Page 8 - State Law Summary of Mechanic's Lien Law

California CA

What is the statutory authority? When does a mechanic’s lien have to be filed for claimant to maintain
California Civil Code § 8000 through § 8848 and § 9000 to § 9566. lien rights?
Original contractor: (a) after the contractor completes the direct contract and (b)
What is the Attachment Date of the Mechanic’s Lien? before the earlier of the following times: (1) 90 days after completion of the work
The lien attaches upon filing of the lien. Cal. Civil Code § 8410. of improvement or (2) 60 days after the owner records a notice of completion or
cessation. Cal. Civil Code § 8412. Subcontractor: (a) after they have ceased to
What constitutes visible commencement of construction? provide work and (b) before the earlier of the following times: (1) 90 days after
Commencement of work of improvement generally means any visible activity on the completion of the work of improvement; (2) 30 days after the owner records a
the subject property which indicates that construction has begun, and includes, notice of completion or cessation. Cal. Civil Code § 8414.
but is not limited to: perimeter fencing to secure the site, deposit of building
materials on the site, equipment located on the site which will be used for or What is the period of enforcement of a filed mechanic’s lien?
during the construction work, grading, etc. An action to foreclose the lien must be commenced in a court of competent
jurisdiction within 90 days after the recording of the claim of lien. If the claimant
What is the priority of the insured construction mortgage/ does not commence an action to enforce the lien within that time, the claim of
deed of trust? lien expires and is unenforceable. Please review the statute for an exception for
A Deed of Trust securing a construction loan will have priority over subsequently extension of credit. Cal. Civil Code § 8460.
recorded mechanic’s liens if it was recorded and the obligation it secures was
created before commencement of the work of improvement to which the lien Is there a procedure to bond over the mechanic’s lien(s)?
claimants furnished labor or materials. However, even if the Deed of Trust is Yes. Under Cal. Civil Code § 8424, it allows a property owner or contractor effected
recorded before the beginning of any visible work on the property, a lien claimant by a mechanic’s lien to record a mechanic’s lien release bond equal to 125 percent
may obtain priority as a result of (a) certain types of site work begun previously of the lien amount with the County Recorder where the mechanic’s lien has been
(see discussion below), (b) advances by the lender in violation of the building loan recorded.
agreement, or (c) lack of a valid obligation at the time work began. Cal. Civil Code
§ 8450-8458. Are the ALTA 32/33 Series Endorsements available for the Loan Policy?
Yes.
California law has special priority rules for “site improvements,” which includes
both on-site work completed within the boundary of the jobsite and off-site work
completed outside the boundary of the jobsite. In California, “site improvements”
include 1) grading, filling, or otherwise improving the real property or a street,
highway, or sidewalk in front of or adjoining the real property, 2) construction
or installation of sewers or other public utilities, and 3) construction of areas,
vaults, cellars, or rooms under sidewalks. As such, this work can stealthily prime
incoming financing. The danger, of course, is that this work is not obvious even
when a priority inspection is performed. Oftentimes the only way title would be
aware of the off-site work would be if it is mentioned in the construction contract
and if this work commenced prior to the loan then priority of the insured deed of
trust is lost to mechanic’s liens. One way that parties address this possible loss of
priority is by utilizing a separate contract for construction of site improvements.

If the sole or primary purpose for recording the deed of trust is to secure a loan to
pay the costs of the site improvements, then said deed of trust even if recorded
before commencement of work for site improvements, will not have priority
over a mechanic’s lien arising from the site improvements unless either: (1) A
payment bond for the site improvements is recorded; or (2) The loan funds for
the site improvements are, in good faith, placed in the control of the lender under
an agreement with the borrower providing that: (a) the funds will be used to pay
claimants; and (b) no portion of the funds will be paid to the borrower unless all
claims of mechanics have been paid, or the period for filing mechanic’s lien claims
has expired and no claims of lien have been filed. Cal. Civ. Code § 8458.

If priority of the insured mortgage/deed of trust is lost, is there a
statutory procedure to regain priority?
No.

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