BILL NUMBER: AB 568 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Dutra
FEBRUARY 21, 2001
An act to add Article 8 (commencing with Section 3155) to Chapter
2 of Title 15 of Part 4 of Division 3 of the Civil Code, relating to
mechanics' liens, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 568, as introduced, Dutra. Mechanics' liens: homeowners'
relief recovery.
The California Constitution gives workmen the right to a mechanics'
lien for the value of labor and materials provided for the
improvement of real property.
Existing law sets forth the procedure for the enforcement of this
right, as specified. Existing law also establishes the Contractors'
State Licensing Board providing for the regulation of those who
contract for the improvement of real property, as specified.
This bill would establish the Homeowners' Protection Act of 2001,
which would prohibit a mechanics' lienholder, if a specified claim is
filed by the property owner, from maintaining an action to foreclose
a recorded lien against a single-family dwelling that is the
property owner's primary residence pursuant to any other provision of
law unless a hearing officer, in a specified hearing, determines
that the property owner has not paid the original contractor in full,
or the property owner has failed to hire only licensed contractors
pursuant to a written contract.
The bill would establish the Homeowners' Relief Recovery Fund in
the State Treasury, to be continuously appropriated for the purposes
of the act, and to be administered by the Contractors' State License
Board. The bill would establish the procedure for a lienholder to
file a claim against the fund, to be decided by a hearing officer, as
specified, and would require the board to adopt certain regulations.
The bill would provide that a finding by a hearing officer that
the original contractor was paid in full by the property owner and
failed to make timely payments to the mechanics' lienholders would
constitute grounds for immediate suspension of the original
contractor's license, except as specified.
The bill would make the presentation of false or fraudulent claims
for the payment of a loss from the fund a felony, punishable as
specified, and would thereby impose a state-mandated local program by
creating a new crime.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 8 (commencing with Section 3155) is added to
Chapter 2 of Title 15 of Part 4 of Division 3 of the Civil Code, to
read:
Article 8. Homeowners' Protection Act of 2001
3155. This article shall be known and may be cited as the
"Homeowners' Protection Act of 2001."
3155.1. For purposes of this article, the following definitions
shall apply:
(a) "Board" means the Contractors' State License Board.
(b) "Claimant" means an "owner," as defined in subdivision (f),
who has filed a claim with the Homeowners' Relief Recovery Fund
pursuant to this article and who has notice of a lien recorded
against his or her real property for the reasonable value of labor,
services, equipment, or material provided or supplied to the
property.
(c) "Full payment" and "paid in full" means that the person who
provided his or her labor, services, equipment, or material has
received compensation for that labor, service, equipment, or material
in an amount equal to the reasonable value of that labor, service,
equipment, or material. A person shall not be considered to have been
paid in full if 10 percent or more of any retention proceeds have
been withheld.
(d) "Fund" means the Homeowners' Relief Recovery Fund.
(e) "Original contractor" is a person who has a direct contractual
relationship with the owner of an existing single-family,
owner-occupied dwelling to provide labor, services, equipment, or
material toward a work of improvement on that property.
(f) "Owner" is a person who is the record owner of a single-family
dwelling that is his or her primary residence.
(g) "Building" is any structure built for the support, shelter, or
enclosure of persons, animals, chattels, or property of any kind.
3155.2. (a) Within the 90-day period following the recording of
the lien, of if a claimant has filed a claim within that 90-day
period pursuant to Section 3155.9, a lienholder may not maintain an
action to foreclose a recorded mechanics lien against real property
containing a single-family owner-occupied dwelling which is the
primary residence of the owner pursuant to any other provision of law
unless a hearing officer determines that the claimant has not paid
the original contractor in full in a hearing held pursuant Section
3155.12 or that the claimant has not complied with subdivision (b).
(b) In order for a claimant to receive the protection of this
article against foreclosure on a lien, the claimant shall hire only
licensed contractors pursuant to a written contract.
3155.3. (a) There is hereby established within the State Treasury
the Homeowners' Relief Recovery Fund, which is hereby continuously
appropriated for the purpose of administering this article, including
the payment of the compensation of hearing officers appointed
pursuant to Section 3155.12, and the provision of monetary relief to
any lienholder who is not paid in full for labor, services,
equipment, or material.
(b) The state shall not be liable for any claims against the fund
except as provided in this article.
3155.4. In order to establish a claim against the Homeowners'
Relief Recovery Fund a claimant shall provide evidence that a
mechanics' lien has been recorded against their real property
pursuant to this chapter.
3155.5. (a) The Contractors' State License Board shall administer
the Homeowners' Relief Recovery Fund and shall develop rules and
regulations, which shall be as informal as possible to administer the
fund pursuant to this article.
(b) The board may file a civil action against any licensed
original contractor in order to obtain reimbursement to the fund for
any payments made to a lienholder upon a finding by a hearing officer
that the original contractor failed to pay the lienholder in full.
(c) The board shall establish a toll-free telephone number to
provide information to all parties involved concerning the Homeowners'
Relief Recovery Fund, the hearing process, and requirements under
this article.
3155.6. (a) Funding shall be in an amount determined by the
Contractors' State License Board to be sufficient to meet the
projected claims over the next year.
(b) The board shall annually determine whether the funding is
sufficient to meet the projected claims over the next year and
annually report to the Legislature on the need to increase or
decrease the funding accordingly. In making this determination, the
board shall not include in any fund balance moneys in the fund that
are encumbered by claims approved pursuant to this article.
(c) The board shall be responsible for an annual review or audit
of the fund.
3155.7. All funding provided pursuant to Section 3155.6 shall be
deposited in the State Treasury to the credit of the Homeowners'
Relief Recovery Fund, which is to be used exclusively for the
purposes of this article.
3155.8. Notwithstanding any other provision of law, the time for
a lienholder to bring an action to foreclose a lien on a
single-family, owner-occupied dwelling which is the primary residence
of the owner shall be extended by 90 days to provide for the claim
period under Section 3155.9, and shall be extended to, and include,
60 days following service of the decision by a hearing officer
regarding the claimant's claim against the Homeowners' Relief
Recovery Fund.
3155.9. Within 90 days after the lienholder has recorded a lien
on a single-family, owner-occupied dwelling which is the primary
residence of the owner, the owner may file a statement of claim with
the Contractors' State License Board. The statement of claim shall
include, but may not be limited to, the following:
(a) A copy of any preliminary notice given by the lienholder,
together with the proof of service accompanied thereby, if a
lienholder is otherwise required to serve a preliminary notice.
(b) A copy of the mechanics' lien recorded in the office of the
county recorder.
(c) A statement of account showing all charges, credits, and
balance due.
(d) Proof of payment, including, but not limited to, a receipt of
payment, credit card receipt, or statement or canceled check.
3155.10. Once the statement of claim described in Section 3155.9
has been filed with the Contractors' State License Board, the board
shall notify the original contractor and the lienholder of the filing
of the claim. The original contractor and the lienholder shall file
a response within 15 days after receipt of the notice. This
response shall state in detail the defense against the claim and
include all documents which the respondent claims support this
defense. If the original contractor contends that it has not been
paid in full, the original contractor shall provide a copy of all
documents in support of this contention. The lienholder, original
contractor, and claimant may submit any other information to assist
the hearing officer to make the determination required by this
article.
3155.11. If the original contractor fails to respond to the claim
filed by the claimant, it shall be presumed that the claimant paid
the contractor in full and the hearing officer shall then determine
the value of the claim based upon the documentation provided.
3155.12. The board shall set a hearing date within 60 days of
receipt of the statement of claim at the office of the Contractors'
State License Board nearest to the site of the work of improvement,
before a hearing officer appointed by the board to hear the
presentation of the lienholder, the original contractor, and the
claimant. To the extent possible, all claims submitted on the same
project shall be consolidated and heard in the same hearing. The
Contractors' State License Board shall provide notice to the original
contractor, the claimant, and the lienholder of the date, time, and
location of this hearing.
3155.13. At the hearing, the hearing officer shall first
determine whether the claimant has made a full payment to the
original contractor. If the hearing officer determines that the
claimant has not paid the contractor in full, the hearing officer
shall dismiss the claim and issue a finding that the lienholder may
pursue foreclosure of its mechanics' lien in the appropriate court.
If the hearing officer determines that the claimant has paid the
original contractor in full, the hearing officer shall determine the
validity and reasonable value of the claim and, if determined to be
valid, enter an order addressed to the Contractors' State License
Board directing it to pay the lienholder the reasonable amount of the
claim, subject to subdivision (a) of Section 3155.3.
3155.14. (a) The hearing shall be conducted in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code.
(b) The hearing officers appointed by the Contractors' State
License Board shall be attorneys licensed to practice in this state
with at least five years of experience in mechanics' lien law.
3155.15. (a) The findings of the hearing officer shall be final,
but shall impose obligations upon the claimant, original contractor,
and lienholder only to the extent that the claimant, original
contractor, or lienholder agree to be bound by those obligations.
However, the remedies available to a party pursuant to this article,
including the right to receive payment from the fund, shall not be
available to a party that does not agree to the obligations. A
lienholder shall be deemed to agree to the obligations only by
recording a release of the lien in the county recorder's office where
the real property is located. The findings of the hearing officer
may be entered into evidence in any subsequent civil action or
proceedings. The findings of the hearing officer shall be served on
the lienholder, original contractor, the claimant, and the board no
more than 10 days after the hearing.
(b) The Contractors' State License Board shall pay to the
lienholder, upon receipt of an order pursuant to Section 3155.13 the
amount of the claim, subject to subdivision (a) of Section 3155.3
within 10 days of receiving evidence that the lienholder has recorded
a release of its lien in the county recorder's office where the real
property is located. The evidence shall be submitted within 15 days
after the findings of the hearing officer are served.
3155.16. A finding by the hearing officer that the original
contractor was paid in full by the claimant and failed to make timely
payments to any lienholder on the work of improvement, except a
finding made pursuant to Section 3155.11, shall be grounds for
immediate suspension of the original contractor's license. The
original contractor shall be given notice of a hearing to challenge
the findings, which shall be conducted within 60 days of the date of
the suspension pursuant to the procedures of the Contractors' State
License Board. If the finding is sustained, the contractor's license
shall be immediately revoked and shall not be reinstated until the
original contractor provides to the Contractors' State License Board
a contractor's license bond as provided in Section 7071.8 of the
Business and Professions Code in the sum of fifty thousand dollars
($50,000).
3155.17. (a) The Contractors' State License Board shall adopt and
make available forms for the notice regarding the claimant's rights
under this article.
(b) The county recorder's office shall provide information
pursuant to subdivision (c) of Section 3155.5 at the same time that
notice is sent to an owner of property upon which a lien is recorded.
3155.18. Any firm, corporation, partnership, or association, or
any person acting in his or her individual capacity, who aids, abets,
solicits, or conspires with any person to knowingly present or cause
to be presented any false or fraudulent claim for the payment of a
loss from the fund under this article is guilty of a felony
punishable by imprisonment in the state prison for two, three, or
five years, and by a fine not exceeding fifty thousand dollars
($50,000), unless the amount of the false or fraudulent claim exceeds
fifty thousand dollars ($50,000), in which event the fine may not
exceed double the amount of the false or fraudulent claim.
SEC. 2. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.