2012 CHANGES TO CALIFORNIA MECHANICS LIEN LAWS

The article below was provided to me by Scott Levitt at Levitt Law. You can find more information on Levitt Law at http://www.levittlawca.com/.

Effective July 1, 2012 the State of California has created new code sections which cover the lien laws and other related items (stop-notice, bonds, foreclosures, etc.).  The major change is that the Code numbers have been moved from the 3000’s to the 8000’s and 9000’s.  It will take some time for most people to begin referencing the new codes.  However, such must be done as there is no “grace period” for citing old codes.

The actual verbiage of many of the codes has been changed.  Below are the pertinent changes that your company should be aware of.  Please contact Levitt Law, APC for further information regarding these changes to the California mechanics lien laws.

Definition of Completion. The deadline for recording a mechanics lien is generally triggered by the "completion" of a work of improvement.  Under current law, acceptance by the owner is one of the criteria deemed to constitute "completion".   Under new §8180, such is no longer the case.  Each of the following constitute "completion": (1) actual completion of all work on the project, (2) occupation or use coupled with cessation of labor, (3) a cessation of labor for 60 continuous days or (4) for 30 days after recording of a notice of cessation).   Acceptance by a public entity remains unchanged.

Time for Recording Notice of Completion. Under the current law, owners have to record notices of completion within 10 days after actual completion of the project. Under the new law (§8182), that time period is extended to 15 days.

Preliminary Notice. Under existing law, the "Preliminary 20-Day Notice" must be served by most types of lien claimants (not the general contractor) at the outset of their work.  Under the new law, this notice is referred to simply as a "Preliminary Notice” and the required language for the Preliminary Notice has been changed (contact Levitt Law for further information). 

Also, §8200 clearly states that contractors in direct contract with the project owner (GC’s) need only provide a Preliminary Notice to construction lenders, if any.

Waiver and Release of Lien Rights. In order to ensure that a "downstream" subcontractor has validly released its right to assert lien, stop notice, or payment bond rights, the law requires that specific waiver and release language be used. Under the new law (§§8132, et seq.), the required language has been changed slightly; one should be careful to utilize the current form as of July 1, 2012 (contact Levitt Law for further information).

The form utilized for progress payments (as opposed to final payment) does not cover certain disputed or extra work items, or claims based on breach of contract, so “upstream” parties may want to supplement the statutory form with additional releases.

Release Bond. Under the new law (§8424), the amount of the bond required to release property from a lien has been reduced from 150 percent to 125 percent of the lien amount.

Separate Notices of Completion Permitted (Private Works) §8186(a).  In projects where the scope of work is being performed under separate direct contracts with the owner, the owner can now record separate notices of completion upon completion of the scope of work under each separate contract.

Design Professionals’ Liens Can Now Be Converted Into Mechanic’s Liens §8319.  Under existing law, design professional liens were extinguished upon commencement of work. After July 1, 2012, design professionals have the added protection of being allowed to convert their design professional liens into a mechanic’s liens.

Construction Contracts: Space Provided For Identification of Lender §8170(b).  Construction contracts after July 1, 2012, must provide a space for the owner to identify any construction lender.  This requirement does not apply to home improvement contracts or pool contracts.  Also, this section does not relieve a contractor from the service of preliminary notice requirements.  If a construction lender is not identified in the contract, a contractor as part of its due diligence should conduct a search of the county clerk records to identify any undisclosed construction lenders and serve them with the required Preliminary 20-day Notice prior to commencement of work.  For subcontractors, §8202 requires direct contractors to make owner and construction lender information available to subcontractors seeking this information for their Preliminary Notices.

Terminology Updates. The term “stop notice” has been replaced with “stop payment notice.” (§8044).   The term “original contractor” has been replaced with “direct contractor” (§8018).

Errors In A Claim Of Lien Will Not Invalidate The Lien §8422(a)(b).  This new Section codifies existing case law that holds that errors in a claim of lien (i.e., errors in a claimant’s demand, credits, and offsets deducted; the work provided; or the description of the site) do not invalidate the lien.  However, such errors will render the lien invalid if a court determines that: (1) the claim of lien was made with the intent to defraud or slander title; or (2) an innocent third party, without notice, actual or constructive, became the bona fide owner of the property after recordation of the claim of lien, and the claim of lien was so deficient that it did not put the party on further inquiry in any manner.

Attorney's  Fees on Petition to Expunge Lien. The new law removes the current $2,000 limit on the amount of attorney's fees that are recoverable on petitions to expunge stale liens; under the new law, all "reasonable" fees will be recoverable to the prevailing party.  The new law also requires that an owner first make a demand that the lien claimant withdraw the lien at least 10 days before initiating a petition to expunge. 

Inland Empire Association Management

I recently had a condominium association approach me about installing solar panels on the roof of their commercial building. I love these projects because nothing gets me more excited than looking at return on investment.

Electricity Meters in Condo Associations:

Each association is developed differently in regards to utility expenses for condominium complexes. The typical set-up for electricity in condominium complexes is to have one house meter and separate, individual meters for each unit owner. The house meter is paid through the association, and covers electricity usage for parking lot lights, wall packs, irrigation controllers, and other elements that are used for the common benefit of all owners. The individual meters are paid directly by the owner, and cover electricity usage for their interior lights, HVAC, machinery, and anything else that draws power for operating their business. That is how I typically see electricity set-up, but I have seen associations where the electricity is on one meter, and expenses are shared on the pro-rata share outlined in the CC&R's. 

Where does solar energy get complicated for condominium associations?

Most of the boards I’ve worked with on solar projects want a solar energy company to install the system at no cost to the association. In these circumstances a solar energy company owns the equipment they install on the association's roof, and they sell the energy generated from the equipment back to the association at a lower cost than SCE. Here’s the problem: This option requires a lot of electricity use to save any money because the company that installs the solar panels for free needs to recoup their costs. To save money with this option of solar energy every owner that is individually metered needs to contract with the solar energy installer. For example, take a park that has fifteen individual meters and one association meter. Then there would need to be sixteen contracts in place (15 owners + association meter) for this to actually save anyone money. It's all about economies of scale to return on this investment. 

The other complication is there is usually one HVAC unit on the roof for every condo unit.  That usually means there is very limited space for solar panels. Less space on your roof for solar panels means you cannot generate as much electricity. Limited space on the roof typically means solar panels are sectioned off to one area of the roof.  If this is the case running a conduit to service each owners’ electrical meter can become very costly, and off-set the ability for the solar company to be competitive with the rate SCE is charging.

Conclusion:

Solar energy is a great option and can work, but every case is different. Think about what your community is willing to spend, not spend, and the available space you have to make the project work. 

Irvine Property Management

In November 2009 the National Fire Protection Agency (NFPA) released some new additions to the NFPA 72, National Fire Alarm and Signaling Code. The additions made it possible for new communication technologies (GSM & cellular) to be implemented for fire control panel communications. Ratifying this code is beneficial to properties with fire life safety monitoring because it allows for significant cost savings on a monthly basis.

How fire panels work & costs associated with fire panel communication:

Fire panels have two dedicated phone lines to each panel. One phone line is used for primary communication between the building and monitoring company, and the secondary line acts as a back-up to the primary. The monitoring company receives communication from the panel about system status, errors, and possible problems on-site. If there is a problem being reported from the property's fire panel then the monitoring company notifies the property manager or owner, and the necessary steps are taken to address the problem. However, if there is a "water flow" on-site then the fire department is dispatched by the fire monitoring company, and other proper parties (property manager, owner, etc) are notified. The term "water flow" is used to describe water flowing out of fire sprinkler system. If water is flowing out of the sprinkler system then it is safe to usually assume there is a fire.

Understanding the basics of fire monitoring is important because you can better break down the costs associated with these systems. The two basic costs are phone lines and a monitoring contract.

Why it saves money to switch to cellular communication vs. land line:
Land line phone lines have become very expensive to maintain because of copper and how expensive it is to repair/replace. I recently switched a FLS account from 10 hard phone lines to cellular and was able to save $3,780 per year. That is a significant savings, and much larger savings can be achieved on properties that have 20+ phone lines.

How to implement the change to cellular:
You'll want to see the contract you have in place with your current monitoring company. Hopefully you didn't sign an unnecessary long term contract. If you didn't sign a long term contract then you will want to confirm with the monitoring company you're switching to that there are no lock out codes on the fire panel. Some companies lock down panels so other providers can't use the panel in the future. You can get these unlocked but it is difficult to do if you terminate service first. If locked then request them to be unlocked and terminate after.

Also, I've heard of FLS companies telling their clients they will take FLS control panels with them if service is terminated. They aren't allowed to do this because it would leave the system without monitoring capabilities. Push back and you'll win that argument all day. I'm always available if you have more questions and want more details. 

Trestle Street Property Management

We are pleased to announce that Trestle Street Partners has been hired on as the community association manager for four new accounts, effective March 1, 2012! The Board of Directors hired us to facilitate association operations, represent the individual owners, advise the board of California Laws, and manage the common area property.

These four accounts add an additional 2,678,062 square feet of industrial and office product to our management portfolio. We look forward to servicing each account and have provided some information on them below...

Information on New Accounts:

1. This association is located in Ontario, California and consists of twenty-four industrial condominium units. The total building square footage of the property is 163, 411. The association is responsible for maintaining the parking lot, parking lot lighting, landscape, physical building structures, fences, fire life safety systems, and roofs. Each owner is responsible for insuring and maintaining the interior of their units.
2. This association is located in Ontario, California and consists of an eight building industrial park that is structured as a planned unit development. The total building square footage is 278,744. The association is responsible for maintaining the park lot, parking lot lighting, landscape, and fire pump system that services each building in the park. Each owner is responsible for insuring their physical building structure, and is responsible for maintenance of the interior and exterior of their building.
3. This association is a sub-association of the association described in item two above. The association consists of nine industrial condominium units in Ontario, California. The total square footage of the property is 30,690. The association is responsible for maintaining the parking lot, parking lot lighting, landscape, physical building structures, fences, fire life safety systems, and roofs.  Each owner is responsible for insuring and maintaining the interior of the units.
4. This master association is located in Ontario, California and consists of twenty-five parcels. The total parcel square footage is 2,235,907. The association is responsible for maintaining the interior streets, parking lot, street lights, landscape, fences and security service. Each owner is responsible for maintaining their building and parcel improvements.

We understand management of community association business parks is a specialized niche that services sophisticated clientele. Our approach to the industry is uniquely driven by personalized relationships with our clients. We look forward to servicing these new accounts and truly appreciate the great opportunity we have been provided.

Riverside County Community Association Management

Association meetings are conducted by following parliamentary procedure. In the United States the most common parliamentary authority is Robert's Rules of Order (http://www.robertsrules.com/history.html). The process is very formal, and in a neighborly setting can be difficult to employ because most people do not understand or care to follow the process.

The structure of this process is pretty simple. Business is conducted by making a motion, and passing the motion puts something into action. However, just like any vote where a decision is made there is usually a debate. If these debates are not properly managed a simple topic can turn into multiple hour long discussion (not kidding). I have been through hundreds of these meetings, and when a filibuster (a process used to delay legislative action) starts to snowball, I'm always tempted to start referring to myself and others as Senator. For example, I would be Senator Rutherford, part of the Independent Party from the State of Management. Actually, I'm not a voting party so I'm more of a lobbyist or secretary, but the joke resonates with me just the same.

My company employs a very active style of management compared to other association management firms. I draw up an agenda of around twenty topics to discuss; keep the meeting on track; run through agenda line items, and take all the notes for decisions that were made. Other management firms leave the public speaking parts up to the President of the association, and have the association's elected Secretary keep the meeting minutes. I employ this active management style because I know parliamentary procedure, have been through hundreds of these debates, and can keep topics on subject as a moderator. If an independent moderator is not conducting the meeting, you can end up just debating and never taking the topic to vote. Keep in mind these meetings are democratic in nature, and the motion is passed by a majority. Let opinions be vented and voiced, but do not let that stop everyone from making a cumulative decision.

Keeping a meeting timely is important, but more important is staying on topic. SB 563 states that if a topic is not on the posted agenda, then the topic is generally not open for discussion. Simply stating this has helped me move many meetings along in the right direction, and I hope it does the same for you.

Los Angeles Community Association Management

"Why can't we all just get along?"
~ Rodney King

I find myself saying this all the time ... It's important when living or operating in a community association that neighborly respect and non-bias is given to each owner. Conflicts between neighbors are bound to arise, and the insecurity of conflict creates an emotional or rational decision. Let's call the emotional decision a reaction and the rational decision a reflection. By understanding reactive and rational behavior we can better manage our lives, and effectively manage problems/conflicts that arise in community associations.

In my opinion apprehension, a fear that something bad will happen, is the genesis of conflict. The first glimmer of apprehension brings forward a decision between rational or emotional behavior. So, how do "we all just get along" when conflict arises? By dropping apprehension/fear, and moving to rational, reflective authenticity.

The root of fear is Darwinian in nature and grounded in self-survival. Conflict arises, self preservation summits, and an emotional reaction ensues. The emotional reaction is a cold river of guilt, blame, inadequacy, rejection, and fear. In that river of emotion, self preservation is going to surface. Keep in mind that self preservation can be the death of you as you fight the current, tire yourself, and possibly drown. Be rational. Think about rivers ending in calm body's of water. Get to that calm body of water, catch your breath, and take a look at the reflection in the water.

The tumultuous river represents fear, anxiety and the drowning sensation of self preservation. The calm water's reflection represents a mirrored image of peaceful understanding of the problem. Do not drown in the river fighting currents. Use rational behavior or you may never make it to the calm body of water where all your problems are solved.

In my opinion people are subconsciously 90% emotional and 10% rational (that may be a stretch). The same ratio seems to subconsciously exist with people being 90% selfish, and 10% unselfish/altruistic. Don't let self preservation get in the way of altruism. The foundation of community is built on being conscious of mutual, unselfish respect. Focus on rational understanding and reflection, diminish apprehension, and the recipe for getting along seems to intervene.

Remember that people have a decision to make when conflict arises. If you get the emotional decision first, and the rational decision second - don't focus on the emotion. Recognize that the response was likely an emotional fear, and accept the altruistic decision that came later.

San Bernardino County Community Association Management

I want to share with you what buying into a community association means. To effectively get that point across I will compare being a member in an association to marriage. Please keep in mind that this read is meant to provide some laughs, and lighten the load of finer details that many really do not care to read or hear about. With that opening I hope the dialogue provided below will help you better understand what buying into a community association really means.

Love & Marriage & Community Associations:

I will be responding as a property manager to a potential buyer in a community association. Take some time to enjoy, laugh, and digest the life decision I'm depicting below. My responses will be detailed in italics.

What does it mean to buy into a community association?

Have you ever been married or considered marriage?

Yes. I've been married to my husband for 20 long years, and battling with his terrible family that I have loved for the same amount of time.

Good. You will be a natural at living in an association.

What?

Well, think about what you have been presented with. This park has twenty-five different owners that all pay into the same bank account to pay for shared expenses. Buying a unit in this association means you will be married, through a non-profit mutual benefit corporation, to every owner/member in this park.

What if another owner fails to pay their association dues?

Good question! You and your husband both work, correct?

Yes.

If you quit your job then who do you count on for money to pay the bills?

My husbands income.

Same thing runs true in an association. If one owner stops paying then all the other owners are responsible for picking up the slack. You are married to each other, need to co-exist in this park together, and have a fiduciary responsibility to each other.

Am I married to you?

Yep! For now we are engaged, but think of me as your psychologist, or trusted friend that is here to help if you ever run into a problem. Do you lease your space?

Yes. The property manager is terrible and the owner of the property I lease from is a dictator.

Associations are a function of democracy. You have a voice as a member of the corporation, and you no longer have to deal with a property manager that is implementing the rules of a dictator. My function is quite different. I work for each owner in the association/corporation, and enforce the rules created by the board that you elect annually. You have a voice in this community, and you can use me as an extension of your voice if you need anything.

Conclusion:

Marriage can be tough, but, in the end, it's all about compromise and understanding. Take the time to understand what you are buying, and if you have questions, please feel free to contact me.