C2A-KS18 Flashcards
Knowledge of the Design Professionals and Mechanic's Lien Laws.
design professionals, mechanics lien, and stop notice laws are governed under what code
CA civil code
Per the design professionals lien law who is considered a deign professional
licensed:
- architect
- landscape architect
- professional engineer
- land surveyor
A design professional can only use the design professional lien law IF…
-construction has not yet commenced
and
-a building permit or other governmental approval has been obtained
-can be used on public or private
True or false. A design professional can use a design professional lien after construction has begun
False.
Once construction has begun any liens used is considered a mechanics lien
mechanics liens can be used on private and public projects
false mechanics liens cannot be used for public projects
what type of project is a design professionals lien not allowed
owner occupied residences for which the expected construction cost is less than $100,000
What are the steps to filing a design professionals lien
- determine whether construction on the project has commenced
- determine government approval (e.g. building permit)
- send demand letter to landowner: done 10 days prior to recording lien
- record design professionals lien: done 10 days after giving notice to landowner
- enforce the lien: file lawsuit within 90 days after recording the lien
What is a stop notice?
- similar to a lien
- lien against funds
How to protect owner from liens?
- require the contractor to purchase a performance bond and payment bond (AIA-A312-2010)
- receive signed lien releases from subcontractor at time of payment
- architect process contractor’s request for payment in a timely manner
- collect and hold rearrange
- recommend the owner file the notice of completion with the county recorder to recede lien period
-for public projects, a stop notice is served to
the owner of public work
-for private projects, a stop notice is served to
the lender
One major difference between a design lien and a mechanic’s lien is that
a mechanic’s lien only applies to labor, materials and services actually used in the project to improve the property and, thus, requires that the project actually commences, whereas a design professional’s lien is used when the construction never commences.
A stop payment notice creates a lien on…
…undisbursed construction funds held by an owner or construction lender. If a stop payment notice claimant has not been paid, the claimant can serve a stop payment notice on an owner which requires the owner to withhold funds from a direct contractor or, on lender financed projects, serve a stop payment notice on a construction lender which requires the construction lender to withhold funds from an owner.
Mechanics Lien — Section 8400
Section 8400. A person that provides work authorized for a work of improvement, including, but not limited to, the following persons, has a lien right under this chapter:
Direct contractor Subcontractor Material supplier Equipment lessor Laborer Design professional
A Mechanics Lien is a legal claim against
real property for satisfaction of a debt (i.e. you or another individual perform work on a private project and are not paid for your service or materials, you can file a mechanics lien)
- Any individual or business that supplies labor or materials on a private project have mechanics lien rights
Architects have mechanics lien rights
-The creation of a mechanics lien does not affect ability to pursue other remedies
True or False
Mechanics Liens are allowed to be utilized on public projects
False
Mechanics Liens are not allowed to be utilized on public projects
What is the prerequisite before someone can file for a Mechanic’s Lien?
-Prerequisite — Send the Preliminary 20 Day Notice Within 20 days of furnishing labor or materials, subcontractors must serve a "Preliminary 20 Day Notice" to Owner, by certified first class mail or in person, which allows the Owner to be made aware of the lien rights of the subcontractors/vendors
- Sending the Preliminary 20 Day Notice helps the subcontractors/vendors protect their lien rights in case they need to file a mechanics lien for failure of payment
- Failure to send the Preliminary 20 Day Notice can cause the subcontractors/vendors to lose some or all of their lien rights
True or False
Architects and General Contractors do not have to send the Preliminary 20 Day Notice as they have a direct contract with the Owner
True
Mechanic’s Lien
Step 1 — Serve Notice of Mechanics Lien
Must serve “Notice of Mechanics Lien” on the Owner of the property by registered mail
prior to recording the lien
Mechanic’s Lien
Step 2 — Record Mechanics Lien
This step involves “recording the lien” at the County Recorder’s Office in the County
where the project is located
Section 8416. (a) A claim of mechanics lien shall be a written statement, signed and verified by the claimant, containing all of the following:
(1) A statement of the claimant’s demand after deducting all just credits and offsets.
(2) The name ofthe owner or reputed owner, if known.
(3) A general statement of the kind of work furnished by the claimant.
(4) The name ofthe person by whom the claimant was employed or to whom the claimant
furnished work.
(5) A description of the site sufficient for identification.
(6) The claimant’s address.
(7) A proof of service affidavit completed and signed by the person serving a copy of the claim of mechanics lien pursuant to subdivision (c). The affidavit shall show the date, place, and manner of service, and facts showing that the service was made in accordance with this section. The affidavit shall show the name and address of the person or persons upon whom the copy of the claim of mechanics lien was served, and, if appropriate, the
title or capacity in which he or she was served.
(8) The following statement, printed in at least 10-point boldface type. The letters ofthe last sentence shall be printed in uppercase type, excepting the Internet Web site address of the Contractors’ State License Board, which shall be printed in lowercase type:
“NOTICE OF MECHANICS LIEN A TTENTION!
Upon the recording of the enclosed MECHANICS LIEN with the county recorder’s office of the county where the property is located, your property is subject to the filing of a legal action seeking a court-ordered foreclosure sale of the real property on which the lien has been recorded. That legal action must be filed with the court no later than 90 days after the date the mechanics lien is recorded. The party identified in the enclosed mechanics lien may have provided labor or materials for improvements to your property and may not have been paid for these items. You are receiving this notice because it is a required step in filing a mechanics lien foreclosure action against your property. The foreclosure action will seek a sale of your property in order to pay for unpaid labor, materials, or improvements provided to your property. This may affect your ability to borrow against, refinance, or sell the property until the mechanics lien is released. BECAUSE THE LIEN AFFECTS YOUR PROPERTY, YOU MAY WISH TO SPEAK WITH YOUR CONTRACTOR IMMEDIATELY, OR CONTACT AN ATTORNEY, OR FOR MORE INFORMA TION ON MECHANICS LIENS GO TO THE CONTRACTORS’ STATE LICENSE BOARD WEB SITE A T www.cslb.ca.gov.”
Mechanic’s Lien
Step 3 —Enforce the Mechanics Lien
File lawsuit to foreclosure mechanics lien within 90 calendar days of the date the mechanics lien was recorded
Timeframes to be aware of regarding Mechanics Liens
If Notice of Completion or Notice of Cessation (work has formally stopped) is not filed by the Owner (we’ll cover Notice of Completion in Knowledge Statement #52), then the period in which to file a lien is
90 days from the completion of construction
Timeframes to be aware of regarding Mechanics Liens
If the Notice of Completion or Notice of Cessation is filed, the lien period is reduced to;
- for Prime Contractors — reduces lien period to 60 days
- for Subcontractors — reduces lien period to 30 days
An advantage to the Owner of filing the Notice of Completion is
it reduces the period in which claimants can file a lien, thus reducing the Owner’s window of liability
True or False
When pursuing liens, Stop Notice is the only lien available for public projects
True
mechanics liens are not allowed to be utilized on public projects
Notice of Non-Responsibilitv
Notice of Non-Responsibility —is utilized when a tenant (not Owner) of a space is performing work and the Owner (landlord) wants to protect themselves from any liens stemming from the failure of the tenant to pay contractors and vendors. The Notice of Non-Responsibility is
completed by the Owner and physically posted at the construction site.
Bonded Stop Notice
a stop notice presented to a construction lender accompanied by a bond with good and sufficient sureties for 125 % of the claim. If a Bonded Stop Notice is presented to the lender, the lender does not have the option to withhold funds
The owner has received a preliminary notice for a mechanic’s lien and calls the architect about it? What should the architect say?
Explain to owner what a preliminary notice
Let the owner know that it’s to give the owner notice that a contractor and/or vendors will be providing materials and/or labor for the owner’s project and that they have lien rights that will be used if they do not get paid for their services.
There is no further action required from owner
Owner should send copy of notice to architect so that architect can keep it for project records.
True or False
In order to have your lien, the work,and/or materials, etc., don’t have to be incorporated into the structure.
False
In order to have your lien, the work,and/or materials, etc., MUST be incorporated into the structure. That is to say that it has to be installed.
