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Understand how the Mechanics’ Lien Deadline Depends on the Validity of the Notice of Completion

by William L. Porter, Attorney at Law

Know Your Mechanics’ Lien Filing Deadlines

Working within deadlines is absolutely crucial to preserving mechanics’ lien rights under California law. The deadlines differ, depending on whether you are an “original” or “prime” contractor (one who contracts with the property owner) or a subcontractor or material supplier. The primary differences are that the prime contractor is not required to serve a “Preliminary 20 Day Notice” (Civil Code section 3097) in order to pursue a mechanics’ lien, whereas the subcontractor and material supplier are required to do so. Another difference is that a prime contractor has a longer period of time in which to record a mechanics’ lien after a valid “notice of completion” or a “notice of cessation” has been recorded (Civil Code sections 3092, 3093), (60 days for original contractors as compared to 30 days for subcontractors and suppliers – See Civil Code sections 3115 and 3116).

Please note that original contractors are not required to serve a Preliminary 20 Day Notice in order to pursue a mechanics’ lien. One reason for this is that the owner has already contracted with the original contractor and is presumably aware of his or her contribution to the project. Nevertheless, it is suggested by many legal practitioners that the original contractor serve the notice anyway. This will provide notice to the construction lender who may not have gained official notice of the original contractor’s identity (See Civil Code section 3097(b)). It is also useful in order to trigger the owner’s deadline for mailing a “Notice of Nonresponsibility” (See Civil Code section 3094).

Original (Prime) Contractor Mechanics’ Lien Deadlines

If a Valid Notice of Completion or a Notice of Cessation has been Recorded

If a valid “Notice of Completion” or “Notice of Cessation” has been recorded with the County Recorder in the County where the work of improvement is physically located, the original (prime) contractor has 60 days after the date on which such notice was recorded before which the original (prime) contractor must record a mechanics’ lien. (See Civil Code sections 3092, 3093, 3095, 3106, 3115, 3117).

Please note that a “Notice of Completion” is generally valid only if filed within 10 days after actual completion. A “Notice of Cessation” may generally be filed only after work on the work of improvement has stopped for a continuous period of 30 days. (See Civil Code sections 3092, 3093, 3106.)

If No Notice of Completion or Notice of Cessation has been Recorded

If no Notice of Completion or Notice of Cessation has been recorded then contractors, subcontractors and suppliers alike have 90 days after work on the project is completed in which they must record a mechanics’ lien. This 90 day period may be extended in cases where, although the project is not fully completed, the work on the project has stopped for a continuous period of 60 days and neither the owner nor his agent has accepted the project or moved into the premises. (See Civil Code sections 3086, 3115, 3116, 3090, 3095 and 3104.)

Subcontractor (and Supplier) Mechanics’ Lien Deadlines

As with the Original (prime) contractor, it is essential the subcontractors and material suppliers are aware of all their important deadlines. Because subcontractors and suppliers must (unlike the original contractor) also serve a “Preliminary 20 Day Notice” under Civil Code section 3097, subcontractors and suppliers have an even greater need to understand these important deadlines. The first of the deadlines of which the subcontractor and material suppliers must be aware is the deadline in connection with the all important “Preliminary 20 Day Notice.”

The Preliminary 20 Day Notice Requirement for Subcontractors and Material Suppliers (Private Works)

Subject to a few exceptions, the “Preliminary 20-Day Notice” is a prerequisite to pursuit of mechanics’ lien claims, stop notice claims and bond claims by subcontractors and suppliers. In private works, one primary purpose of the Preliminary 20-Day Notice is to advise the owner and lender that a potential claimant has contributed work or materials to a project and may file a mechanics’ lien or other legal claim at a later time. Serving the Preliminary 20-Day Notice on the owner and lender provides the requisite notice. Subcontractors and material suppliers should always serve a Preliminary 20 Day Notice within 20 days after first providing labor or materials to a project in order to fully protect their rights to a mechanics’ lien, stop notice or bond claim. (See Civil Code section 3097; see also Civil Code sections 3090, 3095, 3104).

Note: While Civil Code section 3097 specifies the last possible date on which to properly serve the Preliminary 20 Day Notice, it does not specify a date which would be too early to serve the Preliminary 20 Day Notice. The subcontractor or material supplier should establish a mechanism whereby at some point between execution of a contract and the commencement of work or the supplying of materials by the subcontractor or material supplier begins, the Preliminary 20 Day Notice is properly served.

Procedure and Deadline for Service of a Preliminary 20 Day Notice

Within 20 days after first furnishing labor, materials or equipment to a jobsite, the subcontractor or material supplier must fill out and send a “California Preliminary 20-Day Notice” to the original contractor, owner and the lender, if any. The Notice should be sent by either registered mail or certified mail, return receipt requested. Certified mail is usually less expensive. You can also hand-deliver the Notice. However, certified mail is strongly suggested, because it provides a form of objective documentary proof of delivery. Before sending out the Notice, always make a copy of the fully completed Notice for your records. Staple your “Receipt for Certified Mail” to your copy and keep it in a separate folder for the particular job. Later, after the post office returns the green “Return Receipt” to your office, staple that return receipt to your copy and return it to your job file. It is important to safeguard these documents since they may be needed to prove your case in court at a later time (See Civil Code sections 3097, 3097.1; see also Civil Code sections 3087, 3090, 3095, 3104).

Note: In projects where the contract is for over $400, failure of the subcontractor to serve the Preliminary 20 Day Notice may also subject the contractor to disciplinary action with the Contractors’ State License Board. (See Civil Code sections 3097(h), 3114; see also Civil Code sections 3090, 3095, 3097(d), and 3104).

Deadline for Subcontractor or Material Supplier to Record a Mechanics’ Lien

If a Valid Notice of Completion or a Valid Notice of Cessation has been Recorded

If a valid “Notice of Completion” or “Notice of Cessation” has been recorded on the project then, subject to the exception noted below in regard to the 2004 revisions to Civil Code section 3097 and 3259.5, the claimant may have as few as 30 DAYS after the date on which such notice was recorded before which the claimant must record a mechanics’ lien (See Civil Code sections 3092, 3093, 3106, 3116, 3117).

Note: A “Notice of Completion” is generally valid only if recorded within 10 days after actual completion. A “Notice of Cessation” may generally be recorded only after work on the work of improvement has stopped for a continuous period of 30 days (See Civil Code sections 3092, 3093, 3086 and 3106).           

Impact of 2004 Legislation: An exception to the 30 day rule for recording a mechanics’ lien by a subcontractor or supplier after a valid notice of completion or notice of cessation was instituted by legislation which came into effect on January 1, 2004. (Senate Bill 134). This new law, sponsored by the American Subcontractors’ Association, gave a significant new benefit to subcontractors and suppliers by giving the subcontractor or supplier notice of when a Notice of Completion or a Notice of Cessation has been recorded on many private works projects. The new law also changed the language of the California Preliminary 20 Day Notice form that subcontractors and suppliers must use to protect their mechanics’ lien, bond claim and stop notice rights.

The new law requires private project owners to notify subcontractors and suppliers within 10 days after recording a Notice of Completion or Notice of Cessation that the document has been recorded. In order to receive such notice, the subcontractor or supplier must properly use and serve the new form of Preliminary 20 Day Notice. If this properly occurs and the private project owner provides the required notice to the subcontractor or supplier, then the subcontractor or supplier will have only 30 days to record a mechanics’ lien. If an owner under such circumstances, however, fails to properly notify a subcontractor or supplier within 10 days after recording a Notice of Completion or Notice of Cessation, then the Subcontractor or supplier will have 90 days to record a mechanics’ lien. The details of the new law can be found in California Civil Code sections 3097 and 3259.5.

In order to benefit from the new law, the subcontractor or supplier must include the following new language, in boldface type, to the Preliminary 20 Day Notice under the section found near the top of the form entitled:

“NOTICE TO PROPERTY OWNER”:

OTHER THAN RESIDENTIAL HOMEOWNERS OF DWELLINGS CONTAINING FEWER THAN FIVE UNITS, PRIVATE PROJECT OWNERS MUST NOTIFY THE ORIGINAL CONTRACTOR AND ANY LIEN CLAIMANT WHO HAS PROVIDED THE OWNER WITH A PRELIMINARY 20 DAY LIEN NOTICE IN ACCORDANCE WITH SECTION 3097 OF THE CIVIL CODE THAT A NOTICE OF COMPLETION OR NOTICE OF CESSATION HAS BEEN RECORDED WITHIN 10 DAYS OF ITS RECORDATION. NOTICE SHALL BE BY REGISTERED MAIL, CERTIFIED MAIL, OR FIRST CLASS MAIL, EVIDENCED BY A CERTIFICATE OF MAILING. FAILURE TO NOTIFY WILL EXTEND THE DEADLINES TO RECORD A LIEN.

Please note that the new law does not apply to public works projects or owner-occupied personal residences of fewer than 5 units. Moreover, the new law does not apply to those subcontractors and suppliers who fail to serve a Preliminary 20 Day Notice or, of course, when no Notice of Completion or Notice of Cessation has been recorded.

Please be sure to update your Preliminary 20 Day Notice forms to properly include the above language. Failure to do so could result in loss of legal rights important for the collection of debt for work performed and materials supplied to private works projects.

Note: Even though a material supplier may have a contract directly with the owner of the property in question, the material supplier still does not fall into the category of a prime or “original” contractor within the definition of Civil Code section 3095. Therefore, even a material supplier who has a contract directly with the owner must record its mechanics’ lien within only 30 days after a valid notice of completion has been recorded as is required by Civil Code section 3116. Such a supplier cannot take advantage of the 60 day deadline available to prime contractors even though the supplier, like the original contractor, has a contract directly with the owner. A supplier is a supplier and does not become an original contractor simply by having a contract with the owner. See Sparks v. Butte County Gravel Mining Co. (1880) 55 Cal. 389, Vaughn Materials v. Security Pacific National Bank (1985) 170 Cal.App.3d 908, 216 Cal.Rptr. 605.

A suitable Preliminary 20 Day Notice – Private Work form is available in the Resources section of this web site. There are many manufacturers of such forms. Not all such forms have the same appearance as the referenced form. But all proper forms will contain the same essential information.

If No Notice of Completion or Notice of Cessation has been Recorded

If no Notice of Completion or Notice of Cessation has been recorded then contractors, subcontractors and material suppliers have 90 days after work on the project ceases before which they must record a mechanics’ lien. This 90 day period may be extended in cases where, although the project is not fully completed, the work on the project has stopped for a continuous period of 60 days and neither the owner nor his agent has accepted the project or moved into the premises. If you have missed this 90 day deadline and there is no Notice of Completion or Notice of Cessation on file with the County Recorder, consult with an attorney to see if any factual scenario might give you more time than you originally thought. (See Civil Code sections 3086, 3115, 3116, 3090, 3095, 3104.)

How to Determine the Last Date of Work

The last day of work on a project is important to determine for several reasons. If the owner records a “Notice of Completion” under Civil Code section 3093, thereby triggering the quicker time frame for contractors (60 days) and subcontractors and suppliers (30 days) to record their mechanics’ liens under sections 3115 and 3116, it is necessary to first determine whether the Notice of Completion is even valid. This is because Notices of Completion must be recorded no earlier than actual completion of the work of improvement and no later than 10 days after actual completion of the work of improvement. If the Notice of Completion is not recorded within this 10 day window then the Notice of Completion is not valid. (See Civil Code section 3093.)

Where the Notice of Completion is not valid or where no Notice of Completion has been recorded, Civil Code section 3115 and 3116 tell us that contractors, subcontractors and material suppliers alike may record their mechanics’ liens beginning when they have finished supplying their own work or materials to the project up until 90 days after completion of the entire work of improvement.

The last day of work on a project or “completion” is defined under Civil Code section 3086. Section 3086 states:

“Completion” means, in the case of any work of improvement other than a public work, actual completion of the work of improvement. Any of the following shall be deemed equivalent to a completion:

(a) The occupation or use of a work of improvement by the owner, or his agent, accompanied by cessation of labor thereon.

(b) The acceptance by the owner, or his agent, of the work of improvement.

(c) After the commencement of a work of improvement, a cessation of labor thereon for a continuous period of 60 days, or a cessation of labor thereon for a continuous period of 30 days or more if the owner files for record a notice of cessation.

If the work of improvement is subject to acceptance by any public entity, the completion of such work of improvement shall be deemed to be the date of such acceptance; provided, however, that, 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, a cessation of labor on any public work for a continuous period of 30 days shall be a completion thereof.” [emphasis added]

Occupation or Use: Occupation or use of the work of improvement must be open and entire, and must concur with a cessation from work, but such cessation need not continue for any particular time, if it is accompanied by occupation or use of the work of improvement. See Baird v. Havas (1946) 72 Cal.App.2d 520, 164 P.2d 952 .

Where occupancy co-exists with or is consistent with further performance of the work, actual completion has not been achieved. There has been only a cessation of labor that must continue for 60 days before the 90 day lien filing period commences. In such case, where no notice of completion or of cessation was filed, the claimant had 150 days (90 days under section 3115 and 3116 plus 60 days under Section 3086(c)) from such occupancy in which to file a mechanics’ lien. See M. Arthur Gensler, Jr. & Associates, Inc. v. Larry Barrett Inc. (1972) 7 Cal.3d 695, 103 Cal.Rptr. 247, 499 P.2d 503.
 
Acceptance: It is not necessary that acceptance be accompanied by cessation of labor, but it must be open and sufficient to give notice by necessary implication. See, Orlandi v. Gray (1899) 125 Cal. 372, 58 P.15; Hammond Lumber Co. v. Barth (1927) 202 Cal. 606, 262 P. 31.
 
Small subsequent changes to the work, including punch list items to correct defective or damaged work (as opposed to punch lists giving notice to complete uncompleted contract work) will not extend the time of actual completion or the time for filing a mechanics’ lien. See Hammond Lumber Co. v. Yeager (1921) 185 Cal. 355, 197 P. 111; Hunley v. Marinkovich (1942) 53 Cal.App 2d. 288, 127 P.2d 600.

Whether or not a project is “subject to acceptance” depends on whether the improvement was required to be accepted by a public entity pursuant to a legislative act despite the fact that the contractor may have otherwise complied with all requirements necessary for approval and acceptance of the project. See, A.J. Raisch Paving Co. v. Mountain View Sav. & Loan Ass’n (1972) 28 Cal.App.3d 832, 105 Cal.Rptr. 96.

It has been held that a subcontractor working on improvements in a shopping mall could not record a valid mechanics’ lien based on the argument that he did so within 90 days after completion of all the work done at all the individual stores in the mall. This was because each store had a separate contract for improvement, the individual shop owners were not in contractual relationships with each other and each store was thus deemed a separate work of improvement. This is not a situation were a single lien could have been filed on the entire mall for multiple improvements made at the request of a single owner. See, Civil Code section 3130, Insul-Acoustics, Inc. v. Lee (1982) 136 Cal.App.3d 552, 186 Cal.Rptr. 324.
 
Cessation of Labor for 60 Days or 30 Days if Accompanied by a Notice of Cessation: The cessation of labor necessary to meet this standard must impart notice to a careful person. The cessation cannot be a “mere clandestine stopping of actual work.” See, Marble Lime Co. v. Lordsburg Hotel Co. (1892) 96 Cal. 332, 31 P. 164.

Note in Regard to Condominiums: Civil Code section 3131 generally provides that if a work of improvement consists in the construction of two or more separate residential units, each unit shall be considered a separate “work of improvement,” and the time for filing claims of lien against each such residential unit shall commence to run upon the completion of each residential unit. However, this has been held inapplicable to condominiums. See, E. D. McGillicuddy Constr. Co. v. Knoll Recreation Ass'n, Inc. (1973) 31 Cal.App.3d 891, 107 Cal.Rptr. 899.

Key California Civil Code Sections:

Civil Code 3092. “Notice of cessation” means a written notice, signed and verified by the owner or his agent, containing all of the following:

(a) The date on or about when the cessation of labor commenced.
(b) A statement that such cessation has continued until the recording of the notice of cessation.
(c) The name and address of the owner.
(d) The nature of the interest or estate of the owner.
(e) A description of the site sufficient for identification, containing the street address of the site, if any. If a sufficient legal description of the site is given, the validity of the notice shall not, however, be affected by the fact that the street address is erroneous or is omitted.
(f) The name of the original contractor, if any, for the work of improvement as a whole.
(g) For the purpose of this section, “owner” means the owner who causes a building, improvement, or structure, to be constructed, altered, or repaired (or his successor in interest at the date of a notice of cessation from labor is filed for record) whether the interest or estate of such owner be in fee, as vendee under a contract of purchase, as lessee, or other interest or estate less than the fee. Where such interest or estate is held by two or more persons as joint tenants or tenants in common, any one or more of the cotenants may be deemed to be the “owner” within the meaning of this section. Any notice of cessation signed by less than all of such cotenants shall recite the names and addresses of all such cotenants.

The notice of cessation shall be recorded in the office of the county recorder of the county in which the site is located and shall be effective only if there has been a continuous cessation of labor for at least 30 days prior to such recording.

Civil Code 3093. “Notice of completion” means a written notice, signed and verified by the owner or his agent, containing all of the following:

(a) The date of completion (other than a cessation of labor). The recital of an erroneous date of completion shall not, however, affect the validity of the notice if the true date of completion is within 10 days preceding the date of recording of such notice.
(b) The name and address of the owner.
(c) The nature of the interest or estate of the owner.
(d) A description of the site sufficient for identification, containing the street address of the site, if any. If a sufficient legal description of the site is given, the validity of the notice shall not, however, be affected by the fact that the street address recited is erroneous or that such street address is omitted.
(e) The name of the original contractor, if any, or if the notice is given only of completion of a contract for a particular portion of such work of improvement, as provided in Section 3117, then the name of the original contractor under such contract, and a general statement of the kind of work done or materials furnished pursuant to such contract.The notice of completion shall be recorded in the office of the county recorder of the county in which the site is located, within 10 days after such completion. A notice of completion in otherwise proper form, verified and containing the information required by this section shall be accepted by the recorder for recording and shall be deemed duly recorded without acknowledgment. If there is more than one owner, any notice of completion signed by less than all of such co-owners shall recite the names and addresses of all of such co-owners; and provided further, that any notice of completion signed by a successor in interest shall recite the names and addresses of his transferor or transferors.
For the purpose of this section, owner is defined as set forth in subdivision (g) of Section 3092.

Civil Code 3106. “Work of improvement” includes but is not restricted to the construction, alteration, addition to, or repair, in whole or in part, of any building, wharf, bridge, ditch, flume, aqueduct, well, tunnel, fence, machinery, railroad, or road, the seeding, sodding, or planting of any lot or tract of land for landscaping purposes, the filling, leveling, or grading of any lot or tract of land, the demolition of buildings, and the removal of buildings. Except as otherwise provided in this title, “work of improvement” means the entire structure or scheme of improvement as a whole.

William L. Porter is a principal in Porter Law Group, Inc. in Sacramento, California.
He can be reached  at (916) 381-7868.