Articles Posted in Mechanic’s Liens

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1265719_construction_in_progress-1.jpgTwo of the most commonly used remedies available to contractors are mechanics liens and stop payment notices. The rules and procedures affecting mechanics liens, stop payment notices and bond claims changed on July 1, 2012 (SB 189).

An earlier blog dealt with changes to these laws that took place in 2011. Part 1 of this blog for changes that took place in 2012 can be found here.

The following information is meant as general information only. One should not use this information to calculate the timing deadlines of these procedures. It is essential to take into account the specific facts and circumstances of each situation because they affect the timing, notice, and procedures. If the circumstances in this blog pertain to you or your company, contact our office to obtain advice on how to use them.

Stop Payment Notice – When there is a discrete sum of undisbursed construction funds, a contractor may file a Stop Payment Notice. Upon receipt of a Stop Payment Notice, the owner or construction lender holding the funds is required to sequester “sufficient funds” to pay the claimed amount. This has the effect of tying up those funds pending resolution of the matter. On a private works project, a contractor must obtain and serve a bond to require the lender to withhold the money claimed in a Stop Payment Notice.
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1265719_construction_in_progress-1.jpgConstruction contractors have enhanced collection remedies to help them obtain payment. Two of the most commonly used remedies are mechanics liens and stop payment notices. These rights are based on the California Constitution and various statutes.

On July 1, 2012, the rules and procedures affecting mechanics liens, stop payment notices and bond claims changed (SB 189 and 190). New forms and procedures are required. A prior blog dealt with other changes to these laws that took place in 2011.

The following information is meant as general information only. One should not use this information to calculate the timing deadlines of these procedures. It is essential to take into account the specific facts and circumstances of each situation because they affect the timing, notice, and procedures. If the circumstances in this blog pertain to you or your company, contact our office to obtain advice on how to use them.

A Mechanics Lien allows a contractor to record a lien against the property that the contractor improved, giving the contractor a source from which to satisfy a judgment. A Stop Payment Notice (previously called a stop notice) enables a contractor to force an owner or a bank to set aside undisbursed construction funds held by them. Contractors are required to follow procedures to perfect their mechanics lien claim, stop payment notice rights, and bond claims, some of which are described in this blog. Failure to do so will result in waiver of those rights.
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1402599_untitled.jpgWhen a construction contractor (including subcontractors, material suppliers, etc.) is not paid for its work, the contractor is entitled to record a mechanic’s lien against the private property where the work was performed. The mechanic’s lien secures the contractor’s right to payment against the real property that was improved by its labor. This greatly improves the contractor’s ability to collect payment for its work.

Beginning January 1, 2011, construction contractors that are entitled to record a mechanic’s lien must follow a few new procedures. In addition to the former requirements of recording a mechanic’s lien and timely filing a lawsuit to foreclose the lien, contractors must now give a statutory Notice of Mechanic’s Lien to the owner of the property. They must also complete a proof of service proving that they served the Notice. Additionally, once a foreclosure suit is filed with the court, the contractor must record a Notice of Pendency of the Proceedings with the County Recorder within twenty days.
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