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Home>Levelset Community>Legal Help>How is the "cessation of labor" determined? If I'm still providing services as a GC in an attempt to get final inspection approved? Does that count as my labor?

How is the "cessation of labor" determined? If I'm still providing services as a GC in an attempt to get final inspection approved? Does that count as my labor?

CaliforniaLien DeadlinesRight to Lien

HI, On a job that I'm owed $39K for a $900K project. I'mot able to get city approval for final inspection, due to unapproved plans for site drainage. I continued to work on getting that approval with the architect, engineer, and city. Site meetings and inspections happened subsequent to the client moving in. They are claiming I'm past my right to lien "90 days" from occupying on October 10. I had an inspection on 1/9/19. Does that count as continuing labor, as this is the service I provide as a GC? Subsequently, what are the penalties for filing a lien regardless of that determination?

1 reply

Apr 1, 2019
Great question, and I'm sorry to hear you're having trouble getting paid. First, let's look at the deadline for direct contractors to file a mechanics lien. Then, we can look at potential results when filing a lien that's ultimately improper. In California, the deadline for filing a mechanics lien will depend on the lien claimant's role on the project. If the claimant was hired directly by the property owner - the time for a direct contractor to file a mechanics lien is "after the contractor completes the direct contract, and before the earlier of the following times: (a) Ninety days after completion of the work of improvement. (b) Sixty days after the owner records a notice of completion or cessation." So, when hired by the owner, a claimant can't even file their lien until after their contracted work has been completed under the direct contract. Even then - the claimant will have 90 days after the completion of the work, or 60 days after a notice of completion or cessation has been recorded (if one is recorded at all). Now, "completion" can be complex. § 8180 of the California Civil Code attempts to provide some clarity. It states that completion occurs at any of the following events: (1) actual completion of the improvement; (2) occupation or use by the owner along with the cessation of labor; (3) cessation of labor for a continuous period of 60 days; (4) recordation of a notice of cessation after cessation of labor for a continuous period of 30 days; and acceptance by a public entity, if applicable. There are few things that should be taken into consideration here. For one, as hinted at in the above question, even if an owner occupies (or uses) an improvement, unless that occupation or use is coupled with a cessation of labor, that will not work to start the clock for a mechanics lien deadline. The word "labor" isn't defined by itself in the California Civil Code, but § 8022 of the code defines "Labor, service, equipment, or material" to include (but not be limited to) "labor, skills, services, material, supplies, equipment, appliances, power, and surveying, provided for a work of improvement." (emphasis added). The term "labor, service, equipment, or material" is used in its entirety at multiple points throughout the California Civil Code, but it might be argued that due to the "or" in that group of words, and singular word in the group should be defined as set out under § 8022. If that's the case, continuing to provide "skills" and "services" necessary for the work of improvement would constitute "labor". But, taking a step out of the weeds, the point of mechanics lien laws are to protect those who perform labor and provide materials for a work of improvement. When a direct contractor continues to perform their duties under their contract, it might be hard to argue that the project has been "completed" and that the contractor, though they are still providing work toward completing the project, will be unable to file a mechanics lien. Granted, if the matter would ultimately go before a court, it's hard to predict how a decision might turn. Now, let's look at penalties for filing an improper lien. First and foremost, it's worth noting that most mechanics lien filings don't actually make it to a courtroom - when a mechanics lien is filed, generally, the matter typically gets resolved prior to an official lien challenge or before enforcement becomes necessary. Further, if a lien is filed but ultimately challenged, a lien claimant will often have the opportunity to release their filed lien before some legal action is taken against the lien claimant. Further, there's a difference between a fraudulent mechanics lien and a mechanics lien that's ultimately found to be improper. As long as a lien claimant has filed their lien in good faith, believing that they have the right to file a lien, and as long as that lien claim is based on a debt that's actually owed for work performed but unpaid, a lien claimant will generally not be subject to the same liability and potential damages that are in play when a fraudulent lien is filed. zlien discussed that idea in this article: Frivolous Mechanics Liens: Intentionally Fraudulent vs. Honest Mistakes. In many situations, where a claimant's lien cannot stand due to some procedural issue (but the debt and claim remain otherwise valid), a court might merely cancel the lien claim. Of course, it's always possible that a claimant might be held liable for the property owner's damages or attorney fees. Note, though, that under § 8422 of the California Civil Code, erroneous info included in a lien claim won't always invalidate a lien claim - only in two situations will incorrect info lead to a lien being deemed erroneous: "(1) The claim of lien was made with intent to slander title or defraud. (2) An innocent third party, without notice, actual or constructive, became the bona fide owner of the property after recordation of the claim of lien, and the claim of lien was so deficient that it did not put the party on further inquiry in any manner." So, a dispute as to what constitutes the completion of work/cessation of labor on a project wouldn't seem to automatically open a claimant up to liability. Though, it's possible that a claimant's lien might be deemed unenforceable due to a court's determination of when "completion" or "cessation" occurs.
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