BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 189|
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THIRD READING
Bill No: SB 189
Author: Lowenthal (D)
Amended: 1/14/10
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 1/12/10
AYES: Corbett, Harman, Hancock, Leno, Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Mechanics liens
SOURCE : California Law Revision Commission
DIGEST : This omnibus mechanics lien bill recodifies,
reorganizes, and clarifies the mechanics lien statute;
modernizes terminology and eliminates inconsistencies in
language; makes provisions more readable and easier to use;
enacts separate provisions for private and public works;
modernizes and streamlines existing notice requirements;
revises and recasts provisions relating to liens for design
professionals; requires certain bonds to be obtained from
licensed sureties; improves and clarifies statutory forms
relating to waivers and releases; allows notices under the
mechanics lien statute to be given electronically; adds
procedural detail relating to a summary lien release; and
becomes operative January 1, 2012 to allow the industry and
homeowners to become familiar with the new reorganization
and updates.
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ANALYSIS :
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 material for the value of such labor done and
material furnished. (Article 14, Section 3 of the
California Constitution)
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.
(Section 3082 et seq. of the Civil Code. All references
are to the Civil Code)
This bill reorganizes, restates, and modernizes 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.
(Section 3103)
This bill standardizes 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 allows 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.
(Section 3201)
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This bill increases that notice period to 10 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.
(Section 3097(o))
This bill deletes the provision allowing recordation of a
preliminary notice, and the provision requiring county
recorder 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. (Section 3097(b))
This bill clarifies 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.
(Section 3086(b))
This bill deletes "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. (Section
3086)
This bill requires continuous cessation of labor for 60
days or more to constitute completion of those public
works.
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Existing law allows an owner or public entity to record a
notice of completion within 10 days after completion of a
work of improvement. (Section 3093)
This bill allows 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. (Section 3117)
This bill allows 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
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.
(Section 3262)
This bill recasts the statutory forms for clarity, and
makes 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.
(Section 3154)
This bill adds procedural rules relating to the proceeding,
and allows for an award of reasonable attorney's fees to
the prevailing party.
Stop Notices: Payment Bonds: Fees
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Existing law allows a stop notice claimant on a public work
to pay $2 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. (Section 3185)
This bill increases the specified fee to $10, and requires
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. (Section 3171)
This bill allows 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. (Sections 3096, 3143, and 3171)
This bill requires those bonds to be issued by an admitted
surety insurer.
Existing law makes an expedited proceeding available to a
general contractor to resolve a stop work notice dispute.
(Section 3260.2(d))
This bill makes 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. (Section 3235)
This bill clarifies that the bond must be recorded prior to
commencement.
Existing law contains an ambiguity relating to whether
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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. (Section 3247(b))
This bill clarifies 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. (Section 3240)
This bill makes 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. (Section 3249)
This bill makes 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 work of improvement are permitted to
make a claim against the general contractor's payment bond.
(Section 3267)
This bill clarifies 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. (Section 3097(k))
This bill expands that provision to also require notice of
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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. (Section 3123(c))
This bill deletes 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. (Sections 3081.1 to 3081.10)
This bill adds licensed landscape architects to the
identified list of design professionals.
Overview of SB 189 Provisions
The provisions of the bill that recodify the mechanics lien
law are contained in three sections of the bill: Sections
16, 17, and 22.
Section 16 of the bill repeals the existing law informally
known as the design professionals lien statute (Sections
3081.1 to 3081.10) in order to incorporate these sections
into a new mechanics lien statute.
Section 17 of the bill repeals the existing body of law
informally known as the mechanics lien statute (Sections
3082 to 3267).
Section 22 of the bill enacts 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
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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
nonsubstantive conforming revisions to code sections that
contain a cross-reference to the existing mechanics lien
statute. The conforming revisions correct the
cross-references, 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 nonsubstantive
stylistic changes (unrelated to mechanics lien law),
generated by the CLRC or by the Legislative Counsel Bureau,
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.
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 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
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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.
(CLRC, "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
CLRC "Memorandum 2009-45," October 13, 2009.)
Comments
According to the Senate Judiciary Committee analysis, 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, 2009 with the author's
staff, CLRC staff, Senate Judiciary Committee 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
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"oppose unless amended" letter. One of CALPASC's concerns
is the interaction between AB 547 (Monning), Chapter 109,
Statutes of 2009 - operative January 1, 2011, and SB 189.
The CLRC is in discussions with the Contractors State
License Board (CSLB), the sponsor of AB 547, and SB 189
stakeholders and interested parties are informed that the
CLRC and CSLB are very close to agreed language that
incorporates AB 457 into SB 189.
The Associated General Contractors of California (AGC)
writes that with the December 15, 2009 amendments it has
changed its position on the bill from oppose to neutral.
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.
Prior Legislation
AB 457 (Monning), Chapter 109, Statutes of 2009 (which
passed the Senate on July 9, 2009 with a vote of 34-0) -
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 contains 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), 2007-08 Session, 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
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 1/19/10)
California Law Revision Commission (source)
California Council/American Society of Landscape Architects
ARGUMENTS IN SUPPORT : The CLRC writes:
"The existing mechanics lien statute contains archaic
language dating back to 1872. Since the last
recodification of the 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."
RJG:mw 1/19/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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