California Mechanic’s Lien–Does a General Have to Serve a 20 Day Notice?
We are all familiar with the requirement of subcontractors and suppliers serving a preliminary 20 day notice at the beginning of a California construction project in order to later record a California mechanic’s lien. The general rule is typically if you are a general contractor with direct privity with the owner, you do not have to serve such a notice.
But, are there any other instances in which a general must serve a 20-Day?
There may be in the area of tenant improvement. No such notice is required when the general has a contract directly with the owner. If your contract is with the tenant instead, one theory is that since there is no contract with the owner, you must give the notice. For this reason, To be safe, it is always a good idea to serve such a notice. After all, we should not take any chances as to the later validity of a mechanic’s lien.
But there is an exception to this exception. If the owner fails to post and record a California Notice of Non-Responsibility, he/she is deemed to have directed the work of improvement and the tenant would then be acting as his/her agent—the contract could then be considered to be between the owner and the general. In other words, if you tell someone to improve your land, you can hardly complain if there is a mechanics lien against it for non-payment. The Courts in this case do not require serving the 20-Day and a lien can be against the owner’s interest.
On the other hand, if the owner does post the Notice of Non-Responsibility, you are telling the world you are not responsible for a potential mechanic’s lien, have no relationship with the general, and are unwilling to pay for the work. That would mean a mechanics lien should not be against your property for non-payment. Somewhat confusing, isn’t it?
Certainly, if you see a Notice of Non-Responsibility posted (thankfully it must be posted at the beginning of the job), you should serve the 20-Day. If you do not see the Notice of Non-Responsibility posted, you can take the risk and not serve, but what if it was torn down or some other unforeseen circumstance? Do you want to take the risk? Be safe and serve both the owner and the tenant.
The other exception is that technically under the new code provisions, if there is a construction lender on the project, the general must serve the 20-day notice as a condition precedent to later filing a California mechanic’s lien.