Significant Changes to Mechanics Lien Law Effective July 1, 2012

   Effective July 1, all of the existing statutes governing mechanics liens, stop notices and payment bonds in California will be repealed and replaced by new statutes contained at Civil Code sections 8000-8848 (private works) and 9000-9566 (public works). The Civil Code is here.

   Some of the terminology regarding mechanics liens has changed. For example, “direct contractor” is used in place of “original contractor,” and is defined as “a contractor that has a direct contractual relationship with an owner.” The previously named 20-day preliminary notice is called simply a “preliminary notice”.

   The substantive changes include: Standardization of all notice requirements including new service requirements, including service on the owner; new mandatory waiver and release forms; there are several changes regarding completion and owners will now have 15 days to record the Notice of Completion instead of 10; “direct contractors” are required to give preliminary notice only to construction lenders; mechanics lien release bonds need only equal 125% of the claim; a new procedure is provided for judicially releasing liens which includes a requirement that at least 10 days before petitioning for release of lien the owner give the claimant notice; and, elimination of the $2000 cap on the recovery of attorney’s fees to the prevailing party in an action to release a lien.

   Civil Code section 8052 specifically provides that the validity of an “action taken” for purposes of the lien law is governed by the law in place at the time of that action. Unfortunately, this provision is unclear. The best practice for contractors will be to use the form required under current law through June 30, and use the new statutory form beginning July 1.

   Contractors, subs, and materialmen should immediately familiarize themselves with the new statutes so they can timely comply with them. Failure to use the required forms, or follow the required procedure, will result in inability to enforce a lien.

 

 

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