July 12, 2012
Update on Mechanic's Lien and Private Works Stop Notice Laws
On July 1, 2012, the Mechanic’s Lien and private works Stop Notice laws in California changed. The California Legislature overhauled the laws to consolidate their location in the Code and simplify their language. Now, anyone searching for the rules and procedures to enforce Mechanic’s Liens and private works Stop Notices will turn to the “Works of Improvement” part of the California Civil Code, starting at Section 8000. Some archaic language and terms have been replaced with simplified language.
Here are a few changes that our construction lender clients should note:
- The term “original contractor” has been changed to “direct contractor”
- The term “stop notice” has been changed to “stop payment notice”
- The terms “20-Day Preliminary Notice” and “Pre-Lien” have been changed to “Preliminary Notice”
- The changes in terminology and Code section references require the use of new forms, including Preliminary Notices as well as Conditional and Unconditional Waivers and Releases of lien rights
- Construction Lenders must be served with Preliminary Notices
- “Acceptance by the owner” is no longer an approved determination of project completion
- The deadline to record Notices of Completion was extended from 10 days to 15 days following project “completion”
- The amount for bonds to release a Mechanic’s Lien was reduced to 125% of the amount of the claim
- Prime contracts and Subcontracts must provide space for the identification of any construction lender
Overall, the changes do not significantly alter the substance of the Mechanic’s Lien and private works Stop Notice rules and procedures. While the terminology and location in the Code may be different, Mechanic’s Liens and private works Stop Notices are generally created and enforced in the same manner today as they were before July 1, 2012.
If you need help updating your forms or if you have specific questions about Mechanic’s Liens or Stop Notices, please contact us.
The Hopkins & Carley Financial Institutions & Creditors’ Rights Group has a long history of documenting credit relationships and maximizing recoveries on behalf of our creditor clients. Our substantial experience with credit documentation, restructurings, enforcement and bankruptcy and other insolvency proceedings allows us to achieve positive results for our clients by protecting their interests and rights on an expeditious and cost-effective basis, reducing litigation risk and expense whenever possible.
Please click here to view our previous advisory on how non-recourse loans may become recourse.
Please click here to sign up for our Creditors' Rights Advisories.