Working within deadlines is absolutely crucial to preserving mechanics lien rights under California law. The deadlines differ, depending on whether you are a ”direct” contractor, also known as “original” or “prime” contractor (one who contracts directly with the property owner) or a subcontractor or material supplier. The primary differences are that except as to serving the construction lender if any, the direct contractor is not required to serve a “Preliminary Notice” (Civil Code section 8200-8216), whereas the subcontractor and material supplier are required to do so. Another difference is that a direct contractor has a longer period of time in which to record a mechanics lien after a valid “notice of completion” or a “notice of cessation” has been recorded (Civil Code sections 8180-8190), (60 days for original contractors as compared to 30 days for subcontractors and suppliers – See Civil Code sections 8412 and 8414).
Please note that direct contractors are not required to serve a Preliminary Notice on the owner of the property in order to pursue a mechanics lien. One reason for this is that the owner has already contracted with the original contractor and is presumably aware of his or her contribution to the project. Please note though that direct contractors are required to serve the Preliminary Notice on the construction lender to the extent that one exists (see Civil Code section 8200(e)).
If a Valid Notice of Completion or a Notice of Cessation Has Been Recorded
If a valid “Notice of Completion” or “Notice of Cessation” has been recorded with the County Recorder in the County where the work of improvement is physically located the direct (prime) contractor has 60 days after the date on which such notice was recorded before which the direct (prime) contractor must record a mechanics lien. (See Civil Code sections 8050, 8188, 8182, 8184, 9204, 9208).
Please note that a “Notice of Completion” is generally valid only if filed within 15 days after actual completion of the work of improvement. A “Notice of Cessation” may generally be filed only after work on the work of improvement has stopped for a continuous period of 30 days, even though the project is not completed. (See Civil Code sections 8050, 8188, 9202, 8182, 8184, 9204, 9208)
If No Notice of Completion or Notice of Cessation Has Been Recorded
If no Notice of Completion or Notice of Cessation has been recorded as to the work of improvement, then contractors, subcontractors and suppliers alike have 90 days after work on the project is completed before which they must record a mechanics lien. This 90 day period may be extended in cases where, although the project is not fully completed, the work on the project has stopped for a continuous period of 60 days and neither the owner nor his agent has accepted the project or moved into the premises. (See Civil Code sections 8180, 9200, 8412, 8414, 8028, 8018 and 8046.)
As with the direct (prime) contractor, it is essential the subcontractors and material suppliers are aware of important deadlines. Because subcontractors and suppliers must always serve a “Preliminary Notice” under Civil Code section 8200 et seq., subcontractors and suppliers have an even greater need to understand these important deadlines. The first of the deadlines of which the subcontractor and material suppliers must be aware are the deadlines in connection with the all important “Preliminary Notice.”
The Preliminary Notice Requirement for Subcontractors and Material Suppliers (Private Works)
Subject to a few exceptions, the “Preliminary Notice” is a prerequisite to pursuit of mechanics lien claims, stop payment notice claims and bond claims by subcontractors and suppliers. In private works, one primary purpose of the Preliminary Notice is to advise the owner and lender that a potential claimant has contributed work or materials to a project and may file a mechanics lien or other legal claim at a later time. Serving the Preliminary Notice on the owner and lender provides the requisite notice. Subcontractors and material suppliers should always serve a Preliminary Notice within 20 days after first providing labor or materials to a project in order to fully protect their rights to a mechanics lien, stop payment notice or bond claim. (See Civil Code section 8200 et seq., 8400 et seq. and 8600 et seq.)
Note: While Civil Code section 8204 specifies the last possible date on which to properly serve the Preliminary Notice, it does not specify a date which would be too early to serve the Preliminary Notice. The subcontractor or material supplier should establish mechanisms so that at some point between execution of a contract and the commencement of work or the supplying of materials by the subcontractor or material supplier begins, the Preliminary Notice is properly served.
Procedure and Deadline for Service of a Preliminary Notice
Within 20 days after first furnishing labor, materials or equipment to a jobsite, the subcontractor or material supplier must fill out and send a “California Preliminary Notice” to the original contractor, owner and the lender, if any. Direct contractors need only serve the Construction Lender, if any, within the same time period. The Notice should be sent by either registered mail, certified mail, return receipt requested, or by express mail or overnight delivery by an express service carrier. The notice can also be hand-delivered. However, certified mail, registered mail or overnight delivery are strongly recommended, because it provides a form of objective documentary proof of delivery. Before sending out the Notice, always make a copy of the fully completed Notice for your records. Staple your “Receipt for Certified Mail” or other proof of delivery to your copy and keep it in a separate folder for the particular job. Later, after the post office returns the green “Return Receipt” to your office, staple that return receipt to your copy and return it to your job file. It is important to safeguard these documents since they may be needed to prove your case in court at a later time (See Civil Code sections 8200-8216).
Note: In projects where the contract is for over $400, failure of the subcontractor to give the Preliminary Notice may also subject the subcontractor to disciplinary action with the Contractors’ State License Board. (See Civil Code sections 8216, 8410; see also Civil Code sections 8200-8216.).
If a Valid Notice of Completion or a Valid Notice of Cessation Has Been Recorded
If a valid “Notice of Completion” or “Notice of Cessation” has been recorded on the project then, subject to the exception noted below in regard to the 2004 revisions to Civil Code section 3097 and 3259.5 (now 8200 et seq. and 8190), the claimant may have as few as 30 DAYS after the date on which such notice was recorded before which the claimant must record a mechanics lien (See Civil Code sections 8188, 9202, 8182, 8184, 9204, 9208, 8050, 8414, 8186.)
Note: A “Notice of Completion” is generally valid only if filed within 15 days after actual completion. A “Notice of Cessation” may generally be filed only after work on the work of improvement has stopped for a continuous period of 30 days (See Civil Code sections 8188, 9202, 8182, 8184, 924, 9208, 8050, 8414, 8186.)
Impact of 2004 Legislation: An exception to the 30 day rule for recording a mechanics lien by a subcontractor or supplier after a valid notice of completion or notice of cessation was instituted by legislation which came into effect on January 1, 2004. (Senate Bill 134). This law, sponsored by the American Subcontractors’ Association, gave a significant new benefit to subcontractors and suppliers by giving the subcontractor or supplier notice of when a Notice of Completion or a Notice of Cessation has been recorded on many private works projects. The new law also changed the language of the California Preliminary Notice form that subcontractors and suppliers must use to protect their mechanics lien, bond claim and stop payment rights.
The new law requires private project owners to notify subcontractors and suppliers within 10 days after recording a Notice of Completion or Notice of Cessation that the document has been recorded. In order to receive such notice, the subcontractor or supplier must properly use and serve the new form of Preliminary 20 Day Notice. If this properly occurs and the private project owner provides the required notice to the subcontractor or supplier, then the subcontractor or supplier will have only 30 days to record a mechanics lien. If an owner under such circumstances however fails to properly notify a subcontractor or supplier within 10 days after recording a Notice of Completion or Notice of Cessation, then the Subcontractor or supplier will have 90 days to record a mechanics lien. The details of the new law can be found in prior California Civil Code sections 3097 and 3259.5 (now 8190, 8412-8414).
In order to benefit from this law, the subcontractor or supplier must include the following new language, in boldface type, on the Preliminary Notice under the section found near the top of the form entitled:
NOTICE TO PROPERTY OWNER:
EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL, if the person or firm that has given you this notice is not paid in full for labor, service, equipment, or material provided or to be provided to your construction project, a lien may be placed on your property. Foreclosure of the lien may lead to loss of all or part of your property. You may wish to protect yourself against this by (1 requiring your contractor to provide a signed release by the person or firm that has given you this notice before making payment to your contractor, or (2) any other method that is appropriate under the circumstances. This notice is required by law to be served by the undersigned as a statement of your legal rights. This notice is not intended to reflect upon the financial condition of the contractor or the person employed by you on the construction project. If you record a notice of cessation or completion of your construction project, you must within 10 days after recording, send a copy of the notice of completion to your contractor and the person or firm that has given you this notice. The notice must be sent by registered or certified mail. Failure to send the notice will extend the deadline to record a claim of lien. You are not required to send the notice if you are a residential homeowner of a dwelling containing four or fewer units.
Please note that this law does not apply to public works projects or owner-occupied personal residences of less than 5 units. Moreover, the law does not apply to those subcontractors and suppliers who fail to serve a Preliminary Notice or, of course, when no Notice of Completion or Notice of Cessation has been recorded.
Please be sure to update your Preliminary Notice forms to properly include the above language. Failure to do so could result in loss of legal rights important for the collection of debt for work performed and materials supplied to private works projects.
Note: Even though a material supplier may have a contract directly with the owner of the property in question, the material supplier still does not thereby fall into the category of a “direct” , “prime” or “original” contractor within the definition of Civil Code section 8018. Therefore, even a material supplier who has a contract directly with the owner must record its mechanics lien within only 30 days after a valid notice of completion has been recorded as is required by Civil Code section 8414. Such a supplier cannot take advantage of the 60 day deadline available to direct contractors even though the supplier, like the direct contractor, has a contract directly with the owner. A supplier is a supplier and does not become an original contractor simply by having a contract with the owner. See Sparks v. Butte County Gravel Mining Co. (1880) 55 Cal. 389, Vaughn Materials v. Security Pacific National Bank(1985) 170 Cal.App.3d 908, 216 Cal.Rptr. 605.
A free and suitable Preliminary Notice – Private Work form can be found at www.porterlaw.com. There are many manufacturers of such forms. Not all such forms have the same appearance as the referenced form. But all proper forms will contain the same essential information.
If No Notice of Completion or Notice of Cessation Has Been Recorded
If no Notice of Completion or Notice of Cessation has been recorded then contractors, subcontractors and material suppliers alike have 90 days after work on the project is completeed before which they must record a mechanics lien. This 90 day period may be extended in cases where, although the project is not fully completed, the work on the project has stopped for a continuous period of 60 days and neither the owner nor his agent has accepted the project or moved into the premises. If you have missed this 90 day deadline and there is no Notice of Completion or Notice of Cessation on file, consult with an attorney to see if any factual scenario might give you more time than you originally thought. (See Civil Code sections 8180, 9200, 8412, 8414, 8028, 8018, 8046.)
The last day of work on a project is important to determine for several reasons. If the owner records a “Notice of Completion” under Civil Code section 8182, the owner thereby triggering the quicker time frame for contractors (60 days) and subcontractors and suppliers (30 days) to record their mechanics liens under sections 8412 and 8414. However, it is first necessary to determine whether the Notice of Completion is even valid. This is because Notices of Completion must be recorded no earlier than actual completion of the work of improvement and no later than 15 days after actual completion of the work of improvement. If the Notice of Completion is not recorded within this 15 day window then the Notice of Completion is not valid. (See, Civil Code sections 8182 and 9204.)
Where the Notice of Completion is not valid or where no Notice of Completion has been recorded, Civil Code section 8412 and 8414 tell us that contractors, subcontractors and material suppliers alike may record their mechanics liens beginning when they have finished supplying their own work or materials to the project up until 90 days after completion of the entire work of improvement.
The last day of work on a project or “completion” for private works is defined under Civil Code section 8180. Section 8180 states:
8180. (a) For the purpose of this title, completion of a work of improvement occurs upon the occurrence of any of the following events:
(1) Actual completion of the work of improvement.
(2) Occupation or use by the owner accompanied by cessation of labor.
(3) Cessation of labor for a continuous period of 60 days.
(4) Recordation of a notice of cessation after cessation of labor for a continuous period of 30 days.
(b) Notwithstanding subdivision (a), if a work of improvement is subject to acceptance by a public entity, completion occurs on acceptance.
If the work of improvement is subject to acceptance by any public entity, the completion of such work of improvement shall be deemed to be the date of such acceptance; provided, however, that, except as to contracts awarded under the State Contract Act, Chapter 3 (commencing with Section 14250), Part 5, Division 3, Title 2 of the Government Code, a cessation of labor on any public work for a continuous period of 30 days shall be a completion thereof.” [emphasis added] (see Civil Code section 9200 et seq.)
Occupation or Use: The occupation or use of the work of improvement referenced above must be open and entire, and must concur with a cessation from work, but such cessation need not continue for any particular time, if it is accompanied by occupation or use of the work of improvement. See Baird v. Havas (1946) 72 Cal.App.2d 520, 164 P.2d 952 .
Where occupancy co-exists with or is consistent with further performance of the work, actual completion has not been achieved. There has been only a cessation of labor that must continue for 60 days before the 90 day lien filing period commences. In such case, where no notice of completion or of cessation was filed, the claimant had 150 days (90 days under section 3115 and 3116 (now 8412 and 8416) plus 60 days under Section 3086(c) (now 8180)) from such occupancy in which to file a mechanics lien. See M. Arthur Gensler, Jr. & Associates, Inc. v. Larry Barrett Inc. (1972) 7 Cal.3d 695, 103 Cal.Rptr. 247, 499 P.2d 503.
Acceptance: It is not necessary that the acceptance (referenced above) be accompanied by cessation of labor, but it must be open and sufficient to give notice by necessary implication. See, Orlandi v. Gray (1899) 125 Cal. 372, 58 P.15; Hammond Lumber Co. v. Barth (1927) 202 Cal. 606, 262 P. 31.
Small subsequent changes to the work, including punch list items to correct defective or damaged work (as opposed to punch lists giving notice to complete uncompleted contract work) will not extend the time of actual completion or the time for filing a mechanics lien. See Hammond Lumber Co. v. Yeager (1921) 185 Cal. 355, 197 P. 111; Hunley v. Marinkovich(1942) 53 Cal.App 2d. 288, 127 P.2d 600.
Whether or not a project is ”subject to acceptance” depends on whether the improvement was required to be accepted by a public entity pursuant to a legislative act despite the fact that the contractor may have otherwise complied with all requirements necessary for approval and acceptance of the project. See, A.J. Raisch Paving Co. v. Mountain View Sav. & Loan Ass’n (1972) 28 Cal.App.3d 832, 105 Cal.Rptr. 96.
It has been held that a subcontractor working on improvements in a shopping mall could not record a valid mechanics lien based on the argument that he did so within 90 days after completion of all the work done at all the individual stores in the mall. This was because each store had a separate contract for improvement, the individual shop owners were not in contractual relationships with each other and each store was thus deemed a separate work of improvement. This is not a situation were a single lien could have been filed on the entire mall for multiple improvements made at the request of a single owner. See, Civil Code section 3130 (now 8446), Insul-Acoustics, Inc. v. Lee (1982) 136 Cal.App.3d 552, 186 Cal.Rptr. 324.
Cessation of Labor for 60 Days or 30 Days if Accompanied by a Notice of Cessation: The cessation of labor necessary to meet this standard must impart notice to a careful person. The cessation cannot be a ”mere clandestine stopping of actual work.” See, Marble Lime Co. v. Lordsburg Hotel Co. (1892) 96 Cal. 332, 31 P. 164.
Note in Regard to Condominiums: Civil Code section 8448 generally provides that if a work of improvement consists in the construction of two or more separate residential units, each unit shall be considered a separate ”work of improvement,” and the time for filing claims of lien against each such residential unit shall commence to run upon the completion of each residential unit. However, this has been held inapplicable to condominiums. See, E. D. McGillicuddy Constr. Co. v. Knoll Recreation Ass’n, Inc. (1973) 31 Cal.App.3d 891, 107 Cal.Rptr. 899.
Article revised by William L. Porter, Esq. 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.
