Changes to Mechanics Lien law in California

Changes to Mechanics Lien law in CaliforniaOn July 1st, 2012 a number of significant changes to Mechanics Lien Law in California went into effect. It is hard to gauge exactly how much impact these changes have had lien filings in California. A recent article By Carlos Rico in The Daily Transcript postulates that there haven’t been a significant rise or fall in the number of lien filed in the state. He goes on to say that the strength of the economy (or lack of) if the determining factor in mechanics lien filings. (See Carlos’s article here). Taking these arguments into account one could argue that . . . maybe it is too early to decide if the changes to the mechanic’s lien law will produce their intended outcome: to streamline lien filing practices so contractors can get paid for their work.

This Jurisco blog has burned of many words updating California Attorneys on the workings of the Transfer of Lien Bond; also known as a Release of Lien Bond. Changes made to the mechanic’s lien law have a direct effect on any issuing of a Transfer of Lien Bond or a Release of Lien Bond in California. The new law reduces the size of the bond required to adequately release a property of a lien from 150 percent of the lien amount to 125 percent. See below or this Linkfor text of the code)

The good news: This reduction in bond amount makes it easier to issue these bonds. Extrapolated Further: This will help contractors collect payments because a Transfer of Lien Bond (or a Release of Lien Bond) is a legal mechanism that guarantees payment of contested amount if the property owner is found to be liable for the sum.

Does all this sound like a foreign language to you? If so, don’t be daunted. It is complicated. Luckily the surety bond experts at Jurisco can help make sense of all these changes. Contact a representative today.

CA Code 8410-8424

“8424. (a) An owner of real property or an owner of any interest in real property subject to a recorded claim of lien, or a direct contractor or subcontractor affected by the claim of lien, that disputes the correctness or validity of the claim may obtain release of the real property from the claim of lien by recording a lien release bond. The principal on the bond may be the owner of the property, the direct contractor, or the subcontractor.

(b) The bond shall be conditioned on payment of any judgment and costs the claimant recovers on the lien. The bond shall be in an amount equal to 125 percent of the amount of the claim of lien or 125 percent of the amount allocated in the claim of lien to the real property to be released. The bond shall be executed by an admitted surety insurer.

(c) The bond may be recorded either before or after commencement of an action to enforce the lien. On recordation of the bond, the real property is released from the claim of lien and from any action to enforce the lien.

(d) A person that obtains and records a lien release bond shall give notice to the claimant. The notice shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1 and shall include a copy of the bond. Failure to give the notice required by this section does not affect the validity of the bond, but the statute of limitations for an action on the bond is tolled until notice is given. The claimant shall commence an action on the bond within six months after notice is given.”

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