Meeting deadlines can make or break a contractor when dealing with mechanics liens. Every state has different deadlines that must be met when it comes to notices and filings, but the language of that state’s mechanics lien statute greatly dictates when the countdown to many of these deadlines start. In California, a contractor must record a mechanics lien within 90 days of completion in order for the lien to be valid. The issue is that “completion” can be a tricky starting point to determine.
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In 2006, Picerne Construction Corp. agreed with Castellino Villas to build an apartment complex in the City of Elk Grove. This project consisted of 11 apartment buildings, separate garages, a clubhouse, and other facilities. The City issued the certificates of occupancy on July 25, 2006, but Picerne continued to work after this date because work was still required to fulfill the contract. Castellino did sign an “Owner’s Acceptance of the Site” on September 8, 2006, but Picerne to work for a period of time slightly after this date. Renting began in October 2006 at the time when Picerne asked Castellino to release the project retention proceeds.
Picerne recorded a claim of mechanics lien on November 28, 2006. A complaint to foreclose on the mechanics lien was filed on December 29, 2006. Eventually, the case found its way into arbitration. The arbitrator ended up awarded Picerne upwards of $4 million. This award was confirmed by the trial court. This eventually forced Castellino to file for bankruptcy and reach a settlement agreement with many of the contractors below Picerne. The agreement required that the trial court determine the validity, priority, and amount of Picerne’s mechanics lien. The trial court ruled in favor of Picerne, declaring the lien valid. The court held that the date of completion was no later than September 8, 2006, and the mechanics lien was therefore recorded timely. Castellino appealed.
The Court’s Decision on Validity
In Picerne Construction Corp. v. Villas, 2016 WL 653961, the Court of Appeals for the Third District of California affirmed the trial courts decision and upheld the validity of Picerne’s mechanics lien. The issue that came into discussion was when was the actual date of completion. This date would determine when the clock stated ticking for the 90 days to record the claim for a mechanics lien. Castellino made the argument that the date of completion should be on July 25, 2006 when the certificates of occupancy were first issued. The Court disagreed and sided with the trial court:
In the case of any work of improvement other than a public work, the Legislature defined the term completion as “actual completion of the work of improvement.” (Stats. 1969, ch. 1362, § 2, p. 2753 [section 3086].) In addition, the following are deemed to be equivalent to a completion: (a) the occupation or use of a work of improvement by the owner or his agent, accompanied by cessation of labor thereon; (b) the acceptance by the owner or his agent of the work of improvement; or (c) after the commencement of a work of improvement, a cessation of labor thereon for a continuous period of 60 days, or a cessation of labor thereon for a continuous period of 30 days or more if the owner records a notice of cessation of labor. (Stats. 1969, ch. 1362, § 2, p. 2753 [section 3086].) Section 3086 did not equate the issuance of a certificate of occupancy under building regulations with completion of a work of improvement. (Contra, Stats. 1994, ch. 1046, § 2, p. 6342 [section 3260, subdivision (c) defined date of completion for purposes of that section as including the date of issuance of a certificate of occupancy by the public agency issuing the building permit].)
Substantial evidence supports the trial court’s finding that the owner accepted the project as of September 8, 2006……… The owner’s acceptance of the project is the equivalent of completion of the work of improvement under section 3115. (Stats. 1969, ch. 1362, § 2, p. 2753 [section 3086]; Stats. 1969, ch. 1362, § 2, p. 2762 [section 3115].) Picerne timely recorded its claim of mechanic’s lien within 90 days after September 8, 2006.
The Court continued by clarifying that substantial completion no longer is considered “completion” pertaining to the terms of the mechanics lien statute. The Court points out that the trivial imperfections once found in the statute that supported substantial completion triggering the 90 Day Rule have been deleted by the Legislature through amendments. Actual completion and three other circumstances (stated above) define completion of work and trigger the 90 Day Rule.
Clarity and Objectivity
This Court ruling is a perfect explanation of the 90 Day Rule and what constitutes completion in California. Although the court refers to section 3115 and other sections, the definition of completion and 90 Day Rule can now be found in §§8180-8190 and §§8412-8414 respectively. This decision allows for contractors to have a sufficient amount of time to record a valid mechanics lien. The alternative would force many contractors to record a lien while still working on a project. Most importantly, the decision provides clarity and objective guidance to what once was a rather cumbersome and sometimes fatal situation for California mechanics lien claims. For more information on California mechanics liens and deadlines, click here.