BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 424|
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UNFINISHED BUSINESS
Bill No: SB 424
Author: Rubio (D)
Amended: 6/21/11
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-0, 4/12/11
AYES: Evans, Harman, Corbett, Leno
NO VOTE RECORDED: Blakeslee
SENATE FLOOR : 38-0, 04/28/11 (Consent)
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De León, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman, Huff,
Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete
McLeod, Padilla, Pavley, Price, Runner, Simitian,
Steinberg, Strickland, Vargas, Walters, Wolk, Wright,
Wyland, Yee
NO VOTE RECORDED: Hernandez, Rubio
ASSEMBLY FLOOR : 77-0, 06/27/11 (Consent) - See last page
for vote
SUBJECT : Mechanics liens: design professionals
SOURCE : American Council of Engineering Companies of
California
DIGEST : This bill gives design professionals providing
services for private works of improvement the ability to
convert a design professionals lien into a mechanics lien,
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as specified. The provisions of this bill become
operative on July 1, 2012.
Assembly Amendments add clarifying language relative to a
design professional lien expiring.
ANALYSIS : Existing law authorizes design professionals
to record design professional liens against project owners
prior to construction of a private work of improvement.
(Civ. Code Sec. 8300 et seq.)
Existing law authorizes design professionals to record
mechanics liens against a private work of improvement after
construction has begun. (Civ. Code Sec. 8300 et seq.)
This bill authorizes a design professional to convert a
design professionals lien into a mechanics lien if the
design professionals lien otherwise expires, the lien
remains partially or fully unpaid, and the mechanics lien
is recorded within 30 days of the expiration of the design
professionals lien.
This bill requires the recorded mechanics lien to
specifically state that it is a converted design
professional lien and that it shall be recorded and
enforced in the same manner as a mechanics lien, except the
design professional need not provide a preliminary notice
to enforce this mechanics lien. This mechanics lien shall
be effective as of the date of recordation of this
mechanics lien and shall be given priority pursuant to the
provisions of Section 8450.
Existing law requires a preliminary notice to be served, as
specified, prior to the recording of a mechanics lien.
(Civ. Code Sec. 8200 et seq.)
This bill exempts the converted design professionals lien
from the preliminary notice required of a standard
mechanics lien.
This bill specifies that this section shall not apply if a
design professional lien expires pursuant to paragraph (2)
of subdivision (b) of Section 8306 of the Civil Code.
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This bill becomes operative on July 1, 2012.
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 only available once construction begins
on the project. While mechanics liens are not available on
public works of improvement, existing law provides
claimants on public works projects with other statutory
remedies, including stop notices and claims against payment
bonds.
AB 1789 (Cortese, Chapter 1789, Statutes of 1990)
established the design professionals lien right. Prior to
this legislation, design professionals, who typically
provide design, engineering, or planning on a work of
improvement, could only assert a mechanics lien against the
project owner to collect monies owed. Design professionals
regularly provide services on works of improvement prior to
actual construction, so the mechanics lien did not apply to
services rendered prior to construction. Accordingly, the
design professionals lien was created through AB 1789 to
allow design professionals to recover monies owed prior to
construction.
SB 189 (Lowenthal, Chapter 697, Statutes of 2010)
overhauled the mechanics lien law and was based upon the
February 2008 recommendations of the California Law
Revision Commission resulting from its study of mechanics
lien law. (California Law Revision Commission,
Recommendation, Mechanics Lien Law , February 2008.) In
general, the California Law Revision Commission 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.
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This bill provides that a design professionals lien could
be converted into a mechanics lien, as specified.
Prior Legislation
SB 189 (Lowenthal), Chapter 697, Statutes of 2010, which
passed the Senate Floor on 8/25/10 (35-0).
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/27/11)
American Council of Engineering Companies of California
(source)
California Land Surveyors Association
ARGUMENTS IN SUPPORT : According to the author's office:
Currently, a design professional can work for a
particular owner who defaults and abandons the project
without fully paying the design professional?.
SB 424 would authorize a design professional to
convert a recordÝed] design professional lien to a
mechanics lien if certain requirements are met.
Specifically, this bill would create a statutory
mechanism for the lien to be converted to a mechanics
lien for the following reasons: the lien expires
because the work of improvement for which the design
professional provided services begins, the lien
remains fully or partially unpaid, and the design
professional records the mechanics lien within 30
days.
The American Council of Engineering Companies of California
states:
In the approximate twenty years of experience with the
design professional lien, we have learned that the
automatic expiration of the design professional lien
has had at least one significant unintended
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consequence. It is quite simple to defeat the design
professional lien by making a minor permanent
improvement to the project, which causes the
expiration of the design professional lien, and
therefore defeats the ability to collect the unpaid
balance without costly litigation.
SB 424 allows design professionals to file for a
mechanics lien for the unpaid balance of payment for
professional services if, and only if, the design
professional lien expires because the project is
moving forward so the work of improvement commences.
The recording and enforcement of the unpaid mechanics
lien would conform to existing law. Additionally, the
conversion is not automatic; the design professional
must proactively protect their rights and file for a
mechanics lien in a timely manner.
SB 424 will provide a benefit to small A&E firms who
struggle daily with making sure that their efforts and
hard work are justly compensated.
ASSEMBLY FLOOR : 77-0, 06/27/11 (Consent)
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Grove, Hagman,
Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill,
Huber, Hueso, Jeffries, Jones, Knight, Lara, Logue,
Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
Perea, V. Manuel Pérez, Portantino, Silva, Skinner,
Smyth, Solorio, Swanson, Torres, Valadao, Wagner,
Wieckowski, Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Gordon, Gorell, Huffman
RJG:nl 6/28/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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