On July 1, 2012, just three months from now, an all new mechanics’ lien law will be in place in California. This new law, or actually a series of laws, will alter the process that has been in place for many years. This will affect not only contractors, subcontractors and material suppliers, but owners and design professional as well. I strongly recommend spending some time during the next three months getting up to speed on the new laws and if applicable updating your forms for these new laws.
The new laws will be codified in California Civil Code Section 8000 et seq. and it is entitled Works of Improvement.
Under newly enacted Civil Code §8200(e)(2) even the prime or general contractor (called the “Direct Contractor” in the new law) must give preliminary notice to the construction lender.
Minimum requirements for all types of notices required under the mechanics’ lien law will be standardized under Civil Code §8102. Depending upon the type of notice, notice of cessation, notice of completion, preliminary notice, stop notice, there may be additional notice requirements.
Under Civil Code §§ 8132, 8134, 8136 and 8138, conditional, unconditional, periodic and final release forms have also been modified. Since any “waiver and release shall be null, void, and unenforceable unless it is in substantially the [statutory] form”, owners and developers will also need to revise their forms to comply with the new laws.
Under new Civil Code §§ 8480-8488 owners have certain rights to release their property from mechanics’ lien, including as a result of the failure to foreclose on the lien in a timely manner. These procedures have been substantially revised under the new laws. In addition, lien release bonds have been reduced from 150% of the claim to 125% of the claim in new Civil Code § 8424.
A design professional may record a mechanics’ lien for providing work authorized for a work of improvement, subject to specified conditions. Under new Civil Code §8319 a design professional may convert a recorded design professional lien to a mechanics’ lien if certain requirements are met.
This is just the tip of the iceberg on mechanics’ liens and as you can see, it will be very important to understand the new laws if you are in the construction business. These laws go into effect on July 1 so the time to get ready is now.