New California Mechanics Lien Law on 7/1/2012; General Contractors to Serve a Preliminary Notice if There is a Construction Lender

 In Mechanic’s Lien Law Updates and News

 

For decades the California mechanic’s lien statutes made it clear a general contractor was not required to serve a pre-lien notice. It was only for subcontractors and suppliers. The California state legislature has modified the California mechanics lien statutes effective July 1, 2012 requiring such a notice to be served under certain circumstances.

                             What are the circumstances?  In a private work of improvement, that notice is served by a general contractor if there is a construction lender. Without the notice, there is no entitlement to a mechanic’s lien in California. Note that it does not apply if the owner is using their own money or the project is self-financed. By general contractor, we are referring to anyone, whether a GC, sub, or supplier, that has a direct contract with the owner, whether verbal or in writing.

 Thus, new California Civil Code Section 8200 states, in relevant part:

 “A claimant with a direct contractual relationship with an

owner or reputed owner is required to give preliminary notice only to

the construction lender or reputed construction lender, if any.”

 So be on the lookout for this lender information, including securing it from the owner at the beginning of the project. If the owner does not readily give this information, use the form on this site titled “Request for Lien Information” from owner construction signs on the project (for example: “Construction Funding by Bank of America”). And, make sure you serve the bank officer in charge of funding at the exact branch that is providing the construction loan. Obviously, if there is no construction lender, the notice would not be required.

 The claimant who serves the notice on the construction lender can either be the general contractor, or a sub/supplier who has a direct contract with the owner. Here is a summary of the various claimants:

                              A) General contractor. Required to serve the preliminary notice only if there is a construction lender;

                             B) Subcontractor/supplier who has a direct contract with the owner. Required to serve the preliminary notice only if there is a construction lender;

                             C) Subcontractor supplier who has a direct contract with the prime contractor. Must   always serve a preliminary notice, whether or not there is a construction lender.

Thus, new California Civil Code Section 8200 states, in relevant part:

“A claimant with a direct contractual relationship with an owner or reputed owner is required to give preliminary notice only to the construction lender or reputed construction lender, if any.”

 If you are a subcontractor or supplier and have a direct contract with the prime contractor and there is also a construction lender on the project, the best advice is to serve every one with a preliminary notice, including the owner, general contractor, and lender. If you are going to send a notice to the lender, you might as well mail it to the other persons.  Based on the fact that a pre-lien notice is an absolute legal prerequisite to filing a mechanics lien in California, it is better to be safe. 

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