BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 190
                                                                  Page  1

          Date of Hearing:   June 14, 2011

                           ASSEMBLY COMMITTEE ON JUDICIARY
                                  Mike Feuer, Chair
                   SB 190 (Lowenthal) - As Amended:  March 16, 2011

                                  PROPOSED CONSENT

           SENATE VOTE  :   36-0
           
          SUBJECT  :   MECHANICS' LIENS

           KEY ISSUE  :  SHOULD THE LEGISLATURE IMPLEMENT A RECOMMENDATION OF 
          THE CALIFORNIA LAW REVISION COMMISSION TO MAKE ADDITIONAL 
          TECHNICAL IMPROVMENTS TO LAST YEAR'S REORGANIZATION OF THE 
          MECHANICS' LIEN STATUTES?

           FISCAL EFFECT  :   As currently in print this bill is keyed 
          non-fiscal.

                                      SYNOPSIS

          This non-controversial clean-up bill is sponsored by the 
          California Law Revision Commission (CLRC) to enact technical 
          amendments to last year's SB 189 (Lowenthal) in order to update 
          several cross-references and make technical corrections to 
          various new mechanics liens provisions enacted in the prior 
          measure, which reorganized and recodified the mechanics lien 
          laws.  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.  

           SUMMARY  :  Clarifies mechanics' lien laws.  Specifically,  this 
          bill  :   

          1)Corrects cross-references to the Civil Code to conform to the 
            new mechanics' lien provisions enacted under SB 189 to address 
            various technical errors. 

          2)Clarifies 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.








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          3)Becomes operative on the same date as SB 189 which also 
            becomes operative on July 1, 2012.

           EXISTING LAW  :  

           1)Regulates home improvement project contracts.  (Bus. & Prof. 
            Code Sec. 7150 et seq.)

          2)Identifies projects for which a home improvement contract is 
            required, outlines the contract requirements, and lists the 
            items that shall be included in the contracts.  (Bus. & Prof. 
            Code Sec. 7159.)  

          3)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).)

          4)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).)

          5)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).) 
             
           6)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).)








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           7)Provides that the security provided by a subdivider to secure 
            payments to contractors, subcontractors, laborers, and 
            materials or equipment suppliers, after the 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.)

          8)Regulates the conditions under which a mechanics lien may be 
            enforced.  (Civil Code Sec. 8410 et seq.)

          9)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.)

           COMMENTS  :  The California Constitution grants laborers and 
          materials suppliers a mechanic's 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 lien law 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 
          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 








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          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.  The provisions of 
          this bill would become operative on July 1, 2012, consistent 
          with the provisions of SB 189.

          Specifically, 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 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.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Air Conditioning Sheet Metal Association
          Air-conditioning & Refrigeration Contractors Association
          Building Industry Credit Association
          California Chapters of the National Electrical Contractors 








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          Association
          California Landscape & Irrigation Council
          California Legislative Conference of the Plumbing, Heating and 
          Piping Industry
           
            Opposition 
           
          None on file


           Analysis Prepared by :    Kevin G. Baker / JUD. / (916) 319-2334