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	Protecting Property Owners: Changes to California's Mechanic's Lien Law General Legal  By Stephen H. Gentry January 13, 2011 | Los Angeles Daily Journal The concept of a mechanic's lien is an integral part of the California Constitution. (Article 14, Section 3.) The Constitution provides that a laborer or material supplier has a lien on the property where the work of improvement was performed, and instructs the legislature to implement appropriate statutory protection. This mechanism insures that the laborer or material man has recourse against the property (and the property owner), in the event the contractor fails to pay, subject to certain statutory requirements. The statutory implementation of this directive has evolved over the years, and has become both lengthy and complex. The present statutory scheme has been in place since 1969. More recently, concerns have been raised about the fact that the existing procedures do not provide adequate notice enabling property owners to act promptly in construction disputes, so as to avoid a lien on the property and a subsequent lawsuit to enforce the lien. Assembly Bill 457 was passed in August 2009, and took effect on Jan. 1, 2011. It makes significant changes to Civil Code Sections 3084 and 3146 governing the enforceability of mechanic's liens on private (i.e. non-government) projects. The primary purpose of these changes was to provide better notification (and hence protection) to the owner of the property where the project was being constructed. Under prior law, there was no requirement that the lien claimant give notice to the property owner of the recording of the mechanic's lien. Similarly, while former Section 3146 gave the lien claimant the option to record a notice of pending action when suit was filed to enforce the lien, the notice was not mandatory. It was not uncommon, therefore, for the property owner to be unaware of both the lien and the lawsuit until the suit was actually served upon the property owner. Clearly, the earlier the property owner is made aware of a dispute over payment for labor or materials, the greater the likelihood that the owner can investigate the dispute and, hopefully, resolve the problem to the creditor's satisfaction so that litigation can be avoided. AB457 is an effort to improve this unsatisfactory situation. Under the bill, Civil Code Section 3084 was greatly expanded to accomplish four objectives. First, in addition to the descriptive information previously required (statement of the demand, names of the relevant parties, and a description of the property), a mechanic's lien is now required to contain certain mandatory language intended to more fully explain to the property owner the purpose of the lien and the steps that might be taken to resolve the problem. (Section 3084(a)(7).) Second, the statute now requires the lien to be served upon the property owner by registered, certified or first-class mail. (Civil Code Section 3084(c).) Third, it is now mandatory that the mechanic's lien contain a "proof of service affidavit" completed by the person who completed the service by mail. (Civil Code Section 3084(a)(6).) (The statute does not expressly indicate who may serve the lien; presumably, therefore, it is sufficient for the lien claimant to make such service without engaging the services of a separate person.) Finally, the statute now provides that the failure to serve the lien on the property owner renders it "unenforceable as a matter of law." (Civil Code Section 3084(d).) This implies that any suit to enforce such a lien would not result in a judgment against the property owner. The requirement of the service of a preliminary 20-day notice as a pre-condition to the right to record a mechanic's lien remains the same. (Civil Code Sections 3097 and 3114.) In addition, the deadline for recording the lien, which depends upon a variety of factors, remains unchanged. (Civil Code Sections 3115 through 3117.) It should be noted that a mechanic's lien is one of the few documents that can be recorded without notarization. (Civil Code Section 3084(b).) Also remaining unchanged is the requirement that the lien foreclosure action must be filed no later than 90 days after the recording of the mechanic's lien. (Civil Code Section 3144.) The change to Civil Code Section 3146 is less complex, but equally important. In essence, the section now requires the recording of a notice of pending action no later than 20 days after the filing of the lien enforcement lawsuit. This procedure was previously optional. Only from the time of that recording is a prospective purchaser or encumbrancer on notice of the mechanic's lien claim. (By implication, if the notice of pending action is filed more than 20 days after the filing of the lawsuit, it does not operate as constructive notice of the lawsuit at all.) The Legislature clearly intended to improve the mechanic's lien procedures for the benefit of the property owner, who was often the last person to know that there was a dispute over labor or materials relating to a construction project on the property. Practitioners should be aware that a more comprehensive modification of the mechanic's lien law is contained in Senate Bill 189, which was passed in September 2010, but which will not be generally effective until July 1, 2012. Stephen H. Gentry is a principal in Berger Kahn's Orange County office, where he represents clients in a broad range of business, commercial and real estate litigation. He can be contacted at sgentry@bergerkahn.com. This article was originally published by the Los Angeles Daily Journal on Jan. 13, 2011. Back
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