Topic:
LIENS; MOTOR VEHICLES; CONTRACTORS;
Location:
LIENS;
Scope:
Connecticut laws/regulations;

OLR Research Report


The Connecticut General Assembly

OFFICE OF LEGISLATIVE RESEARCH




May 2, 1997 97-R-0628

TO:

FROM: Helga Niesz, Principal Analyst

RE: Connecticut and California Mechanic's Lien Statutes

You asked for a comparison of Connecticut and California mechanic's lien statutes.

SUMMARY

A mechanic's lien is intended to secure payment for work performed and material supplied by a contractor or subcontractor in a construction or home improvement project.

Under Connecticut law, a mechanic's lien becomes valid when recorded on a town's land records within 90 days after the work is done or materials furnished, and remains valid for one year, unless the claimant takes legal action to foreclose the lien on the property. In Connecticut, the claimant must serve a true and attested copy of the lien certificate on the property's owner anytime before he records it with the town or up to 30 days after the recording.

The major difference between the two statutes is that the California law requires a contractor (other than the original contractor) or subcontractor to send an additional earlier preliminary notice to the owner within 20 days after the work has begun or after the claimant has begun to furnish the materials. The preliminary notice, among its other provisions, must warn the owner that a mechanic's lien leading to the loss of the property through foreclosure could be placed against the property even if the owner pays his bills in full to the original contractor. The notice must suggest specified ways of protecting against this outcome. If an invoice contains this information, that is sufficient notice. The notice must also be sent to the construction lender and the original contractor.

Another difference deals with the deadlines for recording the lien. In Connecticut, all claimants have 90 days after the work is completed to record the mechanic's lien on the town records. California, in addition, gives original contractors an option of recording the lien on the county land records 60 days after a notice of cessation or completion of the work has been recorded, and other claimants the option of filing 30 days after recording of these notices. (Connecticut law does not address filing of notices of completion or cessation.)

Finally, Connecticut law gives the claimants one year from recording the lien to begin court action to foreclose it, while California law gives them only 90 days after recording to begin the foreclosure proceedings. But if credit is given and that fact is recorded within the original 90 days, the lien continues until 90 days after the credit expires, but no longer than one year from the job's completion date. Connecticut makes no special provisions for credit.

A bill currently under consideration in the Connecticut legislature (sSB 143) would extend the time for filing a mechanic's lien on the town records from 90 to 120 days after the claimant stops performing services or furnishing materials.

CONNECTICUT

Mechanic's Lien Claimants

The statute allows a mechanic's lien on buildings and land for anyone who has a claim over $10 for materials furnished or services rendered in construction, raising, removal, or repairs of any building or its appurtenances or in lot improvement or site development or plot subdivision if the claim results from the owner's consent (CGS 49-33(a)). The claim takes precedence over any other encumbrance originating after the commencement of the services or furnishing of the materials (CGS 49-33(b)).

If two or more persons have mechanic's liens in connection with the same job, none has any priority over the others except as follows (CGS 49-33(c)). If another kind of valid encumbrance other than a mechanic's lien is filed while the work is continuing, all the mechanic's liens originating before the filing of that other encumbrance have priority over that encumbrance, but no such mechanic's lien has priority over any other such mechanic's lien. That encumbrance and all such mechanic's liens take precedence over any mechanic's lien for materials furnished or services rendered after the filing of that encumbrance. But no one of the mechanic's liens originating after the filing of that encumbrance has precedence over another. If a lienor waives or releases his lien or claim of precedence to that encumbrance, that lien is classed with and has no priority over liens originating subsequent to that encumbrance (CGS 49-33(d)).

A mechanic's lien cannot attach in favor of a subcontractor for more than the amount that the owner has agreed to pay any person through whom the subcontractor claims subject to the apportionment rules (CGS 49-33(a)).

The law requires that a subcontractor must be subrogated to the rights of the person through whom the subcontractor claims. But the subcontractor has a mechanic's lien or right to claim a mechanic's lien in the event of a default by that person, provided the total of such liens cannot attach to the property for more than the amount by which the contract price between the owner and the person through whom the subcontractor claims exceeds the reasonable cost of satisfactory completion of the contract plus damages resulting from such default and all bona fide agreements made by the owner before receiving notice of such lien or liens (CGS 49-33(f)).

If the building is removed, the mechanic's lien does not take precedence over any encumbrance on the land which accrued before the building was removed (CGS 49-33(g)).

Recording and Notice Requirements

A mechanic's lien can be foreclosed in the same manner as a mortgage (CGS 49-33(h)).

In order for a mechanic's lien to be valid, the person performing the services or furnishing the materials must:

1. within 90 days after he has ceased to furnish the materials or perform the service, lodge with the town clerk in the town where the property is located a certificate in writing (which the town clerk must record with deeds of land) (a) describing the premises, the amount claimed as a lien on them, the name of the person against whom the lien is being filed, and the date the performance of services or furnishing of materials began; (b) stating that the amount claimed is justly due; and (c) subscribed and sworn to by the claimant; and

2. within the same time or prior to the lodging of the certificate but not later than 30 days after lodging it, serves a true and attested copy of the certificate on the owner (CGS 49-34).

No one other than the original contractor or a subcontractor whose contract with the original contractor is in writing and has been agreed to in writing by the other party to the original contract is entitled to claim a mechanic's lien unless, after commencing and not more than 90 days after ceasing to furnish materials or render services, he gives written notice to the owner and to the original contractor that he has furnished materials or rendered services and intends to claim a lien for that on the property. But the law says an original contractor is not entitled to receive this notice unless, not later than 15 days after beginning his work, he lodges with the town clerk where the property is located an affidavit in writing (which the town clerk records with the land deeds) stating the name under which he does business and his business address and describing the property.

The notice must be served on the owner or original contractor, if they reside in the same town where the property is, by any indifferent person, sheriff, or other proper officer, by leaving a true and attested copy of it at their residence. If they reside out of town, but have a known agent in town, the notice can be served on the agent. Otherwise, it can be served by mailing a true and attested copy of the notice by registered or certified mail to the owner or original contractor at their residence. If the copy is returned unclaimed, notice must be given by publication. The notice, with the return of the person who served it endorsed on it, must be returned to the original maker of the notice within the above 90-day period (CGS 49-35(a)).

No subcontractor, without a written contract complying with the provisions above, and no one who furnishes material or renders services under a contract with the original contractor or subcontractor, can be required to obtain an agreement with or the consent of the property owner as provided above, to enable him to claim a mechanic's lien (CGS 49-35(b)).

Hearing Procedures

When a mechanic's lien is placed on a property, the property's owner can apply to the Superior Court or to any judge of the Superior Court for a hearing to determine whether the lien should be discharged or reduced. The court or judge must order reasonable notice of the application to be given to the named lienor and to other owners, if they are not a party to the application, and must set a date for the hearing. If any of the parties resides out of state, the notice must be given by personal service, registered or certified mail, publication or such other method as the court or judge directs. At least four days notice must be given prior to the hearing date (CGS 49-35a (a)). The law specifies the form for the application, order, and summons (CGS 49-35a (b)).

When the hearing is held, the lienor must first establish that there is probable cause. Anyone entitled to notice can appear and be heard and prove that the validity of the lien should not be sustained or that the amount is excessive and should be reduced. The court or judge can:

1. deny the application or motion if probable cause is established that the lien is valid;

2. order the lien discharged if probable cause is not established or if its invalidity is established by clear and convincing evidence;

3. reduce the amount of the lien if it is found to be excessive; or

4. order the lien discharged or reduce its amount conditioned on the posting of a bond set by the judge, sufficient to indemnify the lienor for any damage that may occur from the discharge or reduction (CGS 49-35b(a)).

Appeals

An appeal must be filed within seven days of the decision. The effect of the order is automatically stayed for the seven days. Within that period, the party appealing can file an application with the clerk of the court, requesting a stay of the order pending the appeal and listing the reasons for the request, The applicant must send a copy of the application to all the other parties. Upon filing of the application, the effect of the order is further stayed until a decision is made on it. A hearing on the application must be held promptly. The order must be stayed if the party appealing posts a bond. After the hearing, the court can set a bond, grant a stay, deny the stay, or condition the granting of the stay on the giving of a bond. Any order of discharge, reduction, or stay takes effect when a certified copy is recorded on the land records in the town where the lien was originally recorded (CGS 49-35c).

Proportionate Claims

The law says that no mechanic's lien can attach to any property in favor of anyone to a greater amount than the price which the owner agreed to pay for buildings or the development of the lot. When there are several claimants and the amount of their total claims exceeds that price, the claimants, other than the original contractor, must be first paid in full, if the amount of that price is sufficient, but if not, the funds must be apportioned among the claimants, other than the original contractor, in proportion to the amount of the debts due them. The court can direct the manner in which the claims are paid. In determining the amount for which a lien can attach, the owner must be allowed whatever payments he has made, in good faith, to the original contractor, before receiving notice of the lien. No payments made in advance of the time stipulated in the original contract can be considered as made in good faith, unless the owner gives notice of intention to make the payments in writing to each person known to have furnished materials or rendered services at least five days before he makes the payment (CGS 49-36).

Dissolution of Lien or Substitution of Bond

Whenever a mechanic's lien has been placed on real estate, the owner or any interested person can apply to a judge of the Superior Court for the lien to be dissolved on substitution of a bond, and the judge must order reasonable notice of the application to be given to the lienor. If the lienor is not a Connecticut resident, the judge can order that notice be given by publication, registered or certified letter or personal service. If the judge is satisfied that the applicant plans, in good faith, to contest the lien and the applicant offers an adequate bond, the judge must order the lien dissolved and substitute the bond for the lien. If the applicant, within 10 days, causes a copy of the order, certified by the clerk, to be recorded in the town clerk's office where the lien is recorded, the lien is dissolved. If a bond is substituted after an action for foreclosure of the lien is begun, the plaintiff in the foreclosure can amend his complaint, without costs, to make the action apply to the bond, with which he can join an action to recover on his claim. When a bond substitution occurs before the foreclosure action has begun, the plaintiff can join the action on the bond with an action to recover on his claim. Whenever a bond is substituted, the action to recover on the bond has to be brought within one year from the lien certificate's recording date, or the bond is void (CGS 49-37).

After the substitution, the law gives the principal or surety on the bond an opportunity to apply to the court for a hearing on whether the lien for which the bond was substituted should be declared invalid or reduced in amount. The court must then set the date for the hearing and provide for at least four days' notice to the parties prior to the hearing. Hearing procedures are essentially the same as described above. Any order resulting from these applications is considered a final order for appeal purposes (CGS 49-37).

Duration of Lien Validity

The law prohibits a mechanic's lien from continuing in force for a longer period than one year after the lien has been perfected, unless the party claiming the lien begins an action to foreclose it and records a notice of lis pendens on the land records of the town where the lien is recorded within one year from the date the lien was recorded or within 60 days of any final disposition of an appeal, whichever is later. When the one-year or 60-day period expires, without any action commencing, the lien is invalid and discharged as a matter of law. An action to foreclose a mechanic's lien is privileged in respect to trial assignment (CGS 49-39). When these time limits expire, the lien is automatically extinguished and its continued existence without a release on the land records in no way affects the owner's title or the property's marketability (CGS 49-40a).

The law sets out procedures for discharging liens that are invalid but not discharged of record (CGS 49-51).

CALIFORNIA LAW

Preliminary 20-day Notice

In order to qualify to record a mechanic's lien, file a stop notice, or assert a claim against a payment bond, the California statute requires a claimant to first send a preliminary notice not later than 20 days after he first furnished labor, service, equipment, or materials to a jobsite. Not giving this preliminary notice within the time frame does not preclude the claimant from giving it at any time afterward, but he is then only entitled to record a lien for items furnished within 20 days prior to the service of the preliminary notice, and at any time after that. This requirement applies to all contractors or subcontractors except those under direct contract with the owner or those performing actual labor for wages. They must give this notice to the owner, original contractor, and, if there is one, to the construction lender. The law also requires even those who have a direct contract with the owner, other than the original contractor, to send this preliminary notice to the construction lender.

The preliminary notice must contain a general description of the service or materials furnished or to be furnished and a price estimate, the name and address of the person furnishing them, the name of the person contracting for their purchase, and a description of the jobsite. The notice must also contain a statement in boldface type to the effect that if the bills are not paid in full, a mechanic's lien leading to the loss, through court foreclosure, of all or part of the property being improved can be placed against the property even though the owner has paid the contractor in full. The notice must advise the recipient that he may wish to protect himself against this consequence by (1) requiring the contractor to provide a release signed by the person providing this notice or (2) any other appropriate method or device.

But if an invoice for materials contains the information required in this preliminary notice, a copy of the invoice is sufficient notice. For certified architects, registered engineers, or licensed land surveyors who have furnished services for the design of the improvement, giving a preliminary notice not later than 20 days after the improvement work itself has begun is considered complying with the law.

The law voids any agreement where the owner waives his right to preliminary notice under this law.

The notice can be served in several ways. If the person resides in-state, the notice can be delivered personally or left at his home address or place of business, or sent by first-class registered or certified mail, postage prepaid, to the person's home or business address or to the address shown on the building permit. If the person resides out of state, the notice can be served by any of these methods, or, if that is not possible, the notice can be given by first class certified or registered mail addressed to the construction lender or to the original contractor. When the service is made by mail, service is complete at the time the mail is deposited.

Only one notice is required for all the services or materials a claimant furnishes.

If the contract price paid to any subcontractor on a particular job is over $400, that subcontractor's failure to give the preliminary notice is a ground for disciplinary action by the state Registrar of Contractors.

Each person who has served a preliminary 20-day notice can file the preliminary notice on the land records of the county where the property is located. Upon acceptance for recording of a notice of completion or notice of cessation for recording, the county recorder sends notification of that fact to the individuals who have filed the preliminary notice, disclosing the date those other notices were recorded. The preliminary notice filed does not become part of the official recorded documents (California Civil Code, 3097).

Proof that the 20-day notice was served is the proof of service affidavit and/or the return receipt or a photocopy of the delivery record and receipt maintained by the post office (California Civil Code, 3097.1).

Mechanic's Lien Enforcement

A claimant is entitled to enforce a mechanic's lien only if he has given the required preliminary 20-day notice. Each original contractor must record his claim of lien (1) after he completes his contract and before 90 days after completion of the work if no notice of completion or notice of cessation has been recorded or (2) 60 days after recording of the notice of completion or cessation. Claimants other than the original contractor must record his lien claim after he has ceased furnishing services or materials and before (1) 90 days of completion of the work if no notice of completion or cessation has been recorded or (2) 30 days after recording of such notices.

The law gives these mechanic's liens priority over subsequent liens, mortgages, or other encumbrances that attach after the beginning of the job and also over those that the claimant had no notice of and which were unrecorded at the time the job began (California Civil Code, 3134).

The original contractor or subcontractor is entitled to recover only the amount due him under the contract after deducting the other claims for services or materials furnished and embraced within his contract (California Civil Code, 3140).

The California law also contains provisions similar to Connecticut's for substitution of a bond for the lien (California Civil Code, 3143).

Duration of Mechanic's Liens

The law makes mechanic's liens valid for only 90 days after they are recorded (as opposed to Connecticut's one year limit), unless the lienor begins a court action to foreclose within that time, except that if credit is given and notice of that is recorded on the land records after the recording of the original claim and before the 90 days expires, then the lien continues until 90 days after expiration of the credit, but not longer than one year from the job's completion date. If the claimant does not begin an action within these time periods, then the lien is automatically void, as is also the case in Connecticut (California Civil Code, 3144).

If the action to foreclose the lien is not brought to trial within two years after it is begun, the court can in its discretion, dismiss the case for lack of prosecutions (California Civil Code, 3147). We found no similar provision in the Connecticut statute.

HN:pa

Attachments: 1. Connecticut Statute

2. California Statute