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Notice to Owner

How to Prepare and Serve This Required Document

By Diane Dennis

IMPORTANT
Before filing a mechanic's lien you MUST first serve a Notice to Owner to the owner, informing them of your intent to file a lien.

Prior to the change in the law several years ago (in California) a contractor/supplier was not required to send any kind of a 'notice to owner' of a property that he was going to file a lien on.

That caused significant problems for both parties - owners and contractors. 

Why the Notice to Owner Became Necessary

Without a notice of claim of lien from the subcontractor, the owner doesn't know that his contractor isn't paying his subs.

The contractor would file/record the lien and the owner would be none the wiser -- until he attempted to sell or refinance or take out an equity line of credit.

Months, years, decades down the road the owner either hits a rough spot in life, broke and needing a line of credit against his equity - or maybe he's selling his property.

It's only then that he discovers that subcontractors on his project hadn't been paid and that there's one or more liens on his property.

Unfortunately the lender turns him down on his equity line of credit (no doubt due to the lien) or his escrow comes to a screeching halt (again because of the lien).

The owner doesn't want a lien on his property. He paid for the work and he wants the lien removed. 

Unfortunately for him, because he's already cash-strapped and he was denied on his loan (because of the lien), or escrow choked, he doesn't have any cash to pay you what he already paid to your general/direct -- which is basically equivalent to paying for you twice, even though not to you twice.

You Have the RIGHT to Be Paid

It's not your fault that you weren't paid. 

It's your right to be compensated for the work you performed/material you supplied/etc., and even though the owner already paid your general/direct for it, you are still entitled to your payment.

Technically, it comes down to the fact that it's the owner's fault (although you probably don't want to say that to him) ;o) because ultimately he's responsible for making sure that everyone that works on his property is paid -- even prior to the law that now requires that he be notified. 

Ignorance Is Not An Excuse

Many owners never think of these issues. They never think that their contractors might rip off their subcontractors, so when it does happen they're stunned. 

It's kind of like the kid that leaves his bike in the front yard. It never occurs to him to steal someone else's bike so it never occurs to him that someone will steal his bike. 

Same as it never occurs to the owner to rip off his general/direct, so it never occurs to him that his general/direct would rip off his subcontractors.

But, even though the owner was ignorant of the fact that there are snake-type directs/generals (aka bike thieves) on the prowl that do this, that doesn't mean he's getting his bike back (er... his home free of liens) -- until he pays up a second time.

A Notice to Owner Might Have Brought on Payment

No doubt if the owner had received a notice of claim of lien before you filed your lien he would have taken every step needed in order to get your general/direct to pay you. 

Chances are the owner has the right to sue the general/direct but regardless, that still doesn't get you paid any sooner. Now that the project is finished and the general is paid, chances are that the general/direct has used those funds for something and therefore, the owner is going to have that much more difficulty getting any money out of him.

No matter how it goes down you're still the one left holding the [empty] bag. 

Adding insult to injury is that now you're stuck having to keep a mechanic's lien up-to-date so that it doesn't 'expire' before you act on it. Check with an attorney about how that works in your state.




Changes to the Mechanic's Lien Laws

Back in 2011/2012 there was a massive change in the mechanic's lien laws in California. 

One of those changes was an addition of a requirement that the contractor filing the lien must now notify the owner of his intent to file a mechanic's lien.

Notice to Owner Reminder Note on Contractors Desk

The state requires that you use a document with specific verbiage.

This new law, while unfortunately adding yet more paperwork to already over-paperworked contractors, is of benefit to both owners and contractors.    

Now Required Per California Civil Code 8416(a)(8)

The following statement, printed in at least 10-point boldface type. The letters of the last sentence shall be printed in uppercase type, excepting the Internet Web site address of the Contractors’ State License Board, which shall be printed in lowercase type:

NOTICE OF MECHANICS LIEN

ATTENTION!

Upon the recording of the enclosed MECHANICS 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 mechanics lien is recorded.

The party identified in the enclosed mechanics 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 mechanics 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 mechanics 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 MECHANICS LIENS GO TO THE CONTRACTORS' STATE LICENSE BOARD WEB SITE AT www.cslb.ca.gov.

Source: CA Legislative Info

How to Serve the Notice to Owner

The requirements for how to serve the Notice to Owner document are covered under Ca Civil Code 8416(c) through (e). If you don't serve the notice of claim of lien on the owner/reputed owner in the manner required under the law you will not have lien rights.

CALIFORNIA CIVIL CODE 8416(c) thru (e)

8416(c) A copy of the claim of mechanics lien, which includes the Notice of Mechanics Lien required by paragraph (8) of subdivision (a), shall be served on the owner or reputed owner. Service shall be made as follows:

(1) For an owner or reputed owner to be notified who resides in or outside this state, by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing, postage prepaid, addressed to the owner or reputed owner at the owner’s or reputed owner’s residence or place of business address or at the address shown by the building permit on file with the authority issuing a building permit for the work, or as otherwise provided in Section 8174.

(2) If the owner or reputed owner cannot be served by this method, then the copy of the claim of mechanics lien may be given by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing, postage prepaid, addressed to the construction lender or to the original contractor.

(d) Service of the copy of the claim of mechanics lien by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing, postage prepaid, is complete at the time of the deposit of that first-class, certified, or registered mail.

(e) Failure to serve the copy of the claim of mechanics lien as prescribed by this section, including the Notice of Mechanics Lien required by paragraph (8) of subdivision (a), shall cause the claim of mechanics lien to be unenforceable as a matter of law.

Source: CA Legislative Info

  • When you mail the lien notice to the owner/reputed owner you can send it first class, certified mail, or registered mail. 

  • Very Important -- Be absolutely certain that you obtain that certificate of mailing showing that you did indeed mail it, and how. Without that little piece of paper you have no proof that you followed the law and properly served the documents.

  • Don't forget to include a copy of the mechanic's lien when you mail the notice to owner, to the owner. ;o)

  • If you end up having to record the mechanic's lien (who knows maybe the guy will pay up and you won't have to!) be sure to take the lien form, the notice to owner form, the proof of service form, and the certificate of mailing with you to the county clerk's office.

  • Personally I go ahead and pop for the 'return receipt' as well when I serve the doument so that I know and have solid proof that the owner/reputed owner {need to link to  did receive the lien notice and other documents.

  • If you have a "Return Receipt" take that with you as well to the county clerk.

    Some county clerks insist on seeing all of the documents while others don't. It's best to have it with you rather than having to go back to the office to get it.

When to Serve the Notice and Other Documents

As I've mentioned throughout the site here I'm not an attorney and I don't offer legal advice of any type. That being said, because the notice states:

A) "upon recording" and 

B) "intent to file"

I would most definitely send the notice before filing/recording it.

I personally would think that sending it to the owner after recording it would constitute not notifying the owner and thereby taking away your lien rights.

Besides which, with him receiving notice beforehand maybe he'll pay you and save you the hassle. Remember, he doesn't want a lien on his property any more than you want to deal with keeping a lien active and/or foreclosing on it.

Basically what it boils down to is that yes the notice to owner is extra paperwork/time/postage on the front end of a mechanic's lien, but also that it just might save you tons of time and trouble down the line.

At the very least you'll be following the law in regard to serving the paperwork.

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Thank you for visiting and have a great day!
Diane

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