if an owner is required to file a notice of completion with-in 10 days of a certificate of occupancy, what happens if the subcontractors still has work to complete prior to being paid in full and it will take longer to complete then the lien period?
First, the period within which mechanic’s liens may be filed does not commence until after “completion of the work of improvement”. “Completion” is governed by Civil Code section 3106. Generally, if the work is not completed then the period cannot commence, regardless of a notice of completion.
A notice of completion is only effective to trigger the lien recordation period (and shorten it) if it is recorded after the work is complete. It cannot be recorded prematurely. So , generally, if a subcontractor is still working then “completion of the work of improvement” has not occurred and the notice of completion was ineffective.
But, not all work is of the type or magnitude which will prevent the project from being considered complete. Inconsequential work (e.g. “punch list” items) may not be considered ongoing work .
Also the fact that a certificate of occupancy was issued (and, if it has occurred, the actual occupancy of the project by the owners) need to be considered. These events may impact how ongoing work is viewed, and may in and of themselves be considered acts sufficient to trigger completion.
DISCLAIMERâ€”This answer is for informational purposes. It discusses general legal principles, trends, and considerations and is not intended as specific legal advice regarding your question. This answer does not establish an attorney-client relationship.
In order to be valid, a notice of completion must be recorded within ten days of actual completion. (See Civ. Code, sec. 3093(a) and (e).) Actual completion may be determined in a number of ways pursuant to Civil Code section 3086, and it may include occupation or use of the work of improvement by the owner, or his agent, accompanied by a cessation of labor thereon.
The definition of actual completion can be disputed. It has been the subject of multiple court decisions, and the judicial analysis can be very specific to the particular case. In one case, the court determined that completion did not occur until the installation of four soap dispensers had been completed. (Lewis v. Hopper (1956) 140 Cal.App.2d 365.) In other case, a notice of completion was deemed invalid due to 84 hours of work related to HVAC ducts performed after the notice had been recorded. (Munger & Munger v. McBratney (1955) 131 Cal.App.2d Supp. 866.)
If a notice of completion has been or is filed, this may put subcontractors in a difficult position. Each claimant other than an original contractor should record a mechanic's lien after the subcontractor's work has ceased, and before (a) 90 days after completion if no notice of completion or cessation has been recorded, or (b) 30 days after recordation of a notice of completion of notice of cessation.
Good daily records, delivery receipts, wage records, and other documents may help a subcontractor establish that a notice of completion was invalid due to premature recording.
Invalidity of a mechanic's lien for any technical defect will not prevent suit against the entity or person that hired the contractor for breach of contract or quantum meruit, though there may be collection issues.
If you are a subcontractor involved in the project, and if the dollar amount is significant, you may want to review this matter with your legal counsel.
If you do decide to record a mechanic's lien, please note that the requirements for recording have substantially changed.
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