BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 457
Assemblymember Monning
As Amended May 11, 2009
Hearing Date: June 9, 2009
Civil Code
ADM
SUBJECT
Mechanic's Lien; Claim of Lien
DESCRIPTION
This bill would require a mechanic's lienholder (generally a
contractor, subcontractor, or material supplier) on a private
work of improvement, after filing a complaint to foreclose on a
mechanic's lien (also known as a claim of lien), to record in
the proper county recorder's office a notice of the pendency of
the proceedings. This bill would require that a lienholder
serve the property owner with the mechanic's lien and a Notice
of Mechanic's Lien in a form as specified. This bill would also
provide that failure to serve the mechanic's lien and Notice of
Mechanic's Lien as prescribed in the bill would render the
mechanic's lien unenforceable as a matter of law.
(This analysis reflects author's amendments to be offered in
committee.)
BACKGROUND
The California Constitution grants laborers and materials
suppliers a mechanic's lien on any property improved by their
labor or material. The mechanic's lien law in the Civil Code
generally specifies the obligations, rights, and remedies of
those involved in a construction project. Mechanic's liens are
only available on private works of improvement. Current law
provides that a lienholder who has filed a complaint to
foreclose on a mechanic's lien may record in the office of the
proper county recorder a notice of pendency of the foreclosure
action (a "lis pendens"). This bill would require the recording
(more)
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in order to better provide notification to all parties
interested in a construction project. Additionally, current law
does not require that a mechanic's lien or notice of the lien be
served on the property owner. This sometimes results in a
property owner paying twice for the same labor or materials
because the property owner pays the prime contractor, but the
prime contractor does not pass on the payment to the appropriate
subcontractor or material supplier. This bill would require the
lienholder to serve both the mechanic's lien and a specified
Notice of Mechanic's Lien on the property owner. This would
give the property owner notice of their rights and available
remedies. This bill is the result of consensus reached by
stakeholders in private works of improvement.
CHANGES TO EXISTING LAW
1. Existing law provides that mechanics, persons furnishing
materials, artisans, and laborers of every class have a lien
upon the property upon which they bestowed labor or furnished
material for the value of such labor done and material
furnished. (Cal. Const., art. 14, Sec. 3.)
Existing law provides that contractors, subcontractors,
material suppliers, and others who bestow labor, skill,
supplies, or services to a private work of property
improvement have a lien upon the property and establishes the
procedures by which the lien may be recorded and enforced.
(Civ. Code Sec. 3109 et seq.)
Existing law provides that a mechanic's lien does not bind a
property for longer than 90 days after recording of a claim of
lien, unless the claimant commences an action to foreclose on
the lien within the 90-day period. Existing law also provides
that a lien may remain in force for a longer period of time if
credit is given and notice of the fact and terms of the credit
is recorded with the county recorder. However, even if credit
is given, the lien may not remain in force longer than one
year from the completion of the work of improvement if an
action for foreclosure has not been commenced. If the
claimant fails to commence an action to foreclose the lien
within the specified time limitations, the lien is
automatically null and void and of no further force and
effect. (Civ. Code Sec. 3144.)
Existing law provides that, after filing a complaint to
foreclose on a mechanic's lien, the lienholder may record a
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notice of pendency (a "lis pendens") in the proper county
recorder's office. Existing law provides that only from the
time of the recording of such notice is a purchaser or
encumbrancer of the affected property deemed to have
constructive notice of the pendency of the action. (Civ. Code
Sec. 3146.)
This bill would require the plaintiff/lienholder, after filing
a complaint to foreclose on a mechanic's lien, to record in
the proper county recorder's office a notice of the pendency
of the proceedings on or before 20 days after the filing of
the mechanic's lien foreclosure action.
2. Existing law provides that a "claim of lien" means a
written statement, signed and verified by the claimant that
contains all of the following information:
a statement of the claimant's demand after deducting all
just credits and offsets;
the name of the owner or reputed owner, if known;
a general statement of the kind of labor, services,
equipment, or materials furnished by the claimant;
the name of the person by whom the claimant was employed
or to whom the claimant furnished the labor, services,
equipment, or materials; and
a description of the site sufficient for identification.
(Civ. Code Sec. 3084.)
This bill would provide that a "claim of lien" or "mechanic's
lien" means a written statement, signed and verified by the
claimant that contains, in addition to the above five pieces
of information required by Section 3084, an affidavit
completed and signed by the person serving a Notice of
Mechanic's Lien on a property owner or reputed property owner
in a form as prescribed. (See Comment 2 for details of the
Notice of Mechanic's Lien.)
This bill would require that a mechanic's lien and the
accompanying Notice of Lien be served on an owner or reputed
owner by registered mail, certified mail, or first-class mail,
evidenced by a certificate of mailing, postage prepaid,
addressed to the owner or reputed owner at the owner's or
reputed owner's residence or place of business address or at
the address shown by the building permit on file. This bill
would provide that, if the owner or reputed owner cannot be
served, the notice may be given by registered mail, certified
mail, or first-class mail to the construction lender or to the
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original contractor.
This bill would provide that failure to serve the mechanic's
lien and the Notice of Mechanic's Lien, as prescribed by the
bill's provisions, would cause the mechanic's lien to be
unenforceable as a matter of law.
This bill would provide that its provisions would become
operative on January 1, 2011.
COMMENT
1. Stated need for the bill
The sponsor, the Contractors State License Board, writes:
Under existing law, mechanic's lien filing procedures do not
include a requirement that the property owners be notified
when a lien is placed against their property. Furthermore,
many liens are not pursued and become void and unenforceable
by operation of law, clouding the title of the property on
which they were filed. Consequently, consumers are left with
the responsibility of addressing the lien, but are frequently
unaware of the options available to deal with the lien once it
is discovered. Most notably, many property owners do not
realize that an expired mechanic's lien can be expunged by
court action, and often pay the lien claimant even though they
have already paid the prime contractor for the services
covered by the lien.
The goal of AB 457 is to provide all parties involved in a
construction-related transaction with an opportunity to deal
with the relevant obligations in advance of the legal and
financial issues that result from a mechanic's lien. Also,
for those situations where a foreclosure suit is filed by a
contractor, notice of the action should be available to all
parties who are interested in the property in question.
2. Description of Notice of Mechanic's Lien; consumer
protections
This bill would prescribe the form and content of a Notice of
Mechanic's Lien to be served on a property owner, along with the
actual mechanic's lien. Also, the bill would provide that
failure to serve the mechanic's lien and Notice of Mechanic's
Lien would cause the lien to be unenforceable as a matter of
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law. The Notice of Mechanic's Lien would be required to include
the following key information:
upon the recording of a mechanic's lien, the property is
subject to the filing of a legal action seeking a
court-ordered foreclosure sale of the real property on which
the lien has been recorded;
the legal action must be filed with the court no later than 90
days after the date the mechanic's lien is recorded;
the party identified in the lien may have provided labor or
materials for improvement to the property and may not have
been paid for those items;
the notice is a required step in a foreclosure action for
unpaid labor, materials, or improvements provided to the
property;
the foreclosure action may affect the ability to borrow
against, refinance, or sell the property until the mechanic's
lien is released; and
because a lien affects the subject property, the owner may
wish to contact the contractor, an attorney, or for more
information to go to the Contractor's State License Board Web
site.
These provisions are intended to better protect consumer
property owners when mechanic's liens are filed against their
property in connection with a construction project.
3. Author's amendments
The author proposes to delete the penalty of perjury language
and instead insert language concerning the proof of service
affidavit as follows:
On page 3, delete lines 1 through 3, and insert:
(6) A proof of service affidavit completed and signed by the
person serving the Notice of Mechanic's Lien pursuant to
subdivision (c). A "proof of service affidavit" is an affidavit
of the person making the service, showing the date, place and
manner of service and facts showing that such service was made
in accordance with Section 3084. Such affidavit shall show the
name and address of the person or persons upon whom a copy of
the Mechanic's Lien and the Notice of Mechanic's Lien was
served, and, if appropriate, the title or capacity in which he
or she was served.
On page 4, delete lines 31 through 32, and insert:
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(c )(1) The mechanic's lien and the Notice of Mechanic's Lien
described in this section shall be served on the Owner or
Reputed Owner. Service shall be made as follows:
Support : California Chapters of the National Electrical
Contractors Association; California Legislative Conference of
the Plumbing, Heating, and Piping Industry; Air Conditioning
Sheet Metal Association; Air-conditioning and Refrigeration
Contractors Association; Building Industry Credit Association;
American Fence Contractors Association, California Chapter;
California Fence Contractors' Association; California
Professional Association of Specialty Contractors; Engineering
Contractors Association; Flasher/Barricade Association; Marin
Builders Association; American Federation of State, County, and
Municipal Employees; Plumbing-Heating- Cooling Contractors of
California; one individual
Opposition : None Known
HISTORY
Source : Contractors State License Board
Related Pending Legislation : SB 189 (Lowenthal) would
comprehensively revise California's mechanic's lien law. The
bill is the result of recommendations from the California Law
Revision Commission. The bill is currently in the Senate
Judiciary Committee and is a two-year bill.
Prior Legislation : SB 1691 (Lowenthal, 2008) would have
revised, recasted, restated, and reorganized statutory mechanic
lien law with the intent of improving its clarity and usability.
This bill was vetoed. The veto message indicates it was not on
the merits of the bill, but based upon the delay in the
2008-2009 State Budget and the governor's bill prioritization.
Prior Vote :
Assembly Judiciary Committee (Ayes 10, Noes 0)
Assembly Floor (Ayes 76, Noes 0)
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