Source: https://www.lovettlawusa.com/real-estate-construction-law/mechanics-liens/
Timestamp: 2019-04-18 10:42:55+00:00

Document:
Contractors, subcontractors, design professionals and suppliers can put a mechanic's lien on a property when a bill remains unpaid. Until the lien is satisfied, it can affect the owner of the property in many adverse ways, preventing the owner from selling the property and even resulting in foreclosure.
At the Los Angeles-area Law Office of Steven R. Lovett, we have been advising contractors, subcontractors and suppliers on their rights regarding mechanic's liens for nealry 40 years. It is often a necessary last resort when seeking payment to protect your business. Because of the complexity of construction laws and regulations regarding the filing, enforcement and satisfaction of mechanic's liens, it is in your best interest to contact an experienced Los Angeles construction lawyer to learn more about them before you file.
On a private project in California, an additional procedure that can be used to protect rights is to serve a bonded stop notice (renamed as a bonded stop work notice effective July 1, 2012) on the construction lender. This notice must be completed within the time period that any mechanics lien could be recorded against the project. Needless to say, the longer the wait, the less funds will be held by the lender due to the disbursements being made as the job progresses.
To accomplish this procedure, the claimant or its insurance agent could contact a bonding company. The company should be advised that you desire to obtain a bond for a stop work notice on a private work. They will ask you various questions concerning the project and will have you complete an application for a bond. Please have them send the original bond directly to your office. Upon receipt, an attorney can prepare a stop notice and serve it on the branch where the construction funds are being held. It is critical to serve the right branch or else it can result in a stop notice being defective. In some factual circumstances, the filing of the stop work notice may be the only means to recover money. For example, if a contractor is insolvent, and the owner files bankruptcy, the bonded stop notice may still get the claimant paid. Many contractors have a practice of serving a stop work notice on a lending institution when the notice is not bonded. Most lending institutions will simply ignore such a notice and they are not required to pay attention to it absent the bond.
The mechanics lien release bond stands in the place of the mechanics lien. California Civil Code section 8424 provides one method for removing a mechanic's lien. It permits an owner who disputes a lien to release the property from the lien by posting a surety bond equal to 125 percent the amount of the claim. Once the release bond is recorded, the owner of the property is released from the mechanics lien cause of action and the contractor must file a supplemental complaint adding a cause of action on the release bond against the principal of the bond and the bond surety. See e.g., Fontana Paving, Inc. v. Hedley Brothers(1995). 38 Cal. App.4th 146, 151.
Mechanic's lien release bonds may be enforced by the summary procedure provided for in California Code of Civil Procedure Section 996.440. Grade-Way Construction v. Golden Eagle Ins. Co, 13 C.A.4th 826 (1993).
There are no mechanics lien rights on public projects. Construction professionals may only protect themselves through public stop notices and payment bonds. Serving a public works stop notice is a similar procedure to the private stop notice referenced above, but no bond need be obtained.
A Notice of Nonresponsibility is the mechanism for a property owner to release its interest in property after receiving a preliminary notice from a contractor who has an agreement with the property owner's tenant. A Notice of Nonresponsibility generally states that the owner will not be responsible for the alteration, repairs, material or labor used. If the Notice of Nonresponsibility was recorded and posted within 10 days of the owner learning of the work of improvement, the notice insulates the owner from any liability for foreclosure of a mechanic's lien. California Civil Code Section 3094.
However, if the notice was filed too early (i.e., before construction commenced) or too late, the lienor may have lien rights against the owner even though it posted and recorded the Notice of Nonresponsibility. For example, there must be actual construction, not intended construction. A premature notice is ineffective to relieve an owner from liability. Arthur B. Siri, Inc. v. Bridges, 189 Cal. App.2d 599 (1961 ); Hayward Lbr. & Inv. Co. v. Orondo Mines, 34 Cal. App.2d 697.
The lienor can also proceed against the owner, despite the Notice, if the owner required the restaurant to perform the improvements by the terms of the lease. In such a case, the lessor is a participating owner and an agency relationship is implied by law. Howard S. Wright Construction Co. v. Superior Court (BBIC Investors), 106 Cal. App.4th 314 (2003). The fact that the lease did not require any improvements is not determinative. Where the lease is let for a particular purpose and the purpose cannot be effected without the tenant making improvements, the landlord is deemed to be a participating owner. Howard S. Wright Construction Co. v. Superior Court (BBIC Investors), supra. Similarly, if the owner knows of the work being performed, but fails to serve and record a Notice of Nonresponsibility, the prime contractor can avoid the need to serve a preliminary notice. Civil Code ' 3129; Halspar v. LaBarthe (1965) 238 Cal. App.2d 897; Benson Electric v. Hale Bros (1966) 246 Cal. App.2d 686.
What happens when a mechanic's lien is filed against your property? If it is a valid claim, the consequences of not paying can be dire, affecting your ability to get a loan or sell your property — or if you cannot or will not pay the lien, your property could even be foreclosed.
If a mechanics lien has not been perfected by the filing of a lawsuit or extension of the lien period within 90 days, an owner can petition the court to have the lien removed. In addition, if the lien seeks compensation for items other than services not properly the subject of a mechanic's lien, such as delay damages, an owner can file a motion requesting that the court remove the lien. Lambert v. Superior Court (MacEwen) (1991) 228 Cal.App.3d 383.
If you have had a mechanic's lien filed against you, it is imperative that you contact an experienced Los Angeles construction attorney right away. In addition to possible breach of contract issues, contractors have a timeline which they are required to follow. Their failure to do so will invalidate any mechanic's lien claim they filed against your property.
Assembly Bill 457 has made extensive changes to the form of the mechanic's lien in California, effective January 1, 2011. The Assembly Bill has made major changes to California Civil Code Section 3084, the main statute describing the form of mechanic's liens. It also requires service of the lien on the owner prior to recordation. Effective July 1, 2012, former section 3804 was recodified in Civil Code Section 8416.
"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 ATwww.cslb.ca.gov. "
The notice must be in at least 10-point boldface type, and the last sentence must be in all capital letters, other than the web address of the Contractors' State License Board. Presumably the recorder will not accept the lien without this information.
2.. The mechanic's lien form must also contain a proof of service under penalty of perjury showing service of both the mechanic's lien and the notice of mechanic's lien. Presumably the recorder will not accept the lien without this information.
3. The lien and notice must be served 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 If the owner or reputed owner cannot be served by this method, then the notice 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.
Failure to serve the mechanic's lien, including the Notice of Mechanic's Lien, shall cause the mechanic's lien to be unenforceable as a matter of law.
Need Help With a Mechanic's Lien?
We have almost 40 years of experience in assisting construction professionals and property owners throughout Southern California regarding mechanic's liens. Contact a Los Angeles construction attorney by e-mail or call us for a free telephonic consultation.

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