.
A mechanic’s lien cannot be recorded until the claimant has completed all work under the subject contract.
This means either providing the entire scope of *your* work or being excused from remaining work due to a breach of the contract by the party with whom the claimant contracted (although care should be taken before recording a lien based upon an argument that this party has breached the contract).
The mechanic’s lien against any individual property must be recorded, at the County Recorder's office in which county the project is located, within 30/60/90 days of the completion of the work of improvement at that property.
Subcontractors, this doesn't mean within 30/60/90 days of *your* completion of *your* portion of the project, you have *up to* 90 days after the completion of the *entire* project.
The “work of improvement” is typically defined as all work related to the project, which usually means all work done under the prime contract, so a subcontractor who finishes early in the project may not have to record a lien until long after that subcontractor has completed his portion of the project.
That's not to say that you can't file a lien prior to that time frame - you can as long as it's *after* the completion of *your* work.
If 90 days passes before you take the next legal step with your recorded mechanic's lien then it becomes null and void - but if the project is still in progress then you can record another mechanic's lien 'now' if you'd like or you can wait until closer to the end of the *entire* project.
The latest date to record your lien is a day 30, 60, or 90 days after the *entire* work of improvement is completed. Please see the next section down for information as to what causes those days to differ.
Sometimes there will be many months between the date the subcontractor finishes his portion and the date the entire project is complete.
If multiple properties are improved, the deadline is calculated based upon the completion of work on each individual property.
Civil Code Section 8412 states that Direct Contractors have 90 days from the date of completion to file/record a lien unless…**
Civil Code Section 8414 states that 'all claimants other than direct contractors' (read subcontractors/suppliers/etc.) have 90 days from the completion date of the project to file/record a lien unless…**
** In all instances, if the Owner (or the Owner’s agent) records a valid notice of completion within 15 days after the date of actual completion of the work of improvement AND serves copies of the notice on all interested third parties within 10 days of having recorded the completion notice then the normal 90-day deadline is shortened to 30 days for Subcontractors/Suppliers and 60 days for Direct/Prime Contractors.
A mechanic’s lien becomes null and void unless the contractor/supplier files lawsuit, to foreclose on the lien, within 90 days after the date on which the lien is recorded.
All parties claiming any interest in the property must be named in the lien foreclosure lawsuit, although at the time of filing of the lawsuit, only those parties known by the lien claimant to claim an interest in the property must be named.
This can include contractors, subcontractors, suppliers, and/or service providers that have recorded mechanic’s liens as well as anyone that’s recorded a lien of any kind, including judgment liens, mortgages, etc.
Lien foreclosure lawsuits are tricky and an attorney should be retained to file the lawsuit. An attorney should be given at least 14 days to prepare and file a lien foreclosure lawsuit.
A) 90 days for Direct/Prime and 60 days for Sub Contractors and Suppliers if the Owner or Owner’s agent *does not* record a valid notice of completion *within 15 days* after the date of actual completion of the work of improvement and/or does not serve copies of the notice upon the interested parties
B) 60 days for Direct/Prime if the Owner (or Owner's agent) *does* record the completion notice within 15 days after the actual completion of the work of improvement *and* properly serves those notices
C) 30 days for Subcontractors/Suppliers if the Owner (or Owner's agent) *does* record a valid notice of completion within 15 days after the actual completion of the work of improvement *and* properly serves notices
Just because these requirements are in place in regard to the Owner filing and serving the completion notice that doesn't mean you're in the clear if they don't.
If they don't do the notice their only forfeiture is the 30 to 60 days for Subcontractors and 60 to 90 days for Direct Contractors (those who contract directly with the Owner of the property - or tenant if applicable).
So you still have a deadline regardless and you will lose your rights if you don't meet the proper deadline.
This article was written by Diane Dennis with contribution from David J Barnier, a California construction law attorney. As with everything at this website, this is not legal advice or advice of any type.
The only advice offered at this website... Please consult with an attorney (David would be a great one!) to be sure all is done correctly. :o)
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