Articles > Construction law in California
The Importance of a Notice of Completion to Contractors, Subcontractors and Suppliers
by William L. Porter, Attorney at Law
The recording of a valid “Notice of Completion” with the County Recorder is an event of significance to owners, contractors, subcontractors and suppliers alike. The recording of a Notice of Completion is one of several methods used to trigger the time period for the filing of mechanics’ liens and stop notices. Although the recording of a Notice of Completion is not absolutely required on any given project, all those working in the construction industry should understand its significance.
Where a valid Notice of Completion is not recorded in relation to a construction project, a contractor, subcontractor, or supplier might from ninety to one hundred fifty days after completion of the project to record a mechanics’ lien or file a stop notice to secure payment for their services on the project, depending on the facts. However, if a valid Notice of Completion is recorded, then the deadline under most circumstances accelerates and subcontractors and suppliers must record a lien or file a stop notice within only thirty days thereafter. Under the same circumstances, a prime contractor has only sixty days after the recording of a valid Notice of Completion to record a mechanics’ lien. Failure to meet these deadlines often results in loss of the right to a mechanics’ lien or stop notice. There are limited exceptions to these general deadlines, depending on the facts. For example, under Civil Code Section 3097(c)(5) and 3259.5 owners of many private projects must inform subcontractors and suppliers that a Notice of Completion has been recorded. The failure to provide such notice may extend the 30 or 60 day time period to record a mechanics’ lien to 90 days, depending on the facts. Most of the relevant rules are found in Civil Code Sections 3082 through 3267. If you believe you may have missed an important deadline to seek collection of a construction debt, you should consult with a construction attorney immediately to secure your avenues of collection.
Through the proper use of a valid “Notice of Completion” owners can protect themselves by accelerating the date for filing of mechanics liens and stop notices. Contractors, subcontractors and suppliers must remain vigilant to ensure they become aware of the date a Notice of Completion is recorded. The common result of the owner accelerating these deadlines by recording a valid Notice of Completion is that any contractors, subcontractors or suppliers who are not vigilant will lose their rights to a mechanics’ lien, stop notice or bond claim. This result greatly benefits the owner because it cuts off the rights of subcontractors and suppliers to bring direct legal action against the owner or the owner’s real property. Those who miss the deadlines will generally be limited to an action against the prime contractor with whom they contracted and will generally have no direct legal right against the owner.
Unfortunately, except for certain private projects, owners and prime contractors are under no legal obligation to notify suppliers and subcontractors that a Notice of Completion has been recorded. One way for subcontractors and suppliers can help ensure they will be given a copy of the Notice of Completion after it is recorded is through the use of the procedures set forth in California Civil Code section 3097(o). Under that section a potential claimant who files a properly completed Preliminary Twenty Day Notice with the County Recorder of the County where the property is located should receive a copy of the Notice of Completion from the County Recorder after the Notice of Completion is recorded.
One drawback to this procedure is that there is no apparent penalty against the County Recorder’s office for failing to fulfill its obligation to notify the claimant that a Notice of Completion has been recorded. If a claimant fails to timely file a mechanics’ lien or serve a stop notice in reliance on the County Recorder providing section 3097(o) notice, and the County Recorder in fact fails to send a copy of the recorded Notice of Completion to the claimant who properly followed the procedure in section 3097(o), the claimant will have no recourse against the County Recorder if the claimant misses the deadline for filing a lien or stop notice.
Many County Recorder’s offices responsibly send out Notices of Completion to those who use the procedure specified in Civil Code section 3097(o). However, a wise supplier or subcontractor should consider the propriety of filing a mechanics’ lien or serving a stop notice at the earliest legal opportunity, consistent with good business judgment depending on the situation. Suppliers and subcontractors would also do well to at least consult with other trusted subcontractors or suppliers on the job to determine when the job is completed and a Notice of Completion might be filed. If the deadline is missed, the opportunity for a lien or stop notice is generally lost forever. Good calendaring procedures and diligent attention to job site status are the keys to avoid missing your collection remedy deadlines.
William L. Porter is a principal in Porter Law Group, Inc. in Sacramento, California.
He can be reached at (916) 381-7868.