Preliminary Notice and Lien Timetables for Mechanics Liens, Designers Liens, and Stop Work Notices
The Preliminary 20-Day Notice
In discussing lien rights, many design professionals have traditionally
been reluctant to serve a preliminary notice at the inception of the relationship.
However, a preliminary notice must be filed at the beginning of the job
or else it will only relate back 20 days from the date of the service.
A preliminary notice is the only way to protect a design professional
or subcontractor when they have been hired by somebody other than the
owner of the property. If there is a direct contractual relationship with
the owner, a preliminary notice need not be filed. Similarly, if one is
originally hired as a subcontractor, but then establishes an independent
relationship with the project owner, a preliminary notice may be unnecessary.
The use of the preliminary notice is a business decision and must be weighed
against the public relations consequences.
The mechanic's lien area is a very complicated area with very strict formal requirements. For example, the preliminary notice must be sent by certified-mail, return receipt requested, or personally served on the owner, general contractor, and any known bank. The green return receipt must be kept. It is very common for these notices to be sent by ordinary mail, or for someone to lose the return receipt. It is equally common for the preliminary notice to be served at the end of the project when it is too late. Obtain a Los Angeles construction lawyer for help with your mechanic's liens.
Lien Time Tables
In California, prior to the initiation of construction, only a
design professional lien is available. Once construction has been commenced, the mechanics lien
is the only mechanism for the subcontractor to create a relationship with
the owner of the property. Similarly, the stop notice is the only mechanism
to create a relationship with the lending institution which may be financing
It should be kept in mind that unless one is a general contractor (i.e., one has a direct relationship with the property's owner) it is necessary to send the 20-day preliminary notice to the general contractor, owner and financial institution. The 20-day preliminary notice is required before a mechanics lien or stop notice can be filed on a private job.
It should be kept in mind that in California after completion, the commencement of the lien period occurs 60 days after cessation of the job, 30 days after notice of completion has been filed or upon acceptance of the work or occupation of the project by the owner. A cessation is a cessation of work on the project, not necessarily a cessation of work that has been performed by your company.
From that time period, one has 90 days to record a mechanic's lien. Accordingly, there may be a 150-day period to record the lien, consisting of 60 days after cessation of labor, followed by 90 days after the end of the cessation.
After the mechanic's lien has been recorded, if the job has been completed, one must file a lawsuit within 90 days to perfect lien rights. If a lawsuit is not filed, and the project has been completed, the lien should be released because it is no longer in effect and merely serves as an illegal cloud on title. In such a situation, the wrongful lien claimant may be subject to monetary damages.
The Effect of Recording a Preliminary Notice
California law was revised in 1988 to require the county recorder to notify
a subcontractor when a notice of completion or a notice of cessation is
recorded on a particular private works project. Since the deadline for
filing a mechanics lien depends upon when either of these notices are
recorded, this new procedure will help prevent missing the critical time
period. As such, in many instances the new procedure will enable the claimant
to get paid on a project and not lose important lien rights.
California Civil Code section 8214 permits a claimant to file its 20-day preliminary notice with the recorder's office in the county where the jobsite is located. This is in addition to the requirement of mailing this notice by certified mail, return receipt requested, as described above. There is a nominal filing fee and the recorder's office requires both the claimant's signature and date must be an original (not a copy). If you include an extra copy of the notice with a self-addressed, stamped envelope, the recorder's office will mail a conformed copy which indicates the date and time it was filed.
Afterwards, once an owner records a notice of completion or a notice of cessation, the recorder's office will mail the claim and a notice of when either of these documents has been recorded. Once the claimant receives this notice, it should immediately record a mechanics lien, serve a bonded stop notice and a notice of surety on payment bond (if appropriate), or consult a Los Angeles construction attorney for advice on these matters. Once these steps have been taken, it is then crucial to calendar a follow-up date to ensure the lawsuit is filed within the prescribed time periods.
Similarly, regarding California public works projects, California Civil Code section 9362 provides that if the claimant, at the time of filing its stop notice, pays to the public entity a prescribed sum, the public entity must give to each stop notice claimant, notice of the expiration of the stop notice period by personal service or certified mail. This notice must be given to stop notice claimants no later than 10 days after the filing when notice of completion or after the cessation of labor has been deemed a completion of the public work, or after the acceptance of completion, whichever is later. There is a nominal fee for obtaining this information which is payable to the public entity.