California Lien Law Summary

QUESTIONS

What work is covered?

Who may give a stop notice, file a lien, or make a claim against the bond?

lender. [CC 3158-59]

Lien and payment bond: Licensed contractors, licensed subcontractors of any tier, and suppliers of labor, services, equipment, or materials to those parties may file a mechanics’ lien or claim against a bond. [CC 3110-12, 3226] Suppliers to suppliers are NOT entitled to bring any claim. [Tarter, Webster & Johnson, Inc. v. Windsor Developers, Inc., 217 Cal.App.2d Supp. 875, 31 Cal.Rptr. 452 (1963)] Fringe benefit trust funds are also entitled to give stop notices, file mechanics’ liens, and make claims against payment bonds [CC 3111, 3158, 3226], as are contractors who perform “site improvement” work, such as demolition, grading, or excavating [CC 3112, 3158, 3226]. Generally, one who transports materials to a jobsite has no lien rights EXCEPT where (1) the hauler owns the materials and the hauling is part of the cost; (2) the hauler participates in the work of improvement, or (3) the hauler is hired by an agent of the owner. [Ivy Trucking, Inc. v. Creston Brandon Corp., 84 Cal.App.4th 85, 100 Cal.Rptr.2d 582 (Dist.4 2000)] NOTE that where contractors or subcontractors are required to be licensed, they must have the appropriate license in order to bring any action for compensation for work performed or materials provided, and that includes both breach of contract and statutory claims (stop notice, mechanics’ lien, or bond claim). In fact, if a contractor is not licensed, an owner can sue to recover compensation already paid to the contractor. [White v. Cridlebaugh, (178 Cal.App.4th 506, 100 Cal.Rptr.3d 434 (Dist.5 2009)] NOTE ALSO that a contractor who is unlicensed when it entered into the contract, but licensed when the work began will have lien rights, but a contractor that starts the work without a license but obtains a license during the project will not have any lien rights for the project, nor can it bring a breach of contract claim. [B&PC 7031; MW Erectors, Inc. v. Niederhauser Ornamental and Metal Works Co., Inc., 36 Cal.4th 412, 30 Cal.Rptr.3d 755, 115 P.3d 41 (2005); Great West Contractors, Inc. v. WSS Industrial Construction, Inc., 162 Cal.App.4th 581, 76

3248; Union Asphalt, Inc. v. Planet Ins. Co., 27 Cal. Rptr. 2d 371, 21 Cal. App. 4th 1762 (1994)] The prime contractor cannot give a stop notice. [CC 3181] Suppliers to suppliers are not entitled to bring any claim. Generally, one who transports materials to a jobsite has no lien rights EXCEPT where (1) the hauler owns the materials and the hauling is part of the cost; (2) the hauler participates in the work of improvement, or (3) the hauler is hired by an agent of the owner. [Ivy Trucking, Inc. v. Creston Brandon Corp., 84 Cal.App.4th 85, 100 Cal.Rptr.2d 582 (Dist.4 2000)]

Mechanics’ liens are not permitted against public property.

notice claimant -- other than a prime contractor who filed a bonded stop notice -- to instead file a claim against the bond. [CC 3159]

When deciding whether to give a stop notice, there are several important considerations. A general contractor may not give a stop notice to an owner, only to a construction lender. If a general contractor gives an unbonded stop notice (not a bonded stop notice) to a lender and if the contractor provided a payment bond on the project, the lender may not be required to withhold funds. Furthermore, where a payment bond has been recorded, a construction lender has the option to require a stop-notice claimant -- other than a prime contractor who filed a bonded stop notice -- to instead file a claim against the bond. [CC 3159] NOTE ALSO that where a bonded stop notice is given, attorney’s fees will be awarded to the prevailing party. [CC 3176]

NOTE that giving a stop notice is not a prerequisite to claiming a lien against the property, unless the owner demands in writing that the claimant serve a stop notice. If the owner so demands, then the claimant who fails to give the stop notice will lose his or her lien rights. [CC 3158] NOTE ALSO that filing a preliminary notice is a prerequisite to filing a stop notice for certain types of claimants. See the section on “Who must give preliminary notice?” below.

Lien: The project itself, the land it is on, and a convenient space surrounding it. [CC 3128] NOTE that where a tenant has contracted for the construction, the owner

Stop notice: Funds to be paid to general contractor. [CC 3186]

Payment bond: The contractor’s payment bond [CC 3249] or the public entity if it fails to ensure that a contractor provides a sufficient bond with a valid insurer, or fails to ensure that the contractor provides a payment bond at all, then the public entity will be liable to unpaid subcontractors. [Electrical Electronic Control, Inc. v. Los Angeles Unified School District, 126 Cal.App.4th 601, 24 Cal.Rptr.3d 316 (Dist.2 2005)]

Retention: Funds withheld from or by the prime contractor. [PCC 7107] NOTE, however, that from now until January 1, 2014, retainage is not to be withheld on a Department of Transportation project. [PCC 7202]

may exempt the property interest from the lien by recording and posting on the project site a “Notice of Nonresponsibility” within 10 days after the owner learns of the work of improvement. [CC 3129, 3094] Such a notice will not, however, protect an owner who participates in the contract to make the improvements or if the lease requires the tenant to make the improvements. [Howard S. Wright Constr. Co. v. Superior Court, 106 Cal.App. 4th 314 (Dist.1 2003)] NOTE ALSO that the claim of a subcontractor or general contractor will be limited, as each is entitled to recover only the amount due to it less all other claims for labor, services, equipment or materials included within his or her contract. [CC 3140]

Payment bond: The payment bond, where the owner, contractor or subcontractor has provided one. [CC 3096]

Other: There are provisions for collecting against the retainage, if any is withheld. [CC §3260] There is also a provision for an owner or tenant to provide security to the general contractor when the project exceeds certain dollar amounts. [CC 3110.5] See the “Other Remedies” section at the end of this summary.

Stop notice: All claimants must give preliminary notice. [3183, 3098] Remember that a general contractor is not a claimant because general contractors cannot give any kind of stop notice on a public project. [CC 3181]

Payment bond: All claimants except trust funds, people who perform actual labor for wages, and a claimant with a direct contract with the general. If a claimant fails to give preliminary notice, a claim against the payment bond can still be made by timely giving the final notice discussed in the sections relating to final notice below. [CC 3252; American Buildings Co. v. Bay Commercial Construction, Inc., 99 Cal.App.4th 1193, 21 Cal.Rptr.2d 539, (Dist.3 2002)] NOTE, however, that it is grounds for disciplinary action against a subcontractor whose contract exceeds $400 to fail to give the required preliminary notice.

have had their license suspended or revoked two or more times within an eight-year period must disclose this to the owner on any residential project of four or fewer units. [B&PC 7030.1] Failure to include required information leaves the contractor subject to disciplinary action [B&PC 7030(c)], and may constitute a misdemeanor [see B&PC 7159.5]. NOTE also that there are numerous other specific requirements, not discussed here, for information that must be included in a home improvement or service and repair contract. [See B&PC 7150-7168]

[CC 3098(b)]

Stop notice and payment bond: Claimants must give preliminary notice to the prime contractor and public agency. [CC 3098, 3252] If the public agency is the Department of Public Works or the Department of General Services, the notice must either be sent to the office of the disbursing officer of the department constructing the work, or be served on the officer personally. It is no longer required to send a preliminary notice to a claimant’s subcontractor-customer (if applicable), but it is recommended to do so. [CC 3098]

Filing a stop notice is not a prerequisite to making a claim against a public works payment bond. [CC 3250]

Stop notice: Within 20 days after the claimant first furnishes labor, services, equipment, or materials to the job site. If given later, the notice will cover only the materials, etc. supplied 20 days prior to giving notice and thereafter. If notice is given by registered or certified mail, service is complete at the time it is deposited as certified or registered mail. [CC 3098] Payment bond: Same as above. If, however, no preliminary notice is given, the claimant may preserve a claim by giving final notice to the surety and bond principal within 15 days after notice of completion is filed, or within 75 days after completion of the project, if no notice of completion is filed. [CC 3252; American Buildings Co. v. Bay Commercial Construction, Inc., 99 Cal.App.4th 1193, 21 Cal.Rptr.2d 539 (Dist.3 2002)] NEVERTHELESS, IT IS STRONGLY RECOMMENDED that the preliminary notice be timely given. And because the statute is not specific about when a 15- or 75-day notice is deemed given, it is recommended that the notice be received within the applicable time period.

Stop notice and payment bond: A substantially accurate general description of the labor, materials, etc. furnished or to be furnished, and the name of the party to whom furnished. [CC 3098]

as set forth in Form A, entirely in bold face type. NOTE that this language must be followed EXACTLY! NOTE that if an invoice for materials includes all the above information -- including the Notice to Property Owner, it will suffice as notice, if given according to the requirements discussed in the following section, “How must preliminary notice be given?”

-If the claimant is a subcontractor who has failed to pay all compensation due to his or her laborers on the job, the notice must also contain the identity and address of any laborer and any express trust fund to which employer payments are due.

NOTE that if an invoice for materials includes all the above information, it will suffice as notice, if given according to the requirements set out here. [CC 3097] General contractors must include in their contracts with owners the notices set forth in Forms F or G, as applicable. [B&PC 7030] And all contractors who have had their license suspended or revoked two or more times within an eight-year period must disclose this to the owner on any residential project of four or fewer units. The notice must be written either in capital letters in 10-point roman boldface type or in contrasting red print in at least 8-point roman boldface type. [B&PC 7030.1] Home improvement contracts including for swimming pool construction have numerous other requirements for information, notices, and warnings, including a “Mechanics’ Lien Warning,” that must be included but are not set out here. [See B&PC 7159-7159.6] Similarly, see B&PC 7159.10-7159.14 for service and repair contracts.

Stop notice and payment bond: Preliminary notices must be served on the contractor either (1) by certified or registered mail at any place the contractor maintains an office or conducts business or at his or her residence, or (2) by personal service.

NOTE that where the project is being constructed by the California Department of Public Works or Department of General Services, the notice must also be served on the Department’s disbursing officer either by certified or registered mail to his/her office,

cannot be given by any of those means, then it may be sent certified or registered mail addressed to the construction lender or

prime contractor. [CC 3097(f)]

NOTE THAT PROOF OF SERVICE IS REQUIRED in the form of an affidavit showing the time, place, and manner of service plus the name, address, and, if appropriate, title of person served. If the notice was served by mail, the affidavit must include the return receipt of the certified or registered mail, or a photocopy of the record of delivery and receipt maintained by the post office, showing the date of delivery and to whom delivered, or, in the event of nondelivery, by the returned envelope itself. [CC 3114, 3097.1]

General contractors must give the notices set forth in Forms F or G, as applicable, by including them in their contracts with owners. [B&PC 7030] And all contractors who have had their license suspended or revoked two or more times within an eight-year period must disclose this to the owner on any residential project of four or fewer units. The notice may be given in a bid, estimate, or other document prior to entering into the contract. [B&PC 7030.1] Home improvement and swimming pool contractors must meet numerous requirements in providing information, notices, and warnings. [See B&PC 7159- 7159.6] Similarly, see B&PC 7159.10- 7159.14 for requirements that apply to service and repair contractors.

or by personal service. [CC 3098]

Stop notice: All claimants who are entitled to give a stop notice. The prime contractor who has contracted directly with the owner may not give a stop notice. [CC 3181] Payment bond: All claimants who did not give the preliminary notice. [CC 3252] However, it is recommended that final notice be given anyway.

Stop notice:

-State job: Director of department that let contract. [CC 3103]

-Any other public job: The controller, auditor, or other disbursing officer for the contract, or the public body that awarded the contract. [CC 3103]

NOTE that in either case it is recommended that final notice be given to the prime contractor as well.

Payment bond: Surety and bond principal. [CC 3252]

Stop notice: Within 30 days after notice of completion/acceptance or cessation is recorded. If no such notice is recorded, then within 90 days after completion or cessation. [CC 3184]

Payment bond: If no preliminary notice was given, then final notice MUST be given to the surety and bond principal within 15 days of the recording of notice of completion or 75 days after completion where no notice of completion is recorded. [CC 3252; American Buildings Co. v. Bay Commercial Construction, Inc., 99 Cal.App.4th 1193 (Dist.3 2002)] It is recommended that final notice be given even if preliminary notice was served.

NOTE that for public works, the date of completion is determined by the date of acceptance by the public body, or where there is a cessation of labor on any public work for a continuous period of 30 days, except as to contracts awarded under the State Contract Act, Chapter 3 (commencing with Section 14250), Part 5, Division 3, Title 2 of the Government Code. [CC 3086]

notice was given.

As to all types of claims: A contract is “complete” for purposes of filing a lien when all work under the contract has been performed, excused, or otherwise discharged. [CC 3160, 3115, 3117; Howard S. Wright Construction Co. v. BBIC Investors, 136 Cal.App.4th 228 (Dist.1 2006)]. “Completion of the project” means not only actual completion of the project, but also any of the following: (1) the occupation or use of the improvement by the owner or his agent accompanied by cessation of labor on the project; (2) the acceptance by the owner or his agent of the work of improvement; or (3) a cessation of labor on the project for a continuous period of 60 days, or a cessation of labor for a continuous period of 30 days or more if the owner records a notice of cessation. [CC 3086]

Stop notice [CC 3103]:

-General statement of kind of labor, materials, etc. furnished or to be furnished; -Name of person to or for whom furnished; -Value of labor, materials, etc. already furnished AND of the whole agreed to be furnished;

-Name and address of the claimant.

NOTE that the stop notice must be verified by the claimant or the claimant’s “agent.” Case law does not clarify whether the claimant’s attorney is a sufficiently authorized agent.

Payment bond [CC 3227(b)]:

-Kind of labor, materials, etc. furnished; -Name of person to or for whom labor, materials, etc. were furnished; -Amount/value of labor, materials, etc. furnished or to be furnished.

NOTE that the “value” of labor, materials, etc. furnished may also include the 2% penalty for late payment of undisputed progress payments under the Public Contract Code. [PCC 10262.5; Washington Int’l Ins. Co. v. Superior Court, 62 Cal.App.4th 981 (Dist.2 1998)]

Stop notice: By personal service or by registered or certified mail. [CC 3103] Payment bond: By personal service or by registered or certified mail. [CC 3227]

What are the time limits for starting suit?

NOTE that when any contractor or subcontractor files a lawsuit to recover compensation for work performed, he or she must allege that he or she was a duly licensed contractor at all times during the performance of the contract. [B&PC 7031]

mailing, postage prepaid:

-the owner or reputed owner addressed to the owner or reputed owner at the owner’s or reputed owner’s residence or place of business address or at the address shown by the building permit on file with the authority issuing a building permit for the work, or as otherwise provided in CC 3097(j), pertaining to mortgages and other documents; OR if the owner or reputed owner cannot be served by this method, then

-the construction lender or original contractor addressed to the construction lender or to the original contractor. NOTE that service by registered mail, certified mail, or first-class mail evidenced by a certificate of mailing, postage prepaid, is complete at the time of the deposit of that first-class, certified, or registered mail. Failure to serve the mechanics’ lien, including the Notice of Mechanic’s Lien, as prescribed by CC 3084 will cause the mechanics’ lien to be unenforceable as a matter of law. [CC 3084]

Payment bond: By personal service or registered or certified mail. [CC 3227]

Stop notice: More than 10 days after notice is served on either owner or lender AND less than 90 days after the time within which a lien must be filed. [CC 3172] NOTE that this translates into more than 10 days after serving the notice but less than 120 days after the notice of completion or cessation is recorded (150 days for prime contractors), or within 180 days after completion of the work if no notice of completion or cessation is recorded. See “When must final notice be given?” above.

Lien: Within 90 days after claimant records its lien. [CC 3144] NOTE that where a lien was timely recorded but no foreclosure action was filed, and the lien was then released and refiled within the allotted time for filing final notice, the court allowed the claimant to timely foreclose on the second lien. [Koudmani v. Ogle Enterprises, Inc., 47 Cal.App.4th 1650, 55 Cal.Rptr.2d 330 (Dist.4 1996); Coast Central Credit Union v. Superior Court, 209 Cal.App.3d 703 (1989)]

Stop notice: More than 10 days after stop notice served AND within 90 days after the time to file a stop notice expires. [CC 3210] NOTE that this translates into more than 10 days after serving the notice but less than 120 days after the notice of completion/acceptance or cessation is recorded, or within 180 days after completion or cessation of the work if no notice of completion or cessation is filed.) See “When must final notice be given?” above.

Payment bond: After all labor, materials, etc. have been supplied AND within six months after the time to file a stop notice expires. [CC 3249, see 3184]

Retention: After the expiration of the applicable time period(s) within which retention is to be released. Subject to bona fide disputes, retention is to be released by the public entity within 60 days after the date of completion of the improvement, and by the prime contractor within 7 days after the prime receives the funds. If retention is not

released as required, it accrues interest at the rate of 2% per month. [PCC 7107] NOTE that the 2% does not compound monthly, and ceases to accrue upon entry of judgment. [S&S Cummins Corp. v. West Bay Builders, Inc., 159 Cal.App.4th 765, 71 Cal.Rptr.3d 828 (Dist.1 2008)]

Stop notice, payment bond, and retention: Yes. [CC 3250 (stop notice), CC 3248 (bond), PCC 7107 (retention)] Attorney’s fees are also allowed to the prevailing party where a subcontractor sues to collect wrongfully withheld progress payments on a project for a public utility. [CC 3262.5]

Stop notice: There is no specific statutory provision. However, case law shows that stop notice claims may be assigned. [See, e.g., USF&G Co. v. Oak Grove Union School Dist., 205 Cal.App.2d 226 (Dist.1 1962)]

Payment bond: Yes. [See CC 3249]

Stop notice: There are no priorities as among valid stop notice claims: funds are divided prorata among claimants regardless of when the stop notices were served or when actions on the stop notices were filed. [CC 3190]

Payment bond: Funds are divided prorata among those with valid payment bond claims in the same manner as stop notices. [CC 3251]

Yes, although a surety cannot avoid paying a claimant by relying on a waiver given to a

prime contractor, if the waiver document was in error, the claimant did not intend the prime contractor to rely upon it, and the claimant was not actually paid. [See Oldcastle Precast, Inc. v. Lumbermens Mutual Casualty Co., 170 Cal.App.4th 554 (Dist.4 2009)] Contracts with public entities may not include provisions that acceptance of a payment that is otherwise due to the contractor is a waiver, nor may the contract condition payment upon submission of a release of all claims against the public entity. [PCC 7100]

None.

either publicly traded, or privately held with at least $50 million net worth). Only the prime contractor may recover against the security. [CC 3110.5]

No quantum meruit claim: A subcontractor claimant cannot bring a quantum meruit claim against an owner, even if the owner remains indebted to the

prime contractor for the outstanding

amount. [Rogers v. Whitson, 228 Cal.App.2d 662 (Dist.1 1964); Preston Pipelines, Inc. v. JCW-Cypress Home Group, 2006 WL 1119161 (Cal.App. Dist.3 Apr 28, 2006) (Nos. C046055, C047730)]

Special provisions? -If a claimant is employed by the prime contractor or a subcontractor to provide labor, services, equipment, or materials, the claimant’s lien cannot include work or materials not provided for in the owner- prime contract, if the claimant had actual or constructive knowledge of that contract before furnishing the labor, services, equipment, or materials. A claimant will be deemed to have actual notice if the owner- prime contract is filed with the county recorder before commencement of the work. [CC 3124]

-The owner, the prime contractor, a subcontractor, or, in the case of liens, a sub- subcontractor can post a bond for 1-1/2 times the amount of a lien or stop notice and thereby release the lien or avoid the stop notice. [CC 3143, 3171]

-As of 1/1/11, after the complaint to foreclose a lien has been filed, a lis pendens must be recorded to give prospective buyers constructive notice of the claim of lien. [CC 3146]

-Although retainage provisions are not mandatory in public works contracts, they may be included. However, if they are included, provisions apply to allow retention moneys to be invested in securities or placed in an interest-bearing escrow account for the benefit of the prime contractor and, in certain circumstances, subcontractors. [See PCC 10263]

-A subcontractor can include in its claim against the general contractor’s payment bond the 2% penalty imposed by the Public Contract Code for late payment of undisputed progress payments. [Washington International Insurance Co. v. Superior Court, 62 Cal. App.4th 981, 73 Cal.Rptr.2d 282 (Dist.2 1998)]