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Is the Lender requirement in CA for both construction lenders and mortgage lenders?

California

We are typically hired by property management companies for work in CA. Can you confirm that the requirement to notify is the same for “construction lenders” as it is for “mortgage lenders”? It is rare that we work on construction projects with construction loans, however I would expect that most of our properties have mortgages.

2 replies

Jul 15, 2020
If there's a lender on a California construction project, the lender must receive preliminary notices. That doesn't mean any lender for the property must receive notice, though. Rather, notice must only be sent to lenders who are lending or holding funds specifically for the construction project. So, an owner's mortgage provider wouldn't need to receive notice unless that mortgage was secured to pay for the construction work. CA Civil Code § 8200(a)(3) states that notice must be given to a "construction lender or reputed construction lender, if any." And, § 8006 defines the term "construction lender" to include (a) mortgagees or beneficiaries under a construction deed of trust; or (b) an escrow holder or other party holding construction funds. So, if the lender's presence is completely unrelated to the project at hand, then they generally won't be the type of lender who's required to receive a CA preliminary notice. Finally, keep in mind that the CA lien statute sort of admits that construction lenders aren't all that common - so not having a lender is mostly expected for California jobs. Recall above - § 8200(a)(3) states that notice must be given to a lender "if any" (is present). For further discussion on California preliminary notices, these articles should be useful: (1) California Preliminary Notice Rules & FAQs; and (2) The Ultimate Guide to California’s 20-Day Preliminary Notice.
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Jul 16, 2020

Yes, the noitce is a 20-day prelim notice, which is a prerequisite to later lien the property, and the same prelim is notice to the construction lender, whcih is a prerequisite to serve a stop payment notice. If you would like to discuss, call at any time. Thanks,

Carlton & Alberola and/or Andrew Carlton have not been retained by
the recipient of the above comment and, moreover, the above comment does not
create an attorney-client relationship. The above is general commentary based
on limited and insufficient information. If you wish to obtain legal advice,
please contact Andrew Carlton at 949-954-6666 x101, or by email at
andrew@cnalawfirm.com.

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