BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                              UNFINISHED BUSINESS


          Bill No:  SB 189
          Author:   Lowenthal (D)
          Amended:  8/16/10
          Vote:     21

           
           SENATE JUDICIARY COMMITTEE  :  5-0, 1/12/10
          AYES:  Corbett, Harman, Hancock, Leno, Walters

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           SENATE FLOOR  :  35-0, 1/25/10
          AYES:  Aanestad, Ashburn, Calderon, Cedillo, Cogdill,  
            Corbett, Correa, Cox, Denham, DeSaulnier, Ducheny,  
            Dutton, Hancock, Harman, Hollingsworth, Huff, Kehoe,  
            Leno, Liu, Lowenthal, Negrete McLeod, Oropeza, Padilla,  
            Pavley, Price, Romero, Simitian, Steinberg, Strickland,  
            Walters, Wiggins, Wolk, Wright, Wyland, Yee
          NO VOTE RECORDED:  Alquist, Florez, Maldonado, Runner,  
            Vacancy
          
           ASSEMBLY FLOOR  :  75-0, 8/17/10 - See last page for vote


           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;  
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          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 July 1, 2012 to allow the industry and  
          homeowners to become familiar with the new reorganization  
          and updates. 

           Assembly Amendments  (1) provide that a stop work notice is  
          also to be posted at the main post office of the site if  
          one exists, (2) delete provisions authorizing submission of  
          notices electronically as well as language related to  
          requirements for large projects, (3) add double-jointing  
          language with AB 2216 (Fuentes) and AB 2419 (Cook), and (4)  
          change the operative date from January 1, 2012 until July  
          1, 2012.

           ANALYSIS  :    The California Constitution provides that  
          mechanics, persons furnishing materials, artisans, and  
          laborers of every class have a lien upon the property upon  
          which they have bestowed labor or furnished material for  
          the value of the labor done and material furnished.  The  
          California Constitution also requires the Legislature to  
          provide, by law, for the speedy and efficient enforcement  
          of those liens.

          Existing statutory law governs works of improvement,  
          including design professionals' liens and mechanics liens.   
          These provisions govern the conditions required to enforce  
          a lien and for a mechanic's lien to be deemed valid, and  
          define the use of the terms "materialman" and "original  
          contractor" for purposes of the mechanics' lien law.

          This bill revises and recasts those statutory provisions  
          and make both substantive and technical changes.  This bill  
          also replaces the terms "original contractor" and  
          "materialman" with the terms "direct contractor" and  
          "material supplier," respectively.

          This bill enacts separate provisions governing private  

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          works of improvement and public works of improvement.  This  
          bill revises and recasts provisions governing design  
          professionals' liens, mechanics liens, notices of  
          cessation, payment bonds, and retention payments.  This  
          bill makes related and conforming changes.

          This bill also provides that any other act, except as  
          specified, enacted during the 2010 calendar year that takes  
          effect on or before January 1, 2011, and that amends, adds,  
          or repeals any section that is amended, added, or repealed  
          by this act, as specified, shall prevail over this act.   
          This bill incorporates additional changes made by AB 2216  
          and AB 2419, contingent upon the enactment of those bills.

          The provisions of the bill become operative on July 1,  
          2012, except as specified.
           
          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  
          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  

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          "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  
          "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.

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          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  
          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  1/25/10)

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          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."

           
          ASSEMBLY FLOOR  : 
          AYES:  Adams, Ammiano, Anderson, Arambula, Bass, Bill  
            Berryhill, Tom Berryhill, Block, Blumenfield, Bradford,  
            Buchanan, Caballero, Carter, Chesbro, Conway, Cook, Coto,  
            Davis, De La Torre, De Leon, DeVore, Eng, Evans, Feuer,  
            Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,  
            Galgiani, Garrick, Gatto, Gilmore, Hagman, Hall, Harkey,  
            Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries,  
            Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma,  
            Mendoza, Miller, Monning, Nava, Nestande, Niello,  
            Nielsen, Norby, V. Manuel Perez, Portantino, Ruskin,  
            Salas, Saldana, Silva, Skinner, Smyth, Solorio, Audra  
            Strickland, Swanson, Torlakson, Torres, Torrico, Tran,  

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            Villines, Yamada, John A. Perez
          NO VOTE RECORDED:  Beall, Blakeslee, Brownley, Charles  
            Calderon, Vacancy


          RJG:mw  8/18/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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