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. SB 190 Page 2 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).) SB 190 Page 3 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 SB 190 Page 4 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 SB 190 Page 5 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