Are You Prepared For The 2012 Changes to California Lien Laws?

Over eight years ago, the California Law Review Commission started a review of the California construction lien laws. In 2008, the Commission recommended that the existing mechanics lien statutory laws be modified. Their objective was to modernize, simplify, and clarify the lien laws, and make them more user friendly, efficient, and effective. That recommendation (SB 189) was signed into law by the Governor in 2009 and goes into effect on July 1, 2012. This year further legislation (SB 190) was passed to "clean-up" minor issues with the widespread changes made in SB 189.

While many of the changes are minor and many of the changes do not alter the existing statutes substantively, there are a number of changes that are substantive. Moving forward Last & Faoro will be publishing a series of articles on the important substantive changes. But to begin we have assembled a quick summary of the important points.

1. Lien Waiver and Releases: The content of conditional and unconditional lien releases will be changed. The new forms will be mandatory.

2. Definition of Completion: What constitutes completion for the purpose starting the time to record a lien, file a stop notice and/or make bond claim will be changed. Mere "acceptance" of a project by an owner will no longer be considered an indicator of completion.

3. Notice of Completion: Separate notices maybe recorded when there are multiple direct contractors.

4. Notices: The content of notices will be standardized. The method for giving notice will be standardized. The notice periods will be standardized. Also on private works projects, Preliminary 20-Day Notices will need to be provided to construction lenders.

5. Lien Release Bonds: The amount of the lien release bonds will be reduced. This is meant to lower the burdens of securing these bonds.

6. Terminology: The terminology has been changed to reflect modern usage and provide clarity. For example, the phrase for a contractor with a direct contract with a project owner will be "direct contractor", replacing the ambiguous phrase "original contractor".

While the new statutory scheme provides for the courts to follow existing appellate court decisions the courts may be not be inclined to do so. That makes it all that more important that a lien claimant comply with the new statutory changes so that it will not lose its lien rights.

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