Construction Law Forms & Links
Preliminary 20 day Notices: Claimants who do not have a direct contractual relationship with the owner (e.g., subcontractors/materials suppliers) must provide a Preliminary Notice within 20 days of furnishing labor or materials to the job. This ensures that the owner is aware of a potential lien claimant, so that appropriate steps can be taken to confirm that the contractor is paid. Preliminary Notices must be provided to the owner, general contractor, and lender.
In the past, subcontractors viewed the 20 day notice as optional, depending on their assessment of the risk that the General Contractor would not pay them and, if they had a long standing trusted relationship with the GC, did not bother to issue them. Now, if your work costs more than $400, failing to issue a 20 day notice could potentially be a disciplinary violation with the CSLB. Civil Code § 8216
And if you are a General Contractor on a project that has a lender financing the work, you also need to issue a 20 day preliminary notice to the lender to preserve stop notice rights with the lender later. Civil Code §8200(e)(2)
Recording the 20 day Notice:
(Belts and Suspenders) The recordation of a Notice of Completion or a Notice of Cessation can impact deadlines for a Builder’s lien or stop rights. A Builder can get the Recorder to mail notices of when either of those triggering notices is filed simply by recording the 20 Day Notice when it is issued. (If the Recorder errs and does not mail those notices, by statute, it is not responsible for the consequences and there is no defense for missing a deadline because of a Recorder’s failure here. So it is not a fail-safe substitute for watching those recordations on open projects, but it is an added layer of protection a Builder might want to consider making a back office practice.) Civil Code §8214
A Mechanics Lien is an effective remedy for contractors, subcontractors, and others involved in the construction or improvement of real estate to resolve payment problems. If a service or materials provider records a Mechanics Lien against the real estate being improved, the owner cannot easily sell or refinance the property without first paying off the debt secured by the lien. A Mechanics Lien motivates the owner to make sure the contractors get paid by the Owner, and that the subcontractors and materials suppliers get paid by the GC. It is a prerequisite to filing a foreclosure action on the property. As of January 2011, a Notice of Mechanics Lien to the Owner and a Proof of Service Affidavit are now required.
A Stop Notice attaches to the owner’s undisbursed construction funds, rather than to the property itself, as is the case in a Mechanics Lien. Because it attaches to liquidated monies, it is a good security tool for builders and materials suppliers. It can be a companion to a lien, so a builder doesn’t have to choose the form of security; a builder can assert them both.
A Stop Notice compels the owner or lender to hold the remaining construction funds so that claimants can recover for work already completed. Stop Notices are not available to claimants with a direct contractual relationship with the owner.