Recent California Appellate Court Decision Reaffirms A Key Requirement For Asserting A Mechanic’s Lien

Recent California Appellate Court
Decision Reaffirms A Key Requirement
For Asserting A Mechanic’s Lien

By
William C. Last, Jr.

On October 29, 2004, a California Court of Appeal published an opinion, D'Orsay International Partners v. Superior Court of Los Angeles, that reaffirmed that for a mechanic's lien to attach, there must be "actual visible work on the land or the delivery of construction materials thereto." In this case the contractor attempted to circumvent the basic requirement by asserting that it was also providing design and planning services and, as a result, was able to use the mechanic's lien laws that allow design professionals to attach a lien to the real property for which they provide design services.

In the D'Orsay case the contractor provided design and planning services, but the project was never constructed. The contractor recorded a mechanic's lien rather than a design professional lien. The D'Orsay court held that since the contractor recorded a mechanic's lien rather than design professional lien, it was subject to the mechanic's lien law requirements.

The lien laws are predicated on the proposition that one who provides services on materials thereby increases the value of the real property and should be entitled to assert a lien for the value of those services and materials. This article will discuss two of the underlying requirements that a prospective claimant must: (1) perform services, provide labor or provide materials to the project; and (2) the services, labor or materials which were supplied must be used or consumed in the project. This article will also briefly discuss the requirements for a design professional lien.

The services, labor or materials which were supplied must be used or consumed in the project.

California Civil Code section 3110, which sets forth who is entitled to a lien, states: "Mechanics, materialmen, contractors, subcontractors, lessors of equipment, artisans, architects, registered engineers, licensed land surveyors, machinists, builders, teamsters, and draymen, and all persons and laborers of every class performing labor upon or bestowing skill or other necessary services on, or furnishing materials or leasing equipment to be used or consumed in or furnishing appliances, teams, or power contributing to a work of improvement shall have a lien upon the property upon which they have bestowed labor or furnished materials or appliances or leased equipment ..." (Emphasis added)

The D'Orsay court relied on the requirement that labor or materials must be actually bestowed on the property on which the mechanic's lien is being asserted. The courts have long held that a mechanic's lien "does not attach unless and until construction has been undertaken by the doing of actual, visible work on the land or the delivery of construction materials thereto." As the D'Orsay court points out, "The rationale for the ground-work requirement is twofold. First, under section 3128 of the California Civil Code, a mechanic's lien attaches to the work of improvement and the land on which it is situated; if no work of improvement has commenced, there is nothing upon which the lien can attach. [Citation.] Second, actual visible work on the land notifies potential lenders that mechanic's liens have arisen. [Citation.]" (In re Morrell (Bankr. N.D.Cal. (1984) 42 B.R. 973, 976")

The requirement that services or materials be used or consumed impacts suppliers more so than contractors who actually perform work on the job site. The materials can be either used in the construction of the project or consumed during the course of construction (e.g. oil using during threading pipe). The material supplier has the burden of proving that the materials were in fact used or consumed during construction.

Design Professional Liens

In the D'Orsay case the contractor was also providing design and planning services. The contractor provided design and planning services, but the project was never constructed. The contractor recorded a mechanic's lien rather than a design professional lien. The D'Orsay court held that since the contractor recorded a mechanic's lien rather than design professional lien it was subject to the mechanic's lien law requirements.

In 1990, the California legislature passed legislation that established a "Design Professional Lien;" which is codified at Civil Code section 3081.1 et. seq. The lien is not a mechanic's lien but rather a lien against real property that can only be asserted by design professionals. The law is intended to be "the exclusive lien remedy for design professionals in cases where no actual construction of the planned work of improvement is commenced prior to recordation of the notice of lien ... ."

For the purposes of the design professional liens, a "design professional" means any certificated architect, registered professional engineer, or licensed land surveyor who furnishes services pursuant to a written contract with a landowner for the design, engineering, or planning of a work of improvement.

The general prerequisites to recording a design professional lien are as follows: (a) the landowner defaults in any payment or refuses to pay upon the demand; (b) not less than 10 days prior to recordation of the lien the design professional mails by first-class registered or certified mail, postage prepaid, addressed to the landowner, a written demand for payment specifying that a default has occurred pursuant to the contract or agreement and the amount of the default; and (c) the design professional records a lien that includes all the requirements set forth in Civil Code section 3081.3. A design professional must record the notice of lien no later than 90 days after the design professional knows or has reason to know that the landowner is not commencing the work of improvement.

A design professional lien will automatically expire on the occurrence of either of the following: (1) The commencement of the work of improvement for which the design professional furnished services at the request of the landowner; or (2) The expiration of 90 days after recording the notice of lien, unless the design professional files suit to enforce the lien within 90 days of recordation.

The design professional lien statutes do not preclude a design professional from obtaining a mechanic's lien under the mechanic's lien statutes.

Closing Comments

The D'Orsay case points out the importance of meeting the statutory requirements for recording a lien, be it a mechanic's lien or a design professional lien. Assuming you meet the requirements for asserting a design professional lien, you must properly label what type of lien you are recording.

The case also points out that in the current construction environment it is not uncommon for a contractor to have no choice but to record a lien and file a foreclosure action in order to get paid. Considerable time and expense could be saved by maintaining proper and sufficient records that indicate when the services or material were supplied to the project and how they were in fact used or consumed during the course of construction . Such records may be the critical piece of evidence that establishes when the work started and when it stopped, as well as specifically what work and materials were provided and incorporated into the project.

©2004 This article was written by attorney William C. Last, Jr. Bill Last has specialized in Construction Law for more than 24 years and represents contractors throughout California. Bill holds a California "A" and "B" license and is active in a number of construction trade associations. He can be contacted at 415-764-1990 or 650-425-7679. A number of his past articles can be found on his website (www.lhfconstructlaw.com). This bulletin is published periodically to provide general information about current legal issues. The articles are not intended to be a substitute for the advice of an attorney as to a specific problem. If you have a specific legal question or need legal advice, you should contact an attorney.