BILL ANALYSIS                                                                                                                                                                                                    Ó






                             SENATE JUDICIARY COMMITTEE
                             Senator Noreen Evans, Chair
                              2011-2012 Regular Session


          SB 190 (Lowenthal)
          As Amended March 16, 2011
          Hearing Date: March 29, 2011
          Fiscal: No
          Urgency: No
          TW   
                    

                                        SUBJECT
                                           
                                   Mechanics Liens

                                      DESCRIPTION  

          This bill, sponsored by the California Law Revision Commission 
          (CLRC), would update several cross-references and make technical 
          corrections to various new mechanics liens provisions enacted in 
          last year's SB 189 (Lowenthal, Ch. 697, Stats. 2010), which 
          overhauled the mechanics lien law.  This bill, which also would 
          clarify circumstances under which a mechanic's lien could be 
          invalidated, would contain a delayed operative date of July 1, 
          2012, consistent with the provisions of SB 189.  

                                      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 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 
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          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."  

          SB 189 overhauled the mechanics lien law and was 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.)  
          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.)  

          The CLRC issued a tentative recommendation in December 2010 to 
          provide for clean-up provisions to last year's SB 189.  (See 
          California Law Revision Commission Tentative Recommendation, 
          Mechanics Lien Law:  Clean-Up Legislation, December 2010.)  
          Those recommended clean-up provisions would revise several cross 
          references and correct minor technical errors.    

          This bill would adopt the CLRC's tentative recommendations and 
          would make technical corrections to last year's SB 189.  This 
          bill would clarify circumstances under which a mechanics lien 
          claim could be invalidated.  The provisions of this bill would 
          become operative on July 1, 2012, consistent with the provisions 
          of SB 189.


                                CHANGES TO EXISTING LAW
           
          1.  Existing law  regulates home improvement project contracts. 
            (Bus. & Prof. Code Sec. 7150 et seq.)

             Existing law  identifies projects for which a home improvement 
            contract is required, outlines the contract requirements, and 
                                                                      



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            lists the items that shall be included in the contracts.  
            (Bus. & Prof. Code Sec. 7159.)  

             Existing law  provides that home improvement project contracts, 
            as specified, must include a statement whereby the home 
            improvement contractor will provide to the person contracting 
            for home improvement after payment a full and unconditional 
            release from any potential mechanics liens made pursuant to 
            Civil Code Section 3110.  (Bus. & Prof. Code Sec. 7159(c)(4).)

             Existing law  provides regulations regarding home improvement 
            projects between an owner or tenant and a contractor who is 
            licensed or subject to licensing.  (Bus. & Prof. Code Sec. 
            7159.5.)
             
            Existing law  provides that a contractor who is licensed or 
            subject to licensing and involved with a home improvement 
            project is subject to discipline if the contractor fails upon 
            request to furnish the paying party with a full and 
            unconditional release from any potential mechanics lien 
            pursuant to Civil Code Section 8410.  (Bus. & Prof. Code Sec. 
            7159.5(a)(6).)

             Existing law  regulates service and repair contracts between a 
            homeowner or tenant and a contractor who is licensed or 
            subject to licensing.  (Bus. & Prof. Code Sec. 7159.14.)  
            Existing law provides that a service or repair contractor that 
            is licensed or subject to licensing who fails, upon request 
            and payment by the buyer, to provide to the buyer a full and 
            unconditional release from any potential mechanics lien 
            authorized pursuant to Section 8410 is subject to disciplinary 
            action.  (Bus. & Prof. Code Sec. 7159.14(11).) 
             
            Existing law  regulates structural pest control operators.  
            (Bus. & Prof. Code Sec. 8500 et seq.)  Existing law provides 
            that a company performing structural pest control services for 
            which company registration is required must provide the owner 
            of the premises for which services are being rendered with a 
            full and unconditional release from any mechanics liens prior 
            to payment by the owner.  (Bus. & Prof. Code Sec. 8513(d).)
             
            Existing law  regulates bond securities provided in connection 
            with subdivision improvements.   (Gov. Code Sec. 66499 et 
            seq.)  Existing law provides that the security provided by a 
            subdivider to secure payments to contractors, subcontractors, 
            laborers, and materials or equipment suppliers, after the 
                                                                      



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            expiration of lien recordation and acceptance of the work, be 
            reduced to an amount equal to the total claimed by all 
            recorded and noticed lien claimants, and if no claims have 
            been recorded, the security shall be released in full.  (Gov. 
            Code Sec. 66499.7.)

             This bill  would correct the cross-references to the Civil Code 
            to conform to the new mechanics lien provisions enacted under 
            SB 189 and correct various technical errors. 

          2.    Existing law regulates the conditions under which a 
            mechanics lien may be enforced.  (Civil Code Sec. 8410 et 
            seq.)

             Existing law  provides that erroneous information include in a 
            lien claim relating to the claimant's demand, credits and 
            offsets deducted, work provided, or description of the site 
            does not invalidate a claim of lien unless:  (1) the claim of 
            lien was made with the intent to slander title or defraud; or 
            (2) a bona fide owner came into possession of the property 
            after recordation of the lien claim and the lien claim was so 
            deficient that it failed to put the bona fide owner on notice 
            of the lien claim.  (Civil Code Sec. 8422.)

             This bill  would clarify that slander of title is not a 
            circumstance under which a lien claim can be invalidated, but 
            any person who willfully includes in a lien claim labor, 
            services, equipment, or materials not furnished for the 
            property described in the claim will forfeit the lien.
           
           3.  Existing law  , as enacted by SB 189, becomes operative on July 
            1, 2012.  (Civil Code Section 8000 et seq.)

           This bill  would also become operative on July 1, 2012.

                                        COMMENT
           
          1.  Stated need for the bill  
          
          The author writes:
          
            This bill would make conforming revisions to two code sections 
            to update cross-references to sections that were repealed by 
            last year's enactment of SB 189, and would make similar 
            non-substantive revisions to cross-references in three other 
            code sections necessitated by the enactment of SB 189.  The 
                                                                      



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            bill would also make a minor revision to a recodified section 
            of the mechanics lien statute enacted by SB 189, to make its 
            intended meaning clearer.

          2.  Circumstances that would invalidate a mechanics lien  

          This bill would clarify the circumstances under which a 
          mechanics lien may be invalidated.  Existing law, Civil Code 
          Section 8422, invalidates a lien claim if the lien claim was 
          made with intent to slander title.  The CLRC Tentative 
          Recommendation states the need for clarification of this 
          provision as follows "Civil Code Section 8422 is intended to 
          continue the substance of former Civil Code Sections 3118 and 
          3261.  Section 8422 includes a reference to slander of title.  
          That reference might cause confusion in this context.  In order 
          to avoid any misunderstanding, the Commission recommends that 
          the reference be deleted and replaced with language drawn 
          closely from former Civil Code Section 3118."  (See California 
          Law Revision Commission Tentative Recommendation, Mechanics Lien 
          Law:  Clean-Up Legislation, December 2010, p. 2.)  

          Former Civil Code Section 3118 provides that "Ýa]ny person who 
          shall willfully include in his claim of lien labor, services, 
          equipment, or materials not furnished for the property described 
          in such claim shall thereby forfeit his lien."  This language, 
          left out of last year's mechanics lien overhaul bill (SB 189), 
          would be added to Civil Code Section 8422 to clarify another 
          circumstance under which a mechanics lien would be invalidated.  
          By adding this additional invalidating circumstance, this bill 
          would conform the new mechanics lien law to the prior mechanics 
          lien law.

          3.  Technical corrections to SB 189
           
           This bill would make minor technical corrections to the 
           provisions of SB 189.  The CLRC Tentative Recommendation states 
           that some of the technical corrections to cross-references 
           contained in this bill were included in SB 189 but were 
           inadvertently chaptered out by two other bills from last year.  
           (See California Law Revision Commission Tentative 
           Recommendation, Mechanics Lien Law:  Clean-Up Legislation, 
           December 2010, pgs. 1- 2.)  SB 392 (Florez, Stats. 2010, Ch. 
           698) chaptered out the technical corrections to Business and 
           Professions Code Section 7159.  The technical corrections to 
           Government Code 66499.7 were chaptered out by SB 1019 (Correa, 
           Stats. 2010, Ch. 174).  In addition to the technical 
                                                                      



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           corrections chaptered out by SB 392 and SB 1019, the CLRC 
           identified several other cross-reference and technical errors 
           contained in SB 189.  This bill would correct these minor 
           technical errors. 


           Support  :  American Society of Landscape Architects

           Opposition  :  None Known

                                        HISTORY
           
           Source  :  California Law Revision Commission

           Related Pending Legislation  :  None Known

           Prior Legislation  :  See Background and Comment 3.


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