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California’s mechanics lien laws provide substantial protection for contractors and suppliers. In fact, the right to file a lien is mentioned in the state’s constitution! Nevertheless, there are strict processes that must be followed to keep and use lien rights in the state. Here are 5 essential things you need to know about California mechanics lien law.
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1. Preliminary Notice is strictly required – but may help even if given late
California preliminary notices are strictly required in order to file a valid lien claim, which means they should be sent on every job. For most parties, if a preliminary notice is not delivered, the ability to file a valid mechanics lien is lost.
Anyone who does not contract directly with the property owner, like subs and suppliers, must send a preliminary notice on every project. This should be sent to the property owner, general contractor, and the construction lender (if applicable) within 20 days of first furnishing labor or materials to the construction project.
If you miss that deadline, don’t panic. This doesn’t kill your lien rights, but it does alter them a bit. A preliminary notice can still be sent late. However, it will only be effective for labor or materials furnished for the 20 days prior to when the notice is sent. So even if you miss your deadline, it’s better to send it sooner than later. The longer you wait, the more lien rights you will lose.
Now, as for anyone who did directly contract with the property owner, they must send a preliminary notice as well. But, only if there’s a construction lender for the project. This means that GCs in California are not always exempt from the preliminary notice requirement.
It’s not uncommon for contractors to inquire about notice requirements after they run into a payment problem — see this question for example on our Expert Center: Do I need a pre-lien filed in order to lien a project?
Unfortunately, waiting until the moment of non-payment will be too late!
For a closer look:
2. Listing unpaid workers on preliminary notices
This is a particularly unusual requirement that many parties aren’t aware of. The state of California specifically requires potential claimants to provide certain information on their preliminary notices when money is owed to their laborers. California Civ. Code § 8202 (b) states that:
If preliminary notice is given by a subcontractor that has not paid all compensation due to a laborer, the notice shall include the name and address of the laborer and any person or entity… to which payments are due.
Therefore, subcontractors who have unpaid workers (or money owed to a union trust account) at the time they send the preliminary notice must include that information. It’s important to indicate that on the notice itself, or at the very least, attach unpaid payroll slips to the notice.
3. The deadline to file a California mechanics lien runs from completion of the entire project
The deadlines for mechanics liens in California are calculated from the completion of the project, or from the date of the filing of a Notice of Completion (which is not a required document). For general contractors, this is easy, since they will be involved with the project through completion. As for subs and suppliers, this can get a bit trickier, particularly if the labor or materials were provided early on in the project. The general rule is that the deadline to file a California mechanics lien is 90 days for all project participants.
If, however, a Notice of Completion is filed (which formally announces the project completion date) on the project, this deadline is significantly reduced. For general contractors, the time to file a lien claim is shortened to 60 days; while the deadline for subs and suppliers is reduced down to a mere 30 days.
So how do subs and suppliers know if and when a Notice of Completion has been filed? This can be particularly annoying since they have potentially finished work or supplying materials months earlier. Fortunately, the owner is required to provide a copy of the notice; but only if you sent a preliminary notice. Failure by the owner to provide a copy of the notice will render it ineffective to shorten the mechanics lien deadline.
4. Construction lenders are important – request their info
When serving a mechanics lien or sending preliminary notice, it’s important to include the construction lender. In fact, the construction lender is the only party GC’s are specifically required to send a preliminary notice to. Failure to do so could affect the validity and power of a lien claim.
This means that if the construction lender is unknown, companies should take efforts to determine the lender’s identity. In an effort to make this process simpler, we’ve written a whole article on How to Find the Lender on a California Construction Project.
If a party can’t find the lender information themselves, they are specifically entitled to request it, according to California law. Even so, project participants may find themselves faces with some interesting challenges here. What if you request this information from the general contractor or property owner, and they won’t reply?
This was explored in a question answered by our Experts: We have submitted several requests for pre-Lien information, and the contractor is not responding to our request. What suggestions do you have?
5. The mechanics lien foreclosure deadline comes fast
It’s important to know that there is a statute of limitations for filing a lien in California. California’s mechanics lien deadline for a foreclosure action (i.e., the date when a lawsuit must be filed to enforce the lien) is one of the shortest in the country. Again the magic number in California is 90.
California mechanics liens must be foreclosed within 90 days from the date the lien was filed. Comparatively speaking, this is incredibly short. Most other states’ foreclosure deadlines range anywhere from a couple of months to over a year! Therefore, it’s a good idea to take steps toward collecting on the lien immediately.
A good first step is to send a Notice of Intent to Foreclose. Consider this notice a final warning shot before filing a foreclosure lawsuit. This, typically, is pretty effective to induce payment. If you remain unpaid, it may be time to make arrangements to foreclose the lien. Check out this question and answer on our Expert Center for more information: How long does it take to start the lien foreclosure process?