BILL ANALYSIS                                                                                                                                                                                                    






                             SENATE JUDICIARY COMMITTEE
                           Senator Ellen M. Corbett, Chair
                              2009-2010 Regular Session


          SB 189
          Senator Lowenthal
          As Amended December 15, 2009
          Hearing Date: January 12, 2010
          Various Codes
          ADM:jd
                    

                                        SUBJECT
                                           
                                   Mechanics Liens

                                      DESCRIPTION  

          This omnibus mechanics lien bill would do the following:
           recodify, reorganize, and clarify the mechanics lien statute;
           modernize terminology and eliminate inconsistencies in  
            language;
           make provisions more readable and easier to use;
           enact separate provisions for private and public works;
           modernize and streamline existing notice requirements;
           revise and recast provisions relating to liens for design  
            professionals;
           require certain bonds to be obtained from licensed sureties; 
           improve and clarify statutory forms relating to waivers and  
            releases;
           allow notices under the mechanics lien statute to be given  
            electronically;
           add procedural detail relating to a summary lien release; and
               become operative January 1, 2012 to allow the industry and  
              homeowners to become familiar with the new reorganization  
              and updates. 

          (This analysis reflects author's amendments to be offered in  
          committee.)

                                     BACKGROUND  

          The California Constitution grants laborers and materials  
          suppliers a mechanics lien on any property improved by their  
          labor or material.  The mechanics lien law in the Civil Code  
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          generally specifies the obligations, rights, and remedies of  
          those involved in a construction project.  Mechanics liens are  
          not available on public works of improvement.  However, the  
          mechanics lien law in the Civil Code provides claimants on  
          public works projects with other statutory remedies, including  
          stop notices and claims against payment bonds.

          In 1999, the Assembly Judiciary Committee requested the  
          California Law Revision Commission (CLRC) to provide a  
          comprehensive review of mechanics lien law and make suggestions  
          for possible areas of reform.  Following initial efforts to  
          substantively revise specific provisions of existing law, the  
          CLRC began studying a general revision of mechanics lien law in  
          2004.  The CLRC believed that the mechanics lien statute had  
          "become increasingly difficult to use, generating litigation  
          over confusing provisions, and often leaving participants unsure  
          of their rights and obligations."  Therefore, the CLRC decided  
          that its primary objective would be to revise the statute in a  
          way that would make it easier for all practitioners to use and  
          understand.  It placed its highest priority on drafting a  
          "nonsubstantive reorganization of the existing mechanics lien  
          statute that would modernize and clarify existing law."  

          This bill is based upon the February 2008 recommendations of the  
          CLRC resulting from its study of mechanics lien law.   
          (California Law Revision Commission, Recommendation, Mechanics  
          Lien Law, February 2008.)  It is also based upon working group  
          discussions with stakeholders and other interested parties.

          In general, the CLRC included substantive changes to existing  
          law only if the proposed reform fell into one of two categories:  
          1) substantive reforms that were believed to bring about an  
          overarching improvement to the statute as a whole, thereby  
          benefiting all affected persons; and 2) substantive reforms  
          that, although primarily benefiting one group of persons  
          affected by the statute more than others, were perceived not to  
          unduly burden any other group.  (See California Law Revision  
          Commission Memorandum 2009-45, October 13, 2009.) 

                                CHANGES TO EXISTING LAW
           
           Mechanics lien statute
           
           Existing law  provides that mechanics, persons furnishing  
          materials, artisans, and laborers of every class have a lien  
          upon the property upon which they bestowed labor or furnished  
                                                                      



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          material for the value of such labor done and material  
          furnished.  (Cal. Const., art.14, Sec. 3.)

           Existing law  sets forth obligations and rights of contributors,  
          owners, construction lenders, and persons otherwise involved in  
          an improvement to real property, in what is informally known as  
          the mechanics lien statute.  (Civ. Code Sec. 3082 et seq.)

           This bill  would reorganize, restate, and modernize the language  
          of the existing mechanics lien statute. 
          
           Notices
           
           Existing law  requires many different types of notices under the  
          mechanics lien statute, with most notices subject to unique  
          provisions governing content, manner of service, location of  
          service, proof of service, and the like.  (See, e.g., Civ. Code  
          Sec. 3103.)
           This bill  would standardize those requirements for all notices  
          given under the mechanics lien statute, except as expressly  
          otherwise noted.  
           
           Existing law  does not allow notices under the mechanics lien  
          statute to be given electronically.
            
           This bill  would allow notices under the mechanics lien statute  
          to be given electronically, provided the recipient of the notice  
          has agreed in writing to receive notice in electronic form.  
           
           Existing law  requires the giving of five days notice of a  
          hearing to summarily adjudicate a public work stop notice.   
          (Civ. Code Sec. 3201.)
            
           This bill  would increase that notice period to ten days, if the  
          notice is given by mail. 

           Preliminary Notices; Recordation  

           Existing law  allows a claimant on a private work of improvement  
          to record a preliminary notice in the county recorder's office,  
          and requires the county recorder to make a good faith effort to  
          notify that claimant when a notice of completion on the  
          claimant's project has been recorded. (Civ. Code Sec. 3097(o).)
            
           This bill  would delete the provision allowing recordation of a  
          preliminary notice, and the provision requiring county recorder  
                                                                      



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          notification of a recorded notice of completion. 
           
            Existing law  contains an ambiguity relating to whether a general  
          contractor must give preliminary notice to a construction lender  
          on a private work.  (Civ. Code Sec. 3097(b).)
            
           This bill  would clarify that a general contractor must give  
          preliminary notice to a construction lender on a private work.  

           Completion of Private/Public Works of Improvement  

           Existing law  provides that "acceptance by the owner" of a  
          private work of improvement is one of several events deemed to  
          constitute completion of that work of improvement.  (Civ. Code  
          Sec. 3086(b).)

           This bill  would delete "acceptance by the owner" as an event  
          deemed to constitute completion of a private work of  
          improvement.   
           
           Existing law  provides that a continuous cessation of labor for  
          30 days or more on specified public works of improvement  
          constitutes completion of that work.  (Civ. Code Sec. 3086.)

           This bill  would require continuous cessation of labor for 60  
          days or more to constitute completion of those public works.  

           Existing law  allows an owner or public entity to record a notice  
          of completion within 10 days after completion of a work of  
          improvement. (Civ. Code Sec. 3093.)

           This bill  would allow an owner or public entity 15 days after  
          completion of a work of improvement to record a notice of  
          completion.  

           Existing law  allows an owner to record a notice of completion of  
          a portion of a private work of improvement governed by a  
          separate contract within 10 days after that contract has been  
          completed.  (Civ. Code Sec. 3117.)

           This bill  would allow an owner to record a notice of completion  
          corresponding to a portion of a private work of improvement  
          governed by a separate contract up to 15 days after completion  
          of the entire work of improvement.  

           Waiver and Release of Claims Forms
                                                                      



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           Existing law  provides procedural requirements, including the use  
          of specified statutory forms, which must be followed by owners  
          or general contractors to obtain a waiver and release of claims  
          under the mechanics lien law. (Civ. Code Sec. 3262.)

           This bill  would recast the statutory forms for clarity, and  
          would make those procedural requirements applicable to  
          subcontractors and construction lenders as well.  
           
           Release of Lien  

           Existing law  allows an owner to seek release of a recorded lien  
          claim that has not been timely prosecuted in a summary  
          proceeding, and allows an award of attorney's fees not to exceed  
          $2,000 to the prevailing party in the proceeding.  (Civ. Code  
          Sec. 3154.)

           This bill  would add procedural rules relating to the proceeding,  
          and would allow for an award of reasonable attorney's fees to  
          the prevailing party.
           
            Stop Notices; Payment Bonds; Fees
            
            Existing law  allows a stop notice claimant on a public work to  
          pay $2.00 to the public entity in order to be notified when the  
          latest of several specified events occur that trigger the  
          commencement of the time period in which the claimant must file  
          suit to enforce the stop notice. (Civ. Code Sec. 3185.)
            
           This bill  would increase the specified fee to $10.00, and would  
          require the public entity to provide notice of the applicable  
          time period for enforcement, after the occurrence of each such  
          event.  
           Existing law  provides that only an owner, construction lender,  
          or contractor on a work of improvement may post a stop notice  
          release bond.  (Civ. Code Sec. 3171.)
            
           This bill  would allow any person to post the release bond.  
            
           Existing law  allows a statutory payment bond on a private work  
          and a stop notice release bond to be issued by a non-licensed  
          surety.  (Civ. Code Secs. 3096, 3143, 3171.)

           This bill  would require those bonds to be issued by an admitted  
          surety insurer.   
                                                                      



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           Existing law  makes an expedited proceeding available to a  
          general contractor to resolve a stop work notice dispute.  (Civ.  
          Code Sec. 3260.2(d).)

           This bill  would make that expedited proceeding also available to  
          the owner involved in the dispute.

           Clarifying Ambiguities Related to Bonds; Limitations Periods
          
          Existing law  contains an ambiguity relating to whether a private  
          work payment bond must be recorded prior to commencement of a  
          work of improvement in order to limit an owner's lien claim  
          liability.  (Civ. Code Sec. 3235.)
            
           This bill would clarify that the bond must be recorded prior to  
          commencement. 

           Existing law  contains an ambiguity relating to whether persons  
          contributing to a public work pursuant to a supplemental  
          contract may make a claim against the payment bond provided by  
          the general contractor at the outset of the project.  (Civ. Code  
          Sec. 3247(b).)
            
           This bill  would clarify that such persons may make a claim  
          against the payment bond provided by the general contractor at  
          the outset of the project.   
           
           Existing law  provides that an action against a surety to enforce  
          a claim against a statutory private work payment bond recorded  
          before commencement of the work of improvement must be commenced  
          within six months after completion of the work of improvement.   
          (Civ. Code Sec. 3240.)
            
           This bill  would make that limitation period also applicable to  
          an action against the principal on the bond.  

           Existing law  provides that an action against a surety on a  
          public work payment bond must be commenced within six months  
          after the period in which a stop payment notice may be given.   
          (Civ. Code Sec. 3249.)

           This bill  would make that limitation period also applicable to  
          an action against the principal on the bond.  
           Existing law contains an ambiguity relating to whether persons  
          contributing work to a second tier or lower subcontractor on a  
                                                                      



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          work of improvement are permitted to make a claim against the  
          general contractor's payment bond.  (Civ. Code Sec. 3267.)
            
           This bill  would clarify that such persons are permitted to make  
          a claim against the general contractor's payment bond.  

           Labor Issues
           
           Existing law  requires a contractor that fails to timely pay  
          wages to laborers employed by the contractor to provide notice  
          of the nonpayment to the laborer, to the laborer's bargaining  
          representative, and to the construction lender on the project,  
          or face discipline.  (Civ. Code Sec. 3097(k).)

           This bill  would expand that provision to also require notice of  
          the nonpayment to the owner on the project.  

           Notification of Contract Change of Five Percent or More  

           Existing law  requires that an owner notify the general  
          contractor and construction lender of a change in the original  
          contract if the change increases the contract amount by five  
          percent or more.  (Civ. Code Sec. 3123(c).)

           This bill  would delete that provision.

           Licensed Landscape Architects  

           Existing law  allows licensed architects, engineers, and  
          surveyors to claim a "design professionals lien" for  
          pre-commencement design services provided for a work of  
          improvement.  Services that these design professionals provide  
          are also governed by selected provisions of the mechanics lien  
          statute.  (Civ. Code Secs. 3081.1 to 3081.10.)

           This bill  would add licensed landscape architects to the  
          identified list of design professionals.

                                        COMMENT
           
          1.    Stated need for the bill  

          The CLRC writes:

            The existing mechanics lien statute contains archaic language  
            dating back to 1872.  Since the last recodification of the  
                                                                      



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            statute in 1969, individual provisions have been amended more  
            than 70 times.  Over time, the statute has become increasingly  
            difficult to use, generating litigation over confusing  
            provisions, and often leaving unsophisticated participants  
            unsure of their rights and obligations.

            This bill would modernize terminology and make it more  
            uniform; clarify or eliminate inconsistencies and ambiguities  
            throughout the statute; divide longer provisions into shorter  
            and more readable provisions; and organize all provisions in a  
            functionally coherent order.  This clarification of the law  
            should reduce litigation and reduce the risk that important  
            rights will be inadvertently lost through misunderstanding of  
            the law.  This bill would also make a small number of  
            substantive improvements to existing law that would result in  
            an overall benefit to practitioners and persons affected by  
            the mechanics lien statute, with no significant detriment.

          2.    Overview of the bill's provisions  

          The provisions of the bill that would recodify the mechanics  
          lien law are contained in three sections of the bill, Sections  
          16, 17, and 22.

          Section 16 of the bill would repeal the existing law informally  
          known as the design professionals lien statute (Civ. Code Secs.  
          3081.1 to 3081.10) in order to incorporate these sections into a  
          new mechanics lien statute.

          Section 17 of the bill would repeal the existing body of law  
          informally known as the mechanics lien statute (Civ. Code Secs.  
          3082 to 3267.)

          Section 22 of the bill would enact a modernized, clarified, and  
          better organized mechanics lien statute that would incorporate  
          the existing design professionals lien statute as well as all  
          provisions of the existing mechanics lien statute presently  
          applicable to both private and public works of improvement.  The  
          new statute would appear in a new statutory Part within the  
          Civil Code, with the private and public work provisions in two  
          adjacent statutory Titles.

          Of the remaining 107 sections of the bill, 103 make  
          non-substantive conforming revisions to code sections that  
          contain a cross-reference to the existing mechanics lien  
          statute.  The conforming revisions correct the cross-references,  
                                                                      



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          and in some cases, conform existing statutory language to  
          language used in the new mechanics lien statute.  For example, a  
          reference to a "20 day Preliminary Notice" has been revised to  
          read "Preliminary Notice."  In some instances, purely  
          non-substantive stylistic changes (unrelated to mechanics lien  
          law), generated by the CLRC or by Legislative Counsel, are also  
          made to these sections.

          Section 107, which would be uncodified, contains the bill's  
          operative date provision.

          Sections 11 and 21 are to be amended out of the bill as author's  
          amendments.  These sections concern the Automatic Checkout  
          System, which has nothing to do with the mechanics lien law.
          3.    Proposed substantive changes to the mechanics lien law;  
          rationales for changes 
            provided by the CLRC and author
           
           Notices  

          This bill would standardize the requirements for all notices  
          given under the mechanics lien statute, except as expressly  
          otherwise noted.  The standardization would reduce the  
          likelihood of confusion or inadvertent errors by unrepresented  
          or occasional practitioners whose rights under the mechanics  
          lien law often depend on compliance with these notice  
          requirements.

          This bill would allow notices under the mechanics lien statute  
          to be given electronically, provided the recipient of the notice  
          has agreed in writing to receive notice in electronic form.  Use  
          of electronic notice would reduce paperwork, reduce cost,  
          provide for faster receipt, facilitate the use of electronic  
          databases to monitor and track notices, and as to persons who  
          have agreed to receive notice in such form, would reduce the  
          risk of unsuccessful delivery.

          This bill would increase the notice period for a hearing to  
          summarily adjudicate a public work stop notice from five to 10  
          days. This would correct an apparent oversight in the existing  
          statute, as a notice of a hearing sent by mail five days before  
          a hearing date may not be received until on or after the hearing  
          date.

           Preliminary Notices; Recordation  

                                                                      



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          This bill would delete the provision allowing recordation of a  
          preliminary notice, and the provision requiring county recorder  
          notification of a recorded notice of completion.  A recorded  
          notice of completion shortens the time for a claimant to pursue  
          a mechanics lien remedy.  However, as existing law does not  
          provide for any consequence to a county recorder for failure to  
          provide notice of a recorded notice of completion, budgetary  
          considerations have caused many counties to cease giving the  
          notice. Deletion of these two provisions would eliminate the  
          possibility that a claimant will miss a claim deadline by  
          relying on a county recorder to notify the claimant when a  
          notice of completion has been recorded.

          This bill would clarify that a general contractor must give  
          preliminary notice to a construction lender on a private work.   
          Giving of this notice would be consistent with a basic policy  
          reason underlying the giving of all preliminary notice-  
          identification of a contributor to a work of improvement whose  
          identity may otherwise be unknown to the recipient of the  
          notice.

           Completion of Private/Public Works of Improvement  

          This bill would delete "acceptance by the owner" as an event  
          deemed to constitute completion of a private work of  
          improvement.  The existing mechanics lien statute does not  
          define the term "acceptance by the owner," nor does it indicate  
          how it must be manifested, or to whom it must be conveyed. The  
          event does not appear to be significantly relied upon in the  
          industry, and may be constitutionally suspect to the extent it  
          serves to time bar a lien claim of a claimant who was reasonably  
          unaware that the event had occurred.  The bill does continue a  
          provision of existing law (Civ. Code Sec. 3086(a)), which  
          provides that occupation or use of the work of improvement by  
          the owner, accompanied by cessation of labor, constitutes  
          completion of the work of improvement.

          This bill would allow an owner to record a notice of completion  
          corresponding to a portion of a private work of improvement  
          governed by a separate contract up to 15 days after completion  
          of the entire work of improvement.  This would standardize the  
          deadline for recordation of all notices of completion, which  
          should reduce confusion for both owners and claimants that do  
          not have substantial familiarity with mechanics lien law.

          This bill would require continuous cessation of labor for 60  
                                                                      



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          days or more to constitute completion of public works of  
          improvement.  On a modern public construction project, it is not  
          uncommon for a 30-day work stoppage to occur when the project is  
          far from complete.  Requiring a continuous cessation of labor  
          for 60 days or more would reflect the realities of modern public  
          work projects.  A 60-day requirement would also coincide with  
          the period of cessation of labor deemed to constitute completion  
          of a private work of improvement, thereby standardizing this  
          requirement for both private and public works of improvement. 

          This bill would allow an owner or public entity 15 days after  
          completion of a work of improvement to record a notice of  
          completion.  On more complex projects, 10 days may not be a  
          sufficient time to allow for an accurate determination of  
          whether completion has occurred.  Further, while the extra few  
          days could make a significant difference to an owner or public  
          entity, it would not significantly adversely affect a claimant,  
          as the claimant's time to pursue a remedy would continue to run  
          from the date of recordation of the notice of completion.
                                       
           Waiver and Release of Claims  

          This bill would recast the statutory forms relating to waivers  
          and releases of claims for clarity, and would make these  
          procedural requirements applicable to subcontractors and  
          construction lenders.  Current statutory forms and procedural  
          requirements already apply to owners and general contractors.   
          The CLRC states that there does not appear to be any sound  
          public policy reason why this protection of claimants intended  
          by the Legislature should only apply to a subgroup of entities  
          on a construction project that regularly seek waiver and release  
          forms from claimants.



           Release of Lien  

          This bill would add procedural rules relating to the release of  
          a recorded lien claim that has not been timely prosecuted in a  
          summary proceeding, and would allow for an award of reasonable  
          attorney's fees to the prevailing party.

          The inclusion in the statute of basic procedural guidelines for  
          these proceedings would assist litigants by reducing ad hoc or  
          inconsistent rulings on procedural issues by different trial  
          courts.  The CLRC and author also believe that it makes sense to  
                                                                      



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          allow the court to award reasonable attorney's fees.

           Stop Notices; Payment Bonds; Fees  

          This bill would increase a specified $2.00 notice from public  
          entity fee to $10.00, and would require the public entity to  
          provide notice of the applicable time period for enforcement,  
          after the occurrence of each specified event that triggers  
          commencement of the time period in which a claimant must file  
          suit to enforce a stop notice.  The $2.00 fee was established in  
          1969, and represents approximately $10.00 of buying power today.  
           The revised notice would reduce confusion as to deadlines on  
          the part of occasional or unrepresented claimants that do not  
          have substantial familiarity with the mechanics lien law.

          This bill would also allow any person to post a release bond.   
          The CLRC and the author assert that it would be unreasonable to  
          preclude any person that seeks to release funds withheld  
          pursuant to a stop notice from posting an appropriate bond to do  
          so.

          This bill would require a statutory payment bond to be issued by  
          an admitted surety insurer.  This requirement would provide the  
          bond recipient with greater assurance of the solvency of the  
          surety.

          This bill would make an expedited (stop work notice) proceeding  
          available, in addition to the general contractor, to the owner  
          involved in the dispute.  The CLRC and author do not believe  
          there is any policy reason not to provide an owner aggrieved by  
          a work stoppage the same procedural right to an expedited  
          resolution of the dispute that is available to the contractor in  
          the dispute.

           Clarifying Ambiguities Related to Bonds; Limitation Periods  

          This bill would clarify that a private work payment bond must be  
          recorded prior to commencement.  Pre-commencement recordation  
          would allow all contributors to a work of improvement to learn  
          prior to contributing work, whether a constitutional lien right  
          attributable to the work may be restricted or precluded by  
          statute.  

          This bill would clarify that persons contributing to a public  
          work of improvement pursuant to a supplemental contract may make  
          a claim against the payment bond provided by the general  
                                                                      



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          contractor at the outset of the project.  To the best of CLRC's  
          and the author's knowledge there is not any legislative history  
          suggesting an intent to preclude claimants providing work on  
          supplemental public work contract from a payment bond remedy.   
          Such preclusion would severely limit the remedies available to  
          such claimants for unpaid work, since lien claims are not  
          allowed on a public work.  (See Civ. Code Sec. 3109.)

          This bill would make the limitation period for an action against  
          the principal on a bond the same as that against a surety on a  
          public work payment bond, i.e., within six months after the  
          period in which a stop payment notice may be given.  The  
          principal on a bond typically provides for joint and several  
          liability of the principal as to any claim made against the  
          bond.  Conforming the applicable limitation period for bringing  
          such an action against either named defendant would facilitate  
          the joint and several liability, and would standardize this  
          procedural requirement.

          This bill would clarify that persons contributing work to a  
          second tier or lower subcontractor on a work of improvement  
          would be permitted to make a claim against the general  
          contractor's payment bond.  Neither the CLRC nor the author have  
          uncovered any legislative history suggesting an intent to  
          preclude claimants that provide work to subcontractors below the  
          first tier from a payment bond.  To the contrary, policy  
          considerations suggest an intent to allow such claims, as an  
          alternative lien claim is not available on a public work, and  
          may be restricted on a private work.  (See Civ. Code Sec. 3235.)  
           This ambiguity was analyzed by the court in Union Asphalt v.  
          Planet Ins. (1994) 27 Cal.Rptr. 2d 371, which reached the same  
          conclusion.

           Labor Issues  

          This bill would expand the provision that requires a contractor  
          who fails to timely pay wages to provide notice of nonpayment to  
          not only the laborer, the laborer's bargaining representative,  
          the construction lender, but also to the project owner.  Such  
          notice would provide advance warning to the owner that a lien  
          claim from the unpaid laborer may be forthcoming.

           Notification of Contract Change of Five Percent or More  

          This notification in existing law does not indicate when the  
          notification must be made, the manner of notification, or the  
                                                                      



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          consequences of failure to notify.  Thus, the provision does not  
          appear to have any practical utility, is often ignored in the  
          industry, and appears more confusing than helpful.  For those  
          reasons the provision would be deleted in the bill.

           Licensed Landscape Architects  

          This bill would add licensed landscape architects to the current  
          list of design professionals (licensed architects, engineers,  
          and surveyors) who may claim a design professionals lien.  All  
          four types of professionals are licensed under the Business and  
          Professions Code, and are the only types of licensed design  
          professionals that frequently provide pre-commencement work on a  
          work of improvement, often in conjunction with each other.   
          Thus, it makes sense to afford the same lien rights to all four  
          categories of design professionals.

          4.    Examples of nonsubstantive changes to the mechanics lien  
            law  

          The CLRC and author offer the following examples of  
          nonsubstantive changes to the mechanics lien law that the CLRC  
          and author assert are both nonsubstantive and beneficial

           Definitional Changes: Owner
           
          The term "owner" is a crucial concept in mechanics lien law that  
          can have several different meanings (e.g., owner of the  
          improvements vs. owner of the real property on which the  
          improvement is situated, owner of fee simple interest in either  
          vs. owner of a leasehold or other interest).  The existing  
          statute, however, despite extensive use of the term in most of  
          its sections, does not define the term, except in subdivision  
          (g) of a section relating to a notice of cessation, where the  
          definition is expressly stated to be provided for the purpose of  
          that statutory section.  (See Civ. Code Sec. 3092.)

          This bill would provide a definition of the term applicable to  
          every usage throughout the new proposed statute.  (proposed Civ.  
          Code Sec. 8028).  This definition would provide practitioners  
          with both clarity and certainty as to the intended meaning of  
          the term, whenever it is necessary to construe the term as used  
          in any other provision of the law not relating to a notice of  
          cessation.

           Organizational Improvement: Preliminary Notice  
                                                                      



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          A definition of preliminary notice on a private work, one of the  
          most fundamental concepts in mechanics lien law, appears in the  
          existing statute in a single statutory section, Civil Code  
          Section 3097, that contains a total of 50 subdivisions,  
          paragraphs and subparagraphs, many of which are unnumbered or  
          unlettered, and extends over six pages (excluding annotations)  
          in a volume of West's Annotated Codes. 

          The section, which has been amended 16 times since its  
          enactment, is a model of confusion for even experienced  
          practitioners.  Although the section begins with the words  
          "'Preliminary 20-day notice (private work)' means ?," it  
          contains buried deep within the section a provision that also  
          expressly applies to a public work.  (See Civ. Code Sec.  
          3097(k).)   This same section contains provisions relating to  
          contractor discipline (Sec. 3097(h) and (k)), building permits  
          (Sec. 3097(i)), obligations of a county recorder to provide  
          special notices to claimants (Sec. 3097(o)(2)), and detailed  
          instruction relating to information and spaces that must appear  
          in specified written contracts (Sec. 3097(l) and (m)).
          This bill would place these provisions in separate and easily  
          readable statutory sections, with the sections themselves placed  
          in articles or chapters containing provisions that all relate to  
          the same subject matter.  (See, e.g., proposed Civ. Code Sec.  
          8200 et seq.)  This would provide practitioners and readers of  
          the statute with a much more comprehensive understanding of the  
          meaning of all related provisions in the statute.

           Basic Organization
           
          Because it has been amended so many times since its last  
          recodification in 1969, organization of the existing mechanics  
          lien statute has become quite irregular and difficult to follow.
          


          The first statutory chapter of the statute, entitled "General  
          Definitions" contains interspersed among the definitional  
          provisions other provisions that primarily contain detailed  
          substantive rules for practitioners.  (See, e.g., Civ. Code  
          Secs. 3083 (bonded stop notice), 3093 (notice of completion),  
          3097 (preliminary notice on a private work), 3097.1 (proof of  
          service of preliminary notice).)  This bill would group all true  
          definitional provisions, and only definitional provisions, in a  
          distinct statutory article.  (See proposed Civ. Code Secs.  
                                                                      



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          8000-8050.)



          The existing statute ends with a statutory chapter entitled  
          "Miscellaneous Provisions," which contains multiple statutory  
          sections relating to provisions located elsewhere in the  
          statute.  The sections in this chapter are not arranged in any  
          particular order, with some expressly relating to both private  
          and public work (Civ. Code Secs. 3258, 3259, 3266, 3267), some  
          relating only to private work (Secs. 3259.5, 3260, 3260.1,  
          3260.2), some only to public work (Sec. 3265), and the remainder  
          not clearly specifying their intended application.



          This bill would place these provisions together with other  
          related provisions, and by location would make unmistakable  
          whether the provision applied to a private work, a public work,  
          or both.

          5.    Opposition and the December 21 meeting  

          The author received opposition from California Professional  
          Association of Specialty Contractors (CALPASC) and the Air  
          Conditioning Trade Association of California.  A group meeting  
          was held on December 21 with the author's staff, CLRC staff,  
          Senate Judiciary staff, stakeholders, and other interested  
          parties.  The opposition's concerns were discussed and  
          addressed.  During the meeting the parties agreed to work on  
          concerns as the bill moves through the process.

          Based upon that meeting and the assurance that all parties would  
          work together towards a consensus bill, CALPASC withdrew its  
          opposition letter and in its place sent an "oppose unless  
          amended" letter.  One of CALPASC's concerns is the interaction  
          between AB 547 (Monning, Ch. 109, Stats. 2009 - operative  
          January 1, 2011) and SB 189.  The CLRC is in discussions with  
          the State Contractor's License Board (SCLB), the sponsor of AB  
          547, and SB 189 stakeholders and interested parties are informed  
          that the CLRC and SCLB are very close to agreed language that  
          would incorporate AB 457 into SB 189.

          6.    The Associated General Contractors of California (AGC) is  
          now neutral on the bill  

                                                                      



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          The AGC writes that with the December 15, 2009 amendments it has  
          changed its position on the bill from oppose to neutral.  The  
          AGC also writes that there are a few remaining issues it would  
          like to have included in the bill, and if those issues are  
          resolved it would change its position to support.

          7.    Author's amendments  

          On page 26, delete lines 7-39
          On page 27, delete lines 1-40
          On page 28, delete lines 1-37
          On page 33, delete lines 18-19

          These amendments would delete Title 1.4C, Automatic Checkout  
          System, which has nothing to do with mechanics lien law.  That  
          Title would remain where it is currently in statute.


           Support  :   California Council/American Society of Landscape  
          Architects

           Opposition  :  California Professional Association of Specialty  
          Contractors (unless amended); Air Conditioning Trade Association  
          of California

                                        HISTORY
           
           Source  :  California Law Revision Commission
           
          Related Pending Legislation  :

          SB 629 (Liu, 2009) would, among other things, prohibit retention  
          proceeds withheld from any payment made by the owner to the  
          original contractor from exceeding five percent of the amount of  
          the payment otherwise due under the contract.  The bill would  
          prohibit the percentage of the retention proceeds withheld from  
          any payment made by the original contractor to any  
          subcontractor, or by a subcontractor to another subcontractor,  
          from exceeding five percent of the amount of payment otherwise  
          due under the contract or the percentage of each payment that  
          may be withheld under the contract between the owner and the  
          original contractor, which ever is less.  This bill is on the  
          Senate Inactive File.
          AB 396 (Fuentes, 2009) would, among other things, qualify the  
          requirement that the public entity withhold money or bonds  
          sufficient to provide for reasonable litigation costs to make it  
                                                                      



          SB 189 (Lowenthal)
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          applicable only if the original contractor fails to promptly  
          accept a tender of defense of the public entity in the  
          litigation.  This bill has been held in the Senate  
          Appropriations Committee.

           Prior Legislation  :

          AB 457 (Monning, Ch. 109, Stats. 2009 - operative January 1,  
          2011) provides that the definition of "claim of lien" is also  
          the definition of "mechanics lien" and includes within this  
          definition a Notice of Mechanics Lien, which would contain  
          specified information regarding the legal effect of the lien.   
          The bill requires the mechanics lien and Notice of Mechanics  
          Lien to be served upon the owner or reputed owner of the  
          property, or on the construction lender or the original  
          contractor if those parties cannot be served.  The bill requires  
          a proof of service affidavit to be completed and signed by the  
          person serving the Notice of Mechanics Lien.  The bill provides  
          that a failure to serve the mechanics lien, including the Notice  
          of Mechanics Lien, would cause the mechanics lien to be void as  
          a matter of law.  The bill also revises the permissive  
          provisions regarding the recording of the complaint to enforce  
          the lien, to make them mandatory.  

          SB 1691 (Lowenthal, 2008) was an omnibus bill (similar to SB  
          189) that would have reorganized and restated statutory  
          mechanics lien law in order to improve its clarity and  
          usability.  The reorganization and restatement was primarily  
          nonsubstantive.  A number of substantive changes were deleted  
          from the bill pursuant to agreement among the stakeholders.  The  
          bill was vetoed by the governor based upon the 2008-2009 State  
          Budget delay, and not upon the substance of the bill.

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