Comparing the Old and New California Mechanics Lien Law OLD

Law

By Leo Hubbard, Secretary Hoyward Lumber & Investment Co., Los Angeles NEW LAW

Provides for filing of verified claim of work done rvhere a public agency is involved.

No such section.

Trust Deed

1200.1 (f)

This claim is finally'called a in line with the usage of the Stop Notice, to bring the law industry.

Any valid bond is con,clusively presumed if surety corporation writes it. to be a good bond

1188.2 filed after work starts can't come ahead of liens. If ivork has started, Trust Deed can still have bond of 75/o of loan is given and recorded at Deed is. Then all work after that time limited

11e3.1 (b)

Can't split up work.

1193.1 (f)

Owner required to sign.

A question as to wheth",ll?,1;lr ltlor"., or legal descriptio', controls if one is in error.

If cessation of labor pletion, then have 90

1193.1 (g) for 30 days and no Notice of Comdays to file. (12O days in all.)

1190.1 (c)

Stop Notice on private job. Owner may withhold.

Same under old law.

Code formerly didn't Court decisions did.

If of

11e0.1 (d) provide this.

1190.1 rh) building fund, notice to holder freezes fund for benefit lien claimants.

Claimant must know of fund before he sells materials. No assignment valid unless for lien claimant if lender has notice before disbursement.

Legally no method ,r o1lil;,t" !i","', but title companies have done this in practice.

11e0.1 (j) priority if a tirpe Trust to bond. more original contracts, can one contract without having

If work split up into two or file Notice of Completion on completed the other.

Owner or someone on his behalf pletion. can sign Notice oi Com-

In Notice of Completion if error in street address. has no effect if sufficient legal description.

If cessation of labor and no Notice then claimants have 90 davs after 60 days in all.)

Stop Notice to owner of private job. Orvner must withhold funds, unless: of Cessation is filed, days to file tien. (150

Statutory bond has been given, then for private job don't have to withhold, but may do so.

Stop Notice on public job. Must rn'ithhold.

If Stop Notices and not enough funds, pro-rate ar.nounts.

If building fund, and notice given to holder of iund, then holder may withhold from contractor, but this is not mandatory unless claimant files a bond of I-tf times amoun: of claim.

Claimant need not know of fund before he sells materials. No assignment before or after notice has prioritv over lien claimants 'r.vho file notice.

Ou'ner can dispute claim against holder of fund up bond f.or l-fu of amount. Then funds will be by putting disbursed.

Above two sections not efiective if owner has filed statutory bond any time before filing of first notice to rvithhold.

(Continued on Page 54)

Section 4

(Continued from Page 52)

Land subject to lien:

The building and enough land for the convenient use and occupation of the building are subject to the lien. Examples: An entire city lot and the house that is on it; a country estate with its grounds. Exceptional case : An entire ranch. The house and the land around it would be subject to the lien, but only in an exceptional case is the farmed part of the ranch subject to the lien. But don't take a chance-file your lien on the whole ranch.

If work is done on sidewalks or street in front of a lot, at request of owner of lot, you can claim a lien on the lot for the work done on the sidewalks or street.

Section 5-(Complete Revision)

5. Time of Filing Lien a. If the job is completed:

(l) Completion is defined as either of the following:

(a) Occupation or use of the building with ces' sation of labor, or b. If the job is not completed, but work simply stops.

(b) Acceptance by owner.

(2) Within 10 days after either of the two above has i t"ken place, the owner or his agent can file a I Notice of Completion with the County Recorder ' and this is notice to everybody that the lien peri: od has started to run. (The Notice of Completion i can be inspected in the Recorder's Office, and conI tains valuable information for the filling out of a lien.)

(3) A general contractor must file his lien within 60 days after filing of Notice of Completion.

(4) A sub-contractor, material dealer or laborer must file his lien within 30 days (not a month) of the filing of the Notice of Completion. (A material dealer is never a general contractor, so be sure to file your lien within 30 days.)

(5) If no Notice of Completion is filed all persons have 90 days (not three months) after completion rvithin which to file liens.

(1) This is called cessation of labor. If there is cessation of labor for 30 days, the owner can file a Notice of Cessation within 10 days thereafter.

(u) A general contractor has 6O days after the filing of the Notice of Cessation within which to file his lien.

(b) A subcontractor, material dealer or laborer ftas 30 days after the filing of the Notice of Cessation within which to file his lien.

(Z) If no Notice of Cessation is filed, all persons have 90 days after work has ceased for 60 days-a total of 150 days-within which to file liens.

Section 6-d

Narhe of person you furnished the materials to-the general contractor usually-

(Warning: A recent case holds if you name in your lien the owner as the person to whom the materials were furnished, and actually you furnished them to the contractor, your lien is void and you can't recover.)

Section 7

Effect of lien

The claim of lien must be filed in the Recorder's Office in the county where property is located, within the time limit set by law. A valid lien has priority over any mortgage, deed of trust, attachment, judgment or other encumbrance which may have been recorded after the job or improvement was started. A trust deed or mortgage filed after the job or improvement has started can obtain priority by the owner or contractor filing a bond to the amount of 75/a of the mortgage or trust deed. In that case. the lien claimants must look to the bond, and the mortgage or trust deed is prior to liens for rvork done after the mortgage or trust deed is recorded. A lien would not be prior to any unrecorded mortgage or trust deed if the lien claimant had knowledge of it before the job was started. If a building is financed, the lender will insist that its trust is recorded before the work is started. In this case all liens come after the first trust deed (and any others recorded before the work starts.)

Section 12 Building Fund

Usually the construction of a building is financed by a bank or a building and loan association. The bank pays out the money to the general contractor or subcontractors and material dealers in progress payments. On residence construction customarily l/5 oI the total building fund is kept until the property is cleared of liens. If, therefore, the job goes bad and it is necessary to file a lieri, all lien claimants are entitled to share proportionately in what is left of the building fund, and only the lien claimants can share in this fund. Under the new law if a Stop Notice is filed rvith the holder of the building fund, the holder may hold the amount of that claim from the contractor. He must withhold it if the claimant puts up a bond lor l-ft times the amount of his claim. If after the claimant files his notice and bond, the owner or contractor protests it, the owner or conrractor in turn may put up a similar bond, and the funds are then released. Be sure to file ybur claim with the holder of the fund, and either have an arrang.ement .rvith the holder to withhold the money, or file a bond in order to protect yourself.

New Section 14 Stop Notices on private jobs

The California law now provides that a lien claimant can file a Stop Notice with the owner of a private job. This Stop Notice must be verified in proper forrn and must list generally the work done and materials sold. The owner must withhold an amount sufficient to cover the Stop Notice unless a construction bond rvas given at the time the job was started. Even though a construction bond has been given, the owner may still withhold the amount specified in the Stop Notice. This is an important new weapon in the hands of lien claimants, since it forces the o.n,ner to withhold or obtain a construction bond. (See also Section 12 above, relating to building funds.)

Bcck On lob

James W. Mcleod, partner in pany, Los Angeles, was back at ing made a good recovery from arvay for several weeks.

Mahogany Importing Com, his desk November 1, havan operation that kept hinr