California

Lien Waivers

Lien Waiver Summary

A claimant’s waiver and release does not release the owner, construction lender, or surety on a payment bond from a lien or claim unless both of the following conditions are satisfied:

• The waiver and release is in substantially the form provided by law and is signed by the claimant.
• If the release is a conditional release, there is evidence of payment to the claimant.

Evidence of payment may be either of the following:

• The claimant’s endorsement on a single or joint payee check that has been paid by the financial institution on which it was drawn.
• Written acknowledgment of payment by the claimant. See Cal. Civ. Code § 8124.

Notices

Notice of Commencement (or similar like event)

Not Applicable.

Preliminary Lien Notifications

Before recording a mechanics lien, a claimant must give a preliminary 20-day notice (“20-day notice”) to the owner or reputed owner, the direct contractor or reputed direct contractor, and the construction lender or reputed construction lender. A laborer is not required to give preliminary notice. A claimant with a direct contractual relationship with an owner or reputed owner is only required to give the 20-day notice to the construction lender or reputed construction lender, if any. A mechanics lien claimant that has not given the required 20-day notice will not be able to enforce their mechanics lien. See Cal Civ. Code §§ 8200, 8410.

A form of 20-day notice is included in the statute. See Cal Civ. Code §§ 8202. The notice must be served on the owner or reputed owner, direct contractor or reputed direct contractor to which claimant provides work, either directly or indirectly through one or more subcontractors, or Construction lender or reputed construction lender, if any. See Cal. Civ.

Code § 8200(a). Service must be by personal delivery; registered or certified mail, express mail, or overnight delivery by an express service carrier; or in the same way as a summons and complaint would be served pursuant to Cal. Civ. Proc. Code § 415.20.

Timing of Notice – The preliminary notice must be given no later than 20 days after the claimant first furnished work on the work of improvement. See Cal. Civ. Code § 8204.

Design professionals must give the 20-day notice not later than 20 days after the work of improvement has commenced. See Cal. Civ. Code § 8204(b) and Cal Civ. Code §§ 8300– 8319.

If work was provided by a claimant who did not give a preliminary notice, that claimant is not precluded from giving a preliminary notice at any time thereafter. However, the claimant is entitled to record a lien only for work performed within 20 days before the service of the preliminary notice and any time thereafter. See Cal. Civ. Code § 8204.

After the 20-day notice has been served, it may (but is not required to) be recorded with the county recorder. See Cal. Civ. Code § 8214.7.

Effect of Notice- Giving the 20-day notice in compliance with Cal Civ. Code § 8200 is a necessary prerequisite to the validity of a lien claim or stop payment notice under this title.

Notice of Completion

After completion of a work or improvement, an owner may file a Notice of Completion. Completion of a work of improvement occurs upon any of the following events:

• Actual completion of the work of improvement
• Occupation or use by the owner accompanied by cessation of labor
• Cessation of labor for a continuous period of 60 days
• Recordation of a notice of cessation after cessation of labor for a continuous period of 30 days

A Notice of Completion form that does not comply with the statute is not effective. See Cal. Civ. Code § 8182.

When Must It Be Filed
A Notice of Completion is an effective tool for mitigating risk by forcing claimants to come forward with any liens for unpaid labor or materials. The notice has strict, specific requirements which, if not included in the form, void the notice.

About the California Notice of Completion
In California, when a Notice of Completion or cessation is filed with the county recorder, it serves to shorten the lien-finding period for contractors and suppliers on the project. If a Notice of Completion is not filed, contractors and suppliers have 90 days from final completion to file a lien. If a notice is filed, instead of 90 days, general contractors have only 60 days to file a lien, and suppliers and subcontractors have 30 days.

Who completes and records this document?
A Notice of Completion may be completed by the owner or general contractor and filed with the county recorder. A copy of the notice must be sent to all contractors and suppliers who provided preliminary notices on the project.

Are they required by the State?
No, A Notice of Completion is not required in California, but it may be used by owners to shorten the period that they are vulnerable to liens. This eliminates risk to the owner, general contractor, title company, and construction lender.

Why do construction lenders require the owner to file a Notice of Completion?
Although a Notice of Completion is not required in California, it shortens the period that the collateral is at risk of liens and allows the lender to release the final payment faster. When the Notice is not filed the period of time that the property is exposed to mechanics liens is doubled and lenders and their title company will want to mitigate this by withholding payment until the exposure is eliminated. If the property requires a final title endorsement the title company most likely will require this to issue the final endorsement.

The General Contractor’s time to file a lien is 60 days, however other practices such as a conditional lien waiver for final payment can mitigate this risk and eliminate the General Contractors from being able to file liens.

Where can an owner or general contractor find the document?
If required by a lender it’s ultimately the responsibility of the owner/borrower, however, sometimes the title company or General Contractor will be willing to handle the recording of this document for the property owner. Ultimately the goal is to ensure the document is filled out correctly and recorded within 15 calendar days.

Questions regarding the completion of this document can be directed toward the title company that helped close the transaction.

Important things to know when filing
1. A Notice of Completion (NOC) form must be completed fully and correctly.

2. Must be recorded in the office of the county recorder of the county in which the property is located.

3. Must be filed within (15) calendar days of the actual date of completion of the project. The date of completion is when the Final Certificate of Occupancy is issued, in instances where a Certificate of Occupancy is not issued you can use the Final Inspection sign-off by the local agency having authority over the project, such as a building department.

4. The owner or GC must provide a copy of the recorded NOC to all potential lien claimants. This means they should send a copy of the recorded document to all parties that provided a preliminary lien notice.

5. Must list the correct names of the owners of the property. This is the name in which the title is held.

6. Must show the correct property address.

7. Must be completely filled out. If the Notice of Completion is filled out incorrectly or it is not filed within 15 calendar days from the date the work is indicated as being complete the NOC may be considered unusable.

8. Since it can take an extended period of time to receive the original recorded document from the County Recorder’s office, it’s recommended to take the original and a photocopy of the document and request that the Recorder stamps the copy and give it back. This is called “conforming” the copy.