Updated Mechanic’s Lien/Stop Notice/Payment Bond Form Effective July 1, 2012

What Every Construction Contractor Needs to Know About Upcoming Changes to Mechanic’s Lien and Stop Notice Laws

The following article was contributed by the law firm of Atkinson, Andelson, Loya, Ruud & Romo.

The California Legislature has enacted Senate Bill 189 which makes extensive changes to the mechanic’s lien and stop notice laws effective July 1, 2012. As participants in the construction industry, it is essential that SCGMA members become familiar with the changes to protect their legal rights and interests. This article is not intended to provide an exhaustive review of all of the changes contained in the legislation, but rather an overview of the noteworthy changes.

Preliminary Notice: On a private works, direct contractors must now serve a preliminary notice on the construction lender only. By way of review, the preliminary notice is a prerequisite to enforce any mechanic’s lien, stop notice or payment bond claim.

Waiver and Release Forms: The conditional and unconditional waivers and releases upon progress and final payments, formerly Civil Code Section 3262, have been “recast for clarity” at Civil Code Sections 8132-8138. The forms are completely reformatted with bold notice language at the top of the forms. All forms have added a line for identification of the waivant’s customer. The Conditional Waiver and Release on Progress Payment adds language relating to progress payments covered by previous releases that have not been paid. It should be noted that waiver and releases are void and unenforceable unless they are substantially in the form prescribed by statute.  To download the updated forms click on the links below –

• Conditional Waiver and Release on Final Payment Form
• Conditional Waiver and Release on Progress Payment Form
• UnConditional Waiver and Release on Final Payment Form
• UnConditional Waiver and Release on Progress Payment Form

Mechanic’s Lien Change: SB 189 carries forward another recent statutory change to the mechanic’s lien that became effective on January 1, 2011. A claimant must serve the mechanic’s lien and a new “Notice of Mechanic’s Lien” on the owner by either registered, certified, or first class mail, and show proof of service, before the claimant can record the lien. Also, SB 189 will require the claimant’s address to be included on the lien form as of July 1, 2012.

Notice of Completion and Completion: The time in which an owner can file a Notice of Completion is extended from 10 days to 15 days. If there are multiple direct contractors, the owner may record a separate notice of completion with respect to the scope of work under each direct contract. Additionally, on a private work of improvement, “completion” can no longer be accomplished by the “acceptance of the owner” method previously allowed.

Lien Release Bond: The amount of the bond to be given in order to cause the release of the real property from the effect of the lien is reduced from 150% to 125% of the lien amount.

Construction Loans: Both direct contracts (meaning contracts between an owner and contractor) and subcontracts must provide a space for the identification of any construction lender(s).

Standardized Notices: Various notices are required to be given under the mechanic’s lien statutes. The notice content and procedure requirements are now standardized. For example, all such notices must include information, to the extent known, for the following: (a) name and address of owner or reputed owner; (b) name and address of direct contractor; (c) name and address of construction lender, if any; (d) description of the site sufficient for identification; (e) name and address and relationship to the parties of the person giving the notice; and (f) if the person giving the notice is the claimant, then the notice must also include a general statement of the work provided, the name of person to whom it was provided to and a statement or estimate of the claimant’s demand after deducting any credits or offsets. Notice is not invalid by reason of any variance from these requirements if the notice is sufficient to “substantially inform” the person given the notice of the information required.

In addition, the changes now standardize the means by which a claimant or other interested party may serve notice and provide proof of service. Notices can now be served by express mail or overnight delivery by an express service carrier, as well as by the previously allowed personal delivery and delivery given by registered or certified mail. To prove service, a claimant must provide a “proof of notice declaration,” and if served by mail, evidence of mailing, including but not limited to, documentation provided by the post office showing that payment was made to send the notice. Thus, although still sufficient, the signed “green card” is no longer mandatory if the claimant can provide other forms of proof of service designated by the new notice provisions.

Terminology: The new statutes re-define some terms: “original contractor” is now recast as a “direct contractor”, which means a contractor who holds a contract with a project owner. “Material supplier” has replaced the outdated term “materialman.” The term “stop payment notice” replaces “stop notice.” The “Preliminary 20-Day Notice” is now simply the “Preliminary Notice.

Once again, the changes take effect July 1, 2012. Please contact us if you have any questions regarding the changes in the law.

Atkinson, Andelson, Loya, Ruud & Romo has extensive knowledge of public and private works construction issues and has represented numerous owners, general contractors, and subcontractors in a variety of transactions and disputes.