California has often been considered at the forefront of many aspects in American life. Cultural icons call the state home. Trends are born in Hollywood and rush to appear in pricey boutiques along Rodeo Drive. Even laws in the state often set the pace for changes that eventually sweep throughout the rest of the nation. But though California‚Äôs mechanic‚Äôs lien law was first enacted in 1850, the statutes have been slow to modernize, and even today contain language that dates back to 1872.
As the state has grown and evolved, those outdated statutes have become roadblocks, becoming increasingly more difficult to use in a rapidly developing landscape. The obstacles have ignited litigation over conflicting and confusing provisions, and many times, have left unprepared and uneducated parties vulnerable, unsure and unaware of either their rights or responsibilities.
As over the last year California‚Äôs real estate market crumbled and collapsed, legislators rushed to fix and amend throwback laws. The mechanic‚Äôs lien statutes were targeted for tweaks and much-needed modernization.
On January 1st, 2011, two new requirements will go into effect for the state‚Äôs mechanic‚Äôs lien law process. Two years ago, California State Senator Alan Lowenthal began a campaign to update the state‚Äôs lien laws. Two of his sought after changes were just signed into law as Assembly Bill 457 by Governor Arnold Schwarzenegger, amending the lien law process.
Currently in California, after filing a lien, the claimant had the option to record a notice of lis pendens‚ÄĒbasically a public note of the lien. Now, as of January 1, 2011, the state will make this action mandatory within 20 days of filing action.
‚ÄúSo, the owner is going to understand more quickly that an encumbrance has been filed and hopefully will be able to react to it before foreclosure,‚ÄĚ explained Greg Powelson, director, NACM Mechanic‚Äôs Lien and Bond Services (MLBS). ‚ÄúMost states require that once a lien is filed, within ‚Äėx‚Äô amount of days, a copy of that lien must be sent to the owner. It kind of functions as a courtesy. But the idea is the sooner the owner is notified that a lien has been filed, the quicker he‚Äôll be able to resolve that situation. So, the public notification requirement in California, in my opinion, brings the statute up to par with what many of the other states already require.‚ÄĚ
California has also made another significant tweak to its lien laws by expanding the definition of ‚Äúmechanic‚Äôs lien‚ÄĚ to include a Notice of Mechanic‚Äôs Lien. This notice would contain specific information regarding the legal effect of the lien. Under the recently passed state law, the mechanic‚Äôs lien and the Notice of Mechanic‚Äôs Lien are required to be served upon the owner or the reputed owner of a property and the lien claimant is also required to complete and sign a proof of service affidavit to be included as part of the mechanic‚Äôs lien. This is an important factor to be made aware of, since, under the new law, after January 1, 2011, failure to serve the mechanic‚Äôs lien, including the Notice of Mechanic‚Äôs Lien, will cause the mechanic‚Äôs lien to be unenforceable.
It‚Äôs imperative that these two changes to the mechanic‚Äôs lien process in California are recognized by contractors, subcontractors and construction-oriented credit professionals working in the state. The changes are also indicative of the constant stream of changes that are taking place to lien laws from coast-to-coast.
‚ÄúSetting California aside, there are a lot of states that are going through changes, and having current information is always critical,‚ÄĚ explained Powelson. ‚ÄúThis is just one example of the nuance changes that really happen all the time. So, if I had any advice, it would be make sure that you‚Äôre using current information. I mean, that‚Äôs why we created our Lien Navigator, so folks would have the current information in front of them. And, obviously, as soon as this was signed into law, we made sure that our clients were up to speed, regardless if they are using us to file their liens and bonds.‚ÄĚ
He added, ‚ÄúAs it relates to California specifically, the additional steps of notification are now required. You need to comply if you want your lien to be effective.‚ÄĚ
Matthew Carr, NACM staff writer. Follow us on Twitter @NACM_National