© 2006 Gibbs, Giden, Locher & Turner LLP Mechanic’s Liens and Statutory Remedies on Private Works

© 2005 Gibbs, Giden, Locher & Turner LLP MECHANIC’S LIEN 1. Private works only 2. Takes an unsecured claim and makes it secured by real property it secured by real property 3. Owner equity in property is important 4. Foreclose lien/public sale – pay lien

© 2006 Gibbs, Giden, Locher & Turner LLP Persons Entitled to Claim a Mechanic’s Lien 1.Contractors and Subcontractors 2. Material Suppliers, Lessors Of Equipment 3. Architects, Registered Engineered, Surveyors 4. Builders, Truckers, Laborers 5. Individuals Who Furnish Labor Used in Work of Improvement 6. Fringe Benefit Trust Funds 1.Contractors and Subcontractors 2. Material Suppliers, Lessors Of Equipment 3. Architects, Registered Engineered, Surveyors 4. Builders, Truckers, Laborers 5. Individuals Who Furnish Labor Used in Work of Improvement 6. Fringe Benefit Trust Funds

© 2006 Gibbs, Giden, Locher & Turner LLP Persons Not Entitled to Claim a Mechanic’s Lien 1.Supplier to Supplier 2.Landscape Maintenance 3.Unlicensed Contractors

© 2006 Gibbs, Giden, Locher & Turner LLP Procedures for Enforcing the Lien Claim 1.Timely serving a preliminary 20-day notice (if required) 2.Timely recording a claim of lien; 3.Timely initiating foreclosure suit

© 2005 Gibbs, Giden, Locher & Turner LLP 20-DAY PRELIMINARY NOTICE

© 2006 Gibbs, Giden, Locher & Turner LLP Who Must Serve the Notice? ALL Except… 1.The original (prime) contractor 2.The subcontractor dealing directly with owner/builder 3.Persons performing actual 4.labor for wages

© 2006 Gibbs, Giden, Locher & Turner LLP Who Must You Give The Notice To? 1.Owner/reputed owner 2.Original contractor/reputed original contractor 3.Construction Lender /reputed construction lender 4.If no original contractor, anyone dealing directly with the owner builder must give to the construction lender/reputed construction lender

© 2006 Gibbs, Giden, Locher & Turner LLP Service is Made By: 1. Registered mail 2. Certified Mail 3.Personal delivery 4.Public Works Only: First Class OK! PRIVATE: NO FIRST CLASS MAIL !

© 2006 Gibbs, Giden, Locher & Turner LLP When Service Is made 1.Within 20 days after claimant first furnishes labor/services or material to the site. 2.Recommended: contract signing/first furnish labor/material 3.If claimant failed to serve at signing 20 Days Date Of Mailing All labor/materials thereafter

© 2005 Gibbs, Giden, Locher & Turner LLP OWNER/LENDER INFORMATION 1.Where does claimant obtain information? a)Original contractor required to provide b)Original contract/subcontract to include space on contract for lender information c)Building department records for lender information d)County recorder’s office for construction trust deed

© 2006 Gibbs, Giden, Locher & Turner LLP When should the lien be recorded? a)The General/Original contractor cannot record until completing the contract b)All others cannot record until they have ceased furnishing labor/materials and services The Earliest a Lien Can Be Recorded:

© 2006 Gibbs, Giden, Locher & Turner LLP When should the lien be recorded? The Latest a Lien Can Be Recorded: NOC recorded 60 days A.If a valid notice of completion 1)General/original contractor has 60 days: 2)All others have 30 days 30 days A.If a valid notice of completion 1)General/original contractor has 60 days: 2)All others have 30 days

© 2006 Gibbs, Giden, Locher & Turner LLP When should the lien be recorded? B.If no notice of completion 1)All have 90 days from “actual completion” The Latest a Lien Can Be Recorded: Actual Completion 90 days

© 2005 Gibbs, Giden, Locher & Turner LLP COMPLETION Actual completion: 1)Occupancy 2)Acceptance 3)Work ceases for 60 continuous days, CC Section 3086

© 2005 Gibbs, Giden, Locher & Turner LLP New Law Effective January 1, 2004 To take advantage of shorter periods to record lien 30/60 vs. 90: 1.If claimant served “New Preliminary 20-Day Notice” 2.Owner provides “Notification” by registered, certified or first class mail to prime contractor and all who served preliminary notices that NOC recorded 3.When? Within 10 days after recording NOC

© 2005 Gibbs, Giden, Locher & Turner LLP New Law Effective January 1, 2004 To take advantage of shorter periods to record lien 30/60 vs. 90: 4.“Notification” evidenced by “certificate of mailing” 5.If owner fails? All claimants have 90 days from NOC to record lien! 6.What about “bleed over” projects?

© 2006 Gibbs, Giden, Locher & Turner LLP Preparing Mechanic’s Lien

© 2005 Gibbs, Giden, Locher & Turner LLP WHAT CAN BE INCLUDED IN LIEN  Value of labor and material  Direct costs (delay and acceleration)  Lambert v. Superior Court  Civil Code Section 3123 Reasonable value or contract price, whichever is less

© 2005 Gibbs, Giden, Locher & Turner LLP WHAT CANNOT BE INCLUDED IN LIEN  Non-job related costs  Attorneys fees  Purely delay costs, i.e., extended overhead

© 2006 Gibbs, Giden, Locher & Turner LLP The Recording and Foreclosure Action 1.Record in county recorder’s office where property is located 2. The lawsuit must be filed within ninety (90) days from the date the lien is recorded

© 2006 Gibbs, Giden, Locher & Turner LLP Other Mechanic’s Lien Issues 1.Priority of Liens 2.Release Bond 3.Procedure to Remove 4.Attorney’s Fees 5.Willfully Overstated Liens 6.Notice of Nonresponsibility/Leasehold 7.Lis Pendens

© 2006 Gibbs, Giden, Locher & Turner LLP Tenant Improvements a.Written notice signed and verified by the owner or owners agent b.Notifying potential lien claimant that the owner is not responsible for the work to be performed c.The notice must be posted upon the job site and recorded in the County Recorder’s office d.Within 10 days from the date upon which the owner first obtained knowledge of the commencement of a work of improvement Notice of Non-Responsibility Private Works

© 2006 Gibbs, Giden, Locher & Turner LLP A stop notice on private works is a notice to the owner or construction lender (or both) to withhold construction funds to satisfy the claim What is it… STOP NOTICE – PRIVATE WORKS

© 2005 Gibbs, Giden, Locher & Turner LLP STOP NOTICE – PRIVATE WORKS 1. Lien on construction funds 2. Takes an unsecured claim and makes it secured by a lien on construction funds 3. Undisbursed construction funds 4. Complements the mechanic’s lien claim

© 2006 Gibbs, Giden, Locher & Turner LLP - In general any claimant who has mechanic’s lien - In general any claimant who has mechanic’s lien rights also has stop notice rights rights also has stop notice rights Person entitled to serve a stop notice … The Stop Notice Right – Private Works

© 2006 Gibbs, Giden, Locher & Turner LLP The Stop Notice Right – Private Works As with mechanic’s liens, serving a preliminary 20-day notice is a prerequisite to asserting a stop notice Procedural requirements & contents … 20 Days Date Of Mailing All labor/materials thereafter

© 2006 Gibbs, Giden, Locher & Turner LLP When Should The Stop Notice Be Served? - It can be served at any time - It can be served at any time The Earliest a Stop Notice Can Be Served:

© 2006 Gibbs, Giden, Locher & Turner LLP A.If a valid notice of completion 1)General/original contractor has 60 days: 2)All others have 30 days The Latest a Stop Notice Can be Served: NOC recorded 60 days A.If a valid notice of completion 1)General/original contractor has 60 days: 2)All others have 30 days 30 days A.If a valid notice of completion 1)General/original contractor has 60 days: 2)All others have 30 days When Should The Stop Notice Be Served?

© 2006 Gibbs, Giden, Locher & Turner LLP B.If no notice of completion 1)All have 90 days from “actual completion” Actual Completion 90 days B.If no notice of completion 1)All have 90 days from “actual completion” When Should the Stop Notice be Served? The Latest a Stop Notice Can be Served:

© 2006 Gibbs, Giden, Locher & Turner LLP Service is Made By: 1)Registered mail 2)Certified Mail 3)Personal delivery 1)Registered mail 2)Certified Mail 3)Personal delivery NO FIRST CLASS MAIL !

© 2006 Gibbs, Giden, Locher & Turner LLP Who Should the Stop Notice Be Served On? - Served on the manager or other responsible officer at the office/branch administering/holding the funds If a Construction Lender …

© 2006 Gibbs, Giden, Locher & Turner LLP Who Should the Stop Notice Be Served On? -Serve on the owner at its place of business or residence If Owner Funded …

© 2005 Gibbs, Giden, Locher & Turner LLP Preparing A Stop Notice

© 2005 Gibbs, Giden, Locher & Turner LLP Other Stop Notice Issues 1. 1.Stop Notice Bond 2. 2.When to file a lawsuit 3. 3.Distribution of funds pro-rata 4. 4.Release of Stop Notice 5. 5.Attorneys Fees - Bonded Stop Notice v. Mechanic’s Lien

© 2005 Gibbs, Giden, Locher & Turner LLP Other Stop Notice Issues 6. Willfully False Stop Notice 7. Payment Bond Defeat Stop Notice 8. Written Demand for Stop Notice 9. Property Insurance Carrier as Stop Notice Target

© 2005 Gibbs, Giden, Locher & Turner LLP Payment Bond- Private Works 1. Persons entitled to recover 2. Procedural Requirements 3. Serve a 20-day Preliminary Notice or 15/75-day Notice 15/75-day Notice 4. Time for filing of lawsuit