2012 California Construction Law Update – Part 3

Part 3 (and final) of my 2012 California Construction Law Update discusses legislation enacted in 2010 but which goes into effect on July 1, 2012, which overhauls and recodifies the payment remedy provisions found at California Civil Code sections 3082 et seq. which will be recodified at Civil Code sections 8000 et seq. The legislation, sponsored by the California Law Review Commission, is intended to simplify and clarify existing law and includes the following changes:

Preliminary notices and waivers and releases

The statutorily required language for preliminary notices and conditional and unconditional waiver and releases will change. Preliminary notices on private projects will be required to be served on construction lenders whose identity will be required to be disclosed in construction contracts. If a construction loan is obtained after commencement of a project, the identity of the construction lender will be required to be given to those serving preliminary notices.

Definition of “completion” and notices of completion

The definition of “completion” – which is important because it starts the time to record a mechanic’s lien, file a stop notice and make a bond claim – will no longer include acceptance by the owner. Owners will be able to record separate notices of completion where there are multiple prime contractors. The deadline to record notices of completion will be extended from 10 days to 15 days following project completion.

Design professional liens and landscape contractors

There will no longer be a separate design professional lien. Design professionals will be able to record mechanic’s liens, which they had also been able to do under previous law. Licensed landscape architects will be included within the definition of “design professional” and will be able to record mechanic’s liens.

In addition, clarifiying legislation enacted in 2011, provides a 30 day grace period for design professionals to convert design professional liens to mechanic’s liens, and clarifies that the proof of service affidavit which must accompany mechanic’s liens beginning January 1, 2011 must now only include the name of the property owner but also the title or capacity of the person or entity served with the mechanic’s lien.

Petitions to expunge and lien release bonds

Parties prevailing on a petition to expunge a mechanic’s lien will be able to recover the full amount of their reasonable attorney’s fees rather than the previous maximum of $2,000. The statutory amount of lien release bonds will be reduced from 150% to 125% of the amount set forth in mechanic’s liens.

Terminology

Many of the terms used under the previous law will change. The term “original contractor” will be replaced with “direct contractor,” “materialman” will be replaced with “material supplier,” “stop notice” will be replaced with “stop payment notice” and “20-day preliminary notice” will be replaced with “preliminary notice.”