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March 2013

A Novel Solution to a Common Problem

The state of California has enacted several important changes to mechanic’s lien laws, with significant application to the practice of design professionals throughout the state.  Case law interpreting the former code sections will continue to apply, but there are several important substantive changes to the pre-existing lien statutes.  Former California Civil Code §§ 3082 through 3267 have been renumbered beginning at Civil Code § 8000, including new payment enforcement remedies that replace the design professional lien provisions previously enacted.  The new laws became effective on July 1, 2012.   
 
At the outset, the law includes an expanded definition of “design professional.”  Consistent with the prior statute, architects, engineers, and land surveyors are designated as "design professionals," but now, landscape architects also are included in that definition.
 
Under the new law, there will no longer be a "design professional lien" in a literal sense.  Instead, design professionals will be permitted to record a mechanic’s lien prior to commencement of actual construction of a planned work of improvement.  Recording a lien only when construction has actually commenced is not always sufficient for design professionals who frequently provide services for projects that never actually begin due to financing issues or municipal delays.  However, the new law creates a feasible means by which the designer can record a mechanic's lien for professional services before "the first shovel hits the dirt."  The ability of the design professional to record a pre-construction mechanic’s lien is subject to the same requirements as the previous lien laws (i.e. a building permit or other governmental approval of the work of improvement has been obtained and the person contracting with the design professional is the owner of the property to be improved).
 
In addition, because a design professional's pre-construction mechanic’s lien expires upon commencement of a work of improvement, the new law states that a design professional may convert a recorded pre-construction mechanic’s lien into a regular mechanic’s lien within thirty-days of commencement of the work of improvement.  To effectuate such a conversion, the professional must re-record the pre-construction mechanic’s lien and clearly indicate that it is a “converted” pre-construction mechanic’s lien.  However, no preliminary lien notice is required by the design professional if a pre-construction mechanic’s lien is converted into a regular mechanic’s lien.
 
If not converted, a pre-construction lien by a design professional expires 90 days after it was recorded, unless the design professional commences an action to foreclose on the lien.  If the affected property owner partially or fully satisfies the amount owed under the mechanic’s lien, the design professional must record a notice of the partial or full satisfaction of payment and release the lien.
 
Despite the newly designated ability to convert a mechanic's lien once construction commences, the new statute maintains the same notice and recording requirements as the previous law.  That is, before recording a lien, the design professional must give at least 10 days’ written notice to the property owner stating:  1. that a default has occurred; 2. the amount of the default; and 3.  a demand for payment.  In addition, the recorded mechanic’s lien must include the name of the design professional, the name of the current property owner of record, a legal description of the property, the amount of the claim, and identify the building permit or other governmental approval for the planned work of improvement.
 
Although several of the requirements in the former design professional lien law continue to apply under the new statutes, there are a number of substantive changes that benefit a wide array of design professionals.  It is important for architects, registered engineers, land surveyors, and now landscape architects to realize  they have these lien remedies at their disposal and to adjust their procedures accordingly to protect these newly enacted rights. 

Construction

Jesse J. Blyth



Construction