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I hate to use the term “Lien Extension” when talking about California mechanics lien law because the document or the remedy simply does not exist. There is no such thing as a “mechanics lien extension” in California. Nevertheless, this is what everyone refers to when they discuss the state’s “Notice of Credit.” This is just the beginning of the confusion running rampant in California county recorder offices.
California County-Recorders Don’t Know What The Lien Extension Is Called…And That Makes A Big Difference
Let’s start there – with the very name of the document. Though Shakespeare wrote that “ rose by any other name would smell as sweet,” in regards to the right of mechanics lien claimants to have a lien claim extended beyond the 90-day effective period, this utterance may not be true.
It’s A Notice of Credit and Not A Lien Extension
A California mechanics lien expires 90 days after its filing date. It can be “extended” under only one circumstance: if the property owner and the lien claimant agree to payment terms, and record notice of those terms. This extension right is found in California Civil Code §8460(b), reproduced here:
The standard mechanics lien deadline does not apply if the claimant and owner agree to extend credit, and notice of the fact and terms of the extension of credit is recorded (1) within 90 days after recordation of the claim of lien or (2) more than 90 days after recordation of the claim of lien but before a purchaser or encumbrancer for value and in good faith acquires rights in the property. In that event the claimant shall commence an action to enforce the lien within 90 days after the expiration of the credit, but in no case later than one year after completion of the work of improvement. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable.
There aren’t many specific requirements outlined in this statute’s section, and further, there isn’t any talk about an extension of the lien claim. The only time the word “extension” is used it is used within the phrase “extension of credit” – what the contractor is allowing to the owner – and not the “extension” of a lien claim – something the owner would be allowing to the contractor.
To comply with §8460(b), the claimant and owner need merely “agree to extend credit, and notice of the fact and terms of the extension of credit” be recorded. It is for this reason that the document is oftentimes referred to not as a “lien extension” but as a “Notice of Credit.” I believe this is the more proper designation.
Why Does This Matter?
Captioning a document usually doesn’t matter. You can write “Mickey Mouse Is A Great Cartoon” at the top of your lien claim or lawsuit, and while it wouldn’t be a correct designation, your underlying filing should be fine. Almost every state has procedural laws in place that say its the body of the document filed that matters, and not the caption.
Nevertheless, county-recorders refer to the caption of a document often, and you’d be well served to get the caption right. That’s why this California document is so elusive.
Nearly a year ago we tried to record a “Notice of Credit” with Los Angeles County, and they refused to allow it because they didn’t recognize the document and argued it should be captioned “Lien Extension.” Grrrrr. Despite this being wrong, we’ve changed our form to “Lien Extension and Notice of Credit” to appease the recording offices.
That’s not where the problem ends, however. The name of the document has bigger implications.
County recorders in California will reject a document it deems “unrecordable.” Whenever a document is presented to them they are supposed to check a little manual that outlines the requirement for that particular document. All legal instruments recorded must contain identification of the parcel being impacted, and they must be notarized with a proper notary attestation, verification or jurat.
Through dealings with the recorder offices in California when trying to record these §8460 “extensions,” I’ve come to learn that the manual in all county recorder offices consider these documents to be “Lien Extensions,” and they expect them to meet the requirements of a legal instrument. It’s a wrong recommendation.
California Government Code §27201 sets forth what is required for a document to be recorded, providing that:
[T]he recorder shall…accept for recordation any instrument, paper or notice that is authorized or required by statute or court order to be recorded, if the instrument, paper or notice contains sufficient information to be indexed as provided by statute, meets recording requirements of state statutes and local ordinances, and is photographically reproducible.
Re-read this code article and specifically note that there are three distinct and independent types of documents that may be recorded: (i) instruments; (ii) papers; or (iii) notices. Then, re-read §8460(b) which provides that a lien is extended if “notice of the fact and terms of the extension of credit is recorded.”
It’s clear: The document to be recorded pursuant to §8460(b) is not an instrument or a paper. It is a notice.
Notarization and/or a notarial authorization is not a pre-requisite for all notices and papers that get recorded with the county recorder. This is only a requirement for “instruments.” In fact, CA Government Code §27201(b)(1) provides that only “signatures” be on every paper or notice.
As such, the “Notice of Credit” is simply a notice document that must be accepted for recording so long as it meets the statutory requirements meaning that it provides “fact and terms of the extension of credit.”.
Notices of Credit Memo or Manual Change Is Necessary
When speaking with a very helpful county recording supervisor in Alameda County last week I learned that an association publishes manuals for all California county recorders whereby the requirements of all recordable documents are outlined. Every county follows these guidelines.
It’s clear to me that this manual doesn’t understand the “notice of credit” document as provided for by §8460(b). It’s time for this part of the county-recorder manual to change.