In a new case, Hub Construction Specialties, Inc. v. Esperanza Charities, Inc. (filed February 8, 2016, Second District, Div. Eight) 2016 S.O.S. 787, the Court held that under the prior mechanic's lien code (Former Civ. Code, § 3097.1, subd. (a); Stats. 2010, ch. 697, § 16 [repealed].) strict compliance with proof of service provisions was not required when there was evidence that there had been strict compliance with the provisions regarding service of notice.
In a recent case, Palomar Grading & Paving, Inc. v. Wells Fargo Bank, N.A. et al., Court of Appeal (2014 S.O.S. 4573) the appeal court held that "We determine it is the constitutional default rate that should apply to prejudgment interest on a mechanic's lien as applied to noncontracting, innocent owners." California's constitutional default rate for prejudgment interest is 7%.
I Forgot To File A Legal Action to Foreclose
Senate Bill 189, passed in 2009 by California legislatures, institutes a significant overhaul of lien claim laws. Lien claims include mechanic's liens, stop notice claims, and claims on public works payment bonds.
Project owners facing mechanic's lien claims they believe lack merit will often threaten to retaliate with a slander of title action against the claimant. But the law generally does not allow a slander claim against a lien claimant, even if the claim lacks merit. In a recent appeals court case a project owner sought to have the court create a lack of merit exception to this rule. The court refused to do so, instead confirming that even unmeritorious lien claims are privileged acts and not subject to a slander claim.
In a unpublished decision filed October 27, 2011 the Court of Appeals confirmed that a private works bonded stop notice could be invalidated as a result of a clerical error in stating the claim amount.
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.
At present, to record a mechanic's lien a claimant need only to complete and execute a claim of lien form and record the same at the county recorder's office in the county where the project was located. The claimant has no obligation to inform the project owner that the lien has been recorded. Occasionally project owners first learn that their property is subject to a mechanic's lien when they are served an already filed lawsuit seeking foreclosure of the lien.
A lis pendens (a.k.a. notice of pendency of action) is a document which is recorded against the title of real property to notify interested parties that litigation is pending which impacts the said property's title. The lis pendens protects claimants by ensuring that their claim is fully attached to the property and that future interest holders take title subject to the claim, and protects future interest holders by warning them that the claim exists.
In this era of declining property values, owner abandoned projects, and defaulting developers, the private works stop notice has become a central element in contractor payment claims. The private works stop notice is served on a construction lender along with a bond, and creates a lien on undisbursed construction loan funds. But a recent trial court order in a Federal District Court in Arizona shows that this remedy of last resort may be threatened by a new legal challenge.