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Project Completion Determines Mechanics Lien Recording Deadline
Courtesy of Porter Law: Bill Porter
The California mechanics lien is one of the most powerful collection remedies available to contractors, subcontractors and suppliers who are unpaid for work performed and materials supplied in relation to a California private works construction project. The mechanics lien allows the claimant to actually sell the property where the work was performed in order to obtain payment. The recording of a mechanics lien is entirely of course, against the wishes of the property owner. There are a number of important steps to follow and timelines to be met in order to pursue this remedy.
First, Understand Your Preliminary Notice Deadline
Working within deadlines is absolutely crucial to preserving mechanics lien rights under California law. The deadlines differ, depending on whether you are a “direct” contractor, also known as “original” or “prime” contractor (one who contracts directly with the property owner) or a subcontractor or material supplier. The process begins with the serving of a “preliminary notice” no later than 20 days after the party serving the preliminary notice begins supplying labor or materials to the project. Direct contractors are only required to serve the preliminary notice on the construction lender, if any (Civil Code section 8200-8216), whereas subcontractors and material suppliers must serve not only the construction lender, but also the owner and direct contractor (see Civil Code section 8200(e)).
Note: While Civil Code section 8204 specifies the last possible date on which to properly serve the preliminary notice, it does not specify a date which would be too early to serve the preliminary notice. The subcontractor or material supplier should establish mechanisms so that at some point between execution of a contract and the commencement of work or the supplying of materials the preliminary notice is properly served.
Procedure and Deadline for Service of a Preliminary Notice:
Within 20 days after first furnishing labor, materials or equipment to a jobsite, the subcontractor or material supplier must fill out and send a preliminary notice to the original contractor, owner and the lender, if any. Direct contractors need only serve the construction lender, if any, within the same time period. The notice should be sent by either registered mail, certified mail, return receipt requested, by express mail or overnight delivery by an express service carrier. The notice can also be hand-delivered. However, certified mail, registered mail or overnight delivery are strongly recommended because these methods provide a form of objective documentary proof of delivery. Before sending out the notice, always make a copy of the fully completed notice for your records. Staple your “receipt for certified mail” or other proof of delivery to your copy of the preliminary notice and keep it in a separate folder for the particular job. Later, after the post office or other service returns a return receipt or its equivalent to your office, staple that return receipt to your copy of the preliminary notice and return it to your job file. It is important to safeguard these documents since they may be needed to prove your effort to deliver the preliminary in court at a later time (See Civil Code sections 8200-8216).
Note: In projects where the contract is for over $400, failure of the subcontractor to give the preliminary notice may also subject the subcontractor to disciplinary action with the Contractors’ State License Board. (See Civil Code sections 8216, 8410; see also Civil Code sections 8200-8216.). It is very rare that the CSLB will take such action.
Direct (Prime or Original) Contractor Deadline to Record a Mechanics Lien
If a Valid Notice of Completion or a Notice of Cessation Has Been Recorded:
If a valid “notice of completion” or “notice of cessation” has been recorded with the County Recorder in the County where the work of improvement is physically located, the direct (prime) contractor has 60 days after the date on which such notice was recorded before which the direct (prime) contractor must record a mechanics lien. (See Civil Code sections 8050, 8188, 8182, 8184, 9204, 9208).
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