California Mechanic’s Lien.  How to file by a  General Contractor

 
 For as long as anyone would care to remember, how to file a California mechanic’s lien for a general contractor was simple.  Within 90 days of completion of the project, you simply recorded the California lien.  A general contractor in California was never required to serve a pre-lien 20-Day notice. These are companies that have a direct contract with the owner. All this changed on July 1, 2012. If there is a construction lender on the project, prime contractors are now required to serve a pre-lien notice before filing their mechanic’s lien in California.

 California mechanics lien statutes (Civil Code Section 8200) state that any lien claimant that has a direct contract with the owner must serve a pre-lien notice on the construction lender. Further, the old name of California Preliminary 20-Day Notice has been shortened to read “California Preliminary Notice” (good job legislators in California that wasted taxpayer dollars for over three years coming up with these brilliant new ideas). But how do you find out if there is a lender?

 Remember, there is a fundamental difference between seller-financing and construction lending. If ABC Company is building an apartment complex and using its own funds, investor monies, unsecured liens of credit, or a general bank loan not specifically earmarked for construction, there is no need to use a notice.  It is only for traditional construction lending in which the security is the property and requires the bank to supervise progress draws and issue lien waivers so as to prevent the filing of a mechanic’s lien in California.

 But how do you know if there is construction financing? Simply be on the lookout for signs on the property which may say, for example, “Construction funding by Bank of America”. Sometimes the spec book gives the name and address of the lender. Other times you can simply ask the owner or general contractor. And, you can always get this information by looking at the construction trust deed through the recorder’s office. This is found in the same office as where you would file the mechanic’s lien.  Or, you can call us and we will do a quick title check for you.

 If there is a construction lender, the general must serve by certified the owner with the pre-lien within twenty days of first commencing any work on the project. It can be served later, but a California mechanic’s lien can only encompass unpaid work within twenty days of service and everything in the future.

 Many experts are scratching their heads as to why this would be required in the first place. For decades, generals were exempt from this requirement and everyone was familiar with the protocol. Even if there was a construction lender, they required lien waivers from all persons who served twenty day notices and this information was traditionally furnished by the general. Looks like the legislation was more a convenience for the construction lenders who have strong lobby in California.

 Our advice? When you are asking yourself how to file a the mechanics lien in California, serve the notice when in doubt.

 

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