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California Lien Law Summary

California Lien Law Summary

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Published by Alexandra Lynch

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Published by: Alexandra Lynch on Dec 10, 2010
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Section Contents—Pre-lien Notice(s)
Name of Notice
Who Must Use This Notice
How to Serve
Verified or notarized?
 ©2007 NationalLienLaw.com. All rights reserved. (925) 899-8449.Email--info@NationalLienLaw.com. Revised 6/07
Section Contents—Mechanic’s Lien
Who is Entitled to a Lien?
When to File/Record
Where to File/Record
How to Serve
Amount of Lien
Property Subject to the Lien
Furnishing Information
Verified or Notarized
Lien Release Bond
Miscellaneous Issues
Section Contents—Lawsuit to Foreclose Lien
Where to File
Need a Lawyer?1 of 36
 ©2007 NationalLienLaw.com. All rights reserved. (925) 899-8449.Email--info@NationalLienLaw.com. Revised 6/07
General Notes
Be Careful 
: The courts consider a mechanic’s lien to be a privilege and not a right. Youreceive its benefits only if you
strictly adhere 
to the state law requirements.Bottom line: miss a deadline by one day and you have lost it. Unlike otherareas of the law where you can argue equities, find technical exceptions, andlawful excuses, there is no forgiveness here. In this case, knowledge is notonly power, it’s a necessity.This means you will be calendaring dates for three documents: a) Pre-Lien Notice; b)Mechanic’s Lien; and c) lawsuit to foreclose the mechanic’s lien. Write down all thedeadlines in your calendar. Use a highlighter or red pen. If you have a staff, use a “fail safe”system by doubling up and putting it in their calendar also. This reminds you twice. The firstcalendar entry should be two weeks before the due date as a preliminary reminder.On the second calendar entry, do a white lie to yourself. Put the due date as oneweek before it is actually due as insurance in case you get busy or need legal advice.Time is money. You will waste a lot of valuable time running around at the lastmoment, as opposed to doing it early.
 California requires a Notice be sent out before the mechanic’s lien is recorded. Forsimplicity, this notice will be referred to as the “Notice”. The basic information on this Noticeis as follows:
Name of Notice: 
California Preliminary 20-Day Notice
Who Must Use this Notice: 
All general contractors, subcontractors, laborers, and material/equipmentsuppliers who
do not
have a direct contract with the owner or theowner’s agent. For example, a general contractor with a direct verbal orwritten contract with the owner who acts as the prime is not required togive the Notice.Technically, subcontractors and material/equipment suppliers who havea direct contract with the owner are considered an “original contractor”under the statute and need not serve the Notice. However, as apractical matter, it is recommended that all subs and suppliers,regardless of whether they have direct contract with the owner, serve theNotice. This is because you are still required to serve it on theconstruction lender. If you have to send a Notice to the lender, youmight as well send it to everyone.
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 ©2007 NationalLienLaw.com. All rights reserved. (925) 899-8449.Email--info@NationalLienLaw.com. Revised 6/07
And then there are the gray areas that will only give you grief.What if you have a direct contract instead with the owner’s agent,including that person’s architect, engineer, property manager, or broker?What if the owner has a contract with a general and you are simply doinga side job directly with the owner? What if you are paid directly by theowner but take directions from the general contractor? Don’t take anychances – if you are a sub or supplier, serve the Notice on the owner,the general contractor, and construction lender.No Notice is required if you are performing labor for wages only. If youare performing labor but not for wages (for example, a lump sumcontract or T&M/cost plus), you must serve the Notice. For example, acompany that supplies a backhoe and an operator under a lump sumcontract price is not supplying labor for wages.It is grounds for discipline with the Contractors State License Board ifyou do not serve the Notice on contracts exceeding $400. However, itwould be rare if discipline were imposed for this reason only.Because of the confusion in this area, the following examples may behelpful:A) A licensed general does framing work only (no other services)through a contract with the prime contractor who has contracted to dothe whole project. A Notice is required.B) The owner acts as his/her own general or owner/developer andsigns separate contracts with various subcontractors and generals.Since everyone has a direct contract with the owner, whether licensed asa general or subcontractor, no Notice is required.C) A licensed general has a contract with another general (who actsas the prime) to perform specialty plumbing and HVAC work. A Notice isrequired.D) A licensed general, does all the work on the project as the primecontractor, but has a contract only with the architect and engineer andnot the owner. A Notice is required. Be careful if you have a contractdirectly with the owner's agent, such as a project manager or architect.Although one could argue that you have a contract with the ownerbecause it is through his/her agent, this is a gray area and to be safe youshould serve the Notice.E) Either a general or subcontractor has a direct contract with XYZcompany, but it is not entirely certain whether this is a generalpartnership, limited partnership, corporation, or otherwise. There is evenmore confusion as to whether or not this company, which might be acorporation, is also a managing general partner of another larger entitywho actually owns the property. If there are any doubts, always servethe Notice on all applicable entities or persons.
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