PROTECTING STATUTORY LIEN RIGHTS ARISING FROM COVID-19 DELAYS ON NON-ESSENTIAL CONSTRUCTION PROJECTS
Posted by GibbsGiden Under Construction and Public Contracts
The State of California has released guidance exempting construction workers “who support the construction, operation, inspection, and maintenance of construction sites and construction projects (including housing construction)” from Governor Newsom’s March 19, 2020 shelter in place order. This broad exemption includes commercial construction projects. However, many counties and certain cities have issued more restrictive orders pursuant to authority vested in the California Health and Safety Code, which grants local health officers the discretion to take preventive measures necessary to protect and preserve public health in their respective jurisdictions. Generally speaking, these orders have imposed a moratorium on all construction projects (with exceptions for housing and public works construction) which are not deemed “essential infrastructure.”
When and how these orders will be ultimately lifted is unknown, sowing uncertainty into “non-essential” construction projects throughout California. In addition to carefully complying with all contractual notice provisions for delays arising from the COVID-19 pandemic, it is essential that contractors appreciate how their statutory lien rights may be impacted as a result of suspensions to ongoing projects.
It is widely understood that contractors have 90 days to record a lien after completion of a project, or 30 days after the owner records a notice of completion (60 days for direct contractors). However, it is critical to recognize that lien rights may expire sooner when a project is temporarily suspended. Pursuant to California Civil Code §8180, completion of a work of improvement is deemed “completed” when there is a cessation of labor for a continuous period of 60 days, which triggers the clock on asserting lien rights. An owner can also shorten the time period by recording a notice of cessation, after cessation of labor for a continuous period of 30 days.
California law strictly construes lien recordation deadlines. Cessation of work should impart “notice to a careful person.” Marble Lime Co. v. Lordsburg Hotel Co. (1892) 96 Cal. 332, 337. Where the owner subsequently completes the project after a cessation, it will not operate as an extension of time in which to file a notice if the statutory period has passed. Stanislaus Lumber Co. v. Pike (1942) 51 Cal.App.2d 54, 59; Hubbard v. Jurian (1917) 35 Cal. App. 757.
Accordingly, it is imperative for contractors to remain vigilant of applicable deadlines and prepared to timely record lien claims in order to preserve their statutory rights during COVID-19 project suspensions. Because many County Recorder offices are currently closed to the public, lien documentation should be submitted by FedEx with sufficient time to ensure intake and processing in advance of recordation deadlines.
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Mr. Trembley’s practice encompasses a wide range of complex commercial and insurance defense litigation. He has extensive experience in all aspects of case management, from investigations and discovery through law and motion practice and trial preparation. Chris also assists the firm’s clients in various contract and transactional matters and has a strong track record of success both in the courtroom and at the negotiation table.