Mechanic's Liens, Bonds and Stop Notices

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A recent California case may force engineering, procurement and construction companies doing business with foreign suppliers to reconsider—and maybe rewrite—their contracts. In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business.
Continue Reading EPC Contractors Procuring from Foreign Companies need to Reconsider their Contracts

As of January 1, 2018, direct contractors in California who make or take a contract “for the erection, construction, alteration, or repair of a building, structure, or other private work” are jointly and severally liable with their subcontractors for any unpaid wages, fringe benefits and other benefit payments or contributions owed to wage claimants. Governor Brown approved AB 1701 on October 14, 2017. The new law puts the onus on direct contractors to not only monitor their own payroll practices, but to ensure that their subcontractors and lower tier subcontractors are engaging in proper payroll practices.
Continue Reading Direct Contractors In California Should Take Steps Now To Reduce Exposure For Unpaid Wages By Subcontractors

Contractors may benefit in making a small equity investment in the projects they construct. The financial benefit can arise from the investment itself and from improved understanding and communication with the owner during construction itself.

In the past, it was not unusual for construction companies to make small equity investments in the projects they worked on. For example, a construction company building a power plant would take a 5% equity interest in the project. By taking a financial stake in the project, contractors planned to protect their business interest in the project. That was the theory, anyway. Many of these investments did not provide the good returns; often-times the return was negative. While the construction company’s management was great at operating the construction business, it was not so great when it came to the financing business. So the idea went out of fashion.
Continue Reading Contractors May Benefit by Taking Equity in the Project They are Constructing

The amount of a mechanic’s lien in California is generally the lesser of: 1) the reasonable value of the work; or 2) the price agreed upon in the lien claimant’s contract. But does the same measure apply if a lien defendant was not a party to the contract? In Appel v. Superior Court of Los Angeles County, 214 Cal. App. 4th 329 (2013), the appellate court clarified that the same measure does apply.
Continue Reading New Court Decision Clarifies Mechanic’s Lien Valuation Statute

In 2010, the California Legislature enacted Senate Bill (“SB”) 189 to reorganize and simplify the laws governing works of improvement. The bill completely re-writes the statutes which provide for mechanics liens, stop notices and certain construction bonds. These revisions took effect on July 1, 2012. In addition to this reorganization, some substantive changes to the laws governing mechanics’ liens, construction bonds, and stop notices were made. As a result, all of the forms commonly used in the industry, such as the 20-Day Preliminary Notice, Notice of Completion, and Progress/Retention Payment Releases must be changed.
Continue Reading Special Advisory: New Mechanics Lien Act in California

Can a supplier of construction materials be considered a “subcontractor” for purposes of enforcing its claim on a public works payment bond? The answer is “yes” according to a recent decision of the California Court of Appeal. In Eggers Industries v. Flintco, Inc., et al., 201 Cal. App. 4th 536 (3d Dist. 2011), rev. denied (Feb. 15, 2012). The Court affirmed the rule that a “subcontractor’s status as a subcontractor must be determined based on what the subcontractor agrees to do, not what it actually ends up doing,” citing a fifty year-old California Supreme Court decision. In so holding, Eggers provides important guidance regarding the scope of recovery against a public works payment bond permitted by Civil Code sec. 3248 and its replacement, the newly chaptered Civil Code sec. 9554, which takes effect in July 2012.
Continue Reading Court Broadly Defines Subcontractors Who Qualify For Payment Bond Claims

This article is the fifth in a series summarizing construction law developments for 2010.

By Candace Matson, Harold Hamersmith & Helen Lauderdale

A. Bidding

  1. Great West Contractors Inc. v. Irvine School District, 187 Cal. App. 4th 1425 (4th Dist. Aug. 2010)

In Great West Contractors, the Fourth District held that a public agency’s rejection of a bid for a public works project on the basis that a corporate bidder did not list its officers’ licenses is a question of bidder responsibility, not bid responsiveness, and therefore a due process hearing was required. The Court of Appeal said that the case is important for two reasons. First, it presents a challenging problem in public contracting law: how to distinguish a "non-responsive" bid from a de facto determination that the bidder is not a "responsible" bidder. Second, the case presents what the court called "an object lesson in how evidence that, at least on its face, tends to show favoritism – indeed, on this record, favoritism most foul – never got squarely presented to, or considered by, the trial court." The Court invited readers of the opinion to judge for themselves whether "stonewalling" might not be a better word than "delay" for describing the public agency’s actions.
 Continue Reading The Year 2010 In Review: Public Works Projects

This article is the third in a series summarizing construction law developments for 2010.

By Candace Matson, Harold Hamersmith & Helen Lauderdale

A. Mechanic’s Liens

1. New Requirement for Mechanic’s Liens (AB 457)

Effective January 1, 2011, Civil Code Section 3084 is amended to require that mechanic’s lien claimants must give notice of certain information included in the lien claim to the property owner and accompany the notice with a proof of service affidavit.
 Continue Reading The Year 2010 In Review: Mechanic’s Liens, Lis Pendens and Construction Bonds

By Edward Lozowicki & James Higgins

California contractors and material suppliers beware. Beginning on January 1, 2011, a mechanic’s lien claimant will be required to give notice of a mechanic’s lien to the property owner. The notice must contain specific information, be included on the lien claim and be accompanied by a proof of service affidavit. Failure to comply invalidates the lien as a matter of law. (Assembly Bill 457 (2009), amending California Civil Code Section 3084.)

Continue Reading Mechanic’s Lien Update: Lien Claimants Must Now Give Owners “Notice of Mechanic’s Lien”

By Scott Hennigh

In California and most states, a contractor can get some security to assure that it will be paid for its work on a project. An unpaid contractor on a private project can go to the county recorder and record a mechanic’s lien against the property to which it provided labor, service, materials or equipment. The mechanic’s lien makes the property security for the debt owed to the contractor. Then, if the project owner still does not pay, the contractor can file a complaint requesting that a court enter judgment and order a foreclosure sale of the property so that the debt can be paid from the sale proceeds.Continue Reading Get Paid With A Powerful Alternative to California’s Mechanic’s Lien

In AF Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc., issued March 23, 2006, the Fourth Appellate District was faced with the question of whether an electrical supplier’s conduct in filing a stop notice fell within the ambit of C.C.P. § 425.16, the anti-Slapp statute.Continue Reading Appellate Court Finds That the Filing of a Stop Notice Is Potentially Subject to the Litigation Privilege if Made in Good Faith Contemplation of Litigation