The California Mechanics’ lien is the only creditor’s remedy that stems from a constitutional right.
The first Mechanics’ Lien law was enacted on April 12, 1850. At the time California had not been accepted into the Union and the California legislature was not yet federally recognized. Admission would not come until September that year. None the less the California Constitutional Convention had already been held and a California Constitution had been declared the previous December. It was a document of only a few pages long and had no provision for a mechanics’ lien.
An 1855 “Act to provide for the Lien of Mechanics and Others” repealed this first act and became the first Mechanics’ Lien statute enacted by the officially recognized California government. It was very similar to the Mechanics’ Lien law of today:
“All artisans, builders, mechanics, lumber merchants, and all other persons performing labor or furnishing materials for construction or repair of any building, wharf or superstructure shall have a lien on such building… for the work and labor done or materials furnished.”
It gave original contractors sixty days and others not directly contracting with the owner thirty days to record a lien at the county recorders office. There was no such thing as a Notice of Completion to shorten the deadlines. Presumably because the postal system was not as established as it is today the claimant had the duty to personally serve the owner within five days. The Public Recorder did not do it. The lien had to be brought to a court for foreclosure within six months.
Early Law Did Not Include All Of the Property
An interesting part of this early law was that the recorded lien did not include all of the property that the improved structure was built on but was limited to “such convenient space around (it) as may be required for the convenient use and occupation of the premises, not to exceed 500 square feet.” Perhaps this was because at the time property was granted to private owners in huge land grants and it would not make practical sense to grant a lien on an entire tract for a small building.
Origin of the Stop Notice
In 1856 the legislature created a simple version of a stop notice for private projects. It held that upon being “served with a notice by a subcontractor or materialman the owner shall withhold from the contractor out of the first money due…under the contract until the validity of the claim can be ascertained in a proper legal proceeding.”
There was no explanation about what rights the subcontractor had if the owner had already paid the contract price. This was decided in 1860 in the case of McAlpin v Duncan where the court held a lien was limited to the contract price and if the sub didn’t give notice of the lien to the owner before the contractor was paid the sub was out of luck. This case was consistent with early construction procedures in which typical safeguards required the owner to make payments personally, like the joint check method used today. Preliminary Notices did not exist and a sub had to give a claim of lien on each job to be ensured of payment.
Problems with the 1862 Amendment
The 1862 amendment to the law revealed the problems that were appearing. The amount of liens that could be perfected in favor of subs and suppliers was limited by the amount of the contract price. It can be guessed that this amount became the subject of many disputes between subs and owners. Subs would presumably argue that the original contract price was enough to pay them in full. The new version of the law required that all contracts that exceeded $200 had to be in writing signed by the owner or else they were void and no payment was due to anyone. The mandatory written contract itself created a lien in which subs had to be paid before the original contractor, and if there was not enough money for all then it was divided up proportionally depending on amounts due.
Origin of the 20-Day Preliminary Notice
To protect the owner this version also created the precursor to the modern Preliminary 20-day notice. “It shall be the duty of the…laborer to give written notice to the original contractor before payment is due.” Interestingly, the legislature also included in the 1862 version costs and attorney fees to the prevailing party in a dispute arising from a mechanics’ lien claim. This is probably because even then legal fees were expensive enough that a claim for unpaid work would cost enough in attorney fees that it wasn’t worth the investment. By allowing the worker to add his attorney fees to the amount due he would not lose anything if the claim was successful. This is a clause that many contractors leave out of their contracts even today.
Notice of Non-Responsibility
There was still no clear procedure for an owner to claim that he did not know the work was being done so as to avoid having to pay for work done on the wrong property or otherwise. The Notice of Nonresponsibility that we have now didn’t get enacted until 1868. It started off as an exception to the lien law. “Every building constructed upon any lands with the knowledge of the owner shall be subject to a lien…unless the owner shall within three days give notice that he will not be responsible by posting notice in a conspicuous place.” This may also be were the modern consumer protection law giving homeowners a right to cancel the contract within three days originated.
The Constitutional Convention of 1878
Still, in 1878,.the year that the Constitutional Convention began in California to create a new constitution it was apparent that the existing Mechanics’ Lien laws were not working. Congressman Beerstecher presented the convention with a petition signed by “a large number of mechanics, materialmen, and laborers of San Francisco,” which was the largest city of the state at the time. It read:
“The undersigned respectfully represent that the practical working of the recent legislation and decisions of the Supreme Court regarding rights of mechanics, materialmen, and laborers to a lien for their labor and materials is such that those who depend upon such a law for just protection fail in nearly all cases to obtain it.”
This petition was presented the Convention six times to get it passed and resulted in substantially the same constitutional protection that contractors and materialmen enjoy today.
Did the New Constitution Apply to Pre-existing Liens?
The new Constitution created an immediate problem by requiring legislature to “provide by law for the speedy and efficient enforcement of liens” but the legislature did not make any new laws until 1885 because it was supposed that the existing laws were sufficient. In 1880 owners of a building in Sacramento tried to get out of paying for materials supplied by the Sacramento Lumber Company by claiming that the new Constitution required new Mechanics’ Lien laws and therefore the old ones were no longer valid. The Supreme Court disagreed in the case of Germania v. Wagner (1882).
In 1885 the legislature created yet another version of the Mechanics’ Lien law that was in harmony with the fact that it now had a constitutional basis. The fact that it now stemmed from the constitution meant that it was a law to be interpreted liberally in favor of the worker and that it was a right that could not be waived by agreement or limited by the legislature.
Origin of the Recording Statute for Mechanics’ Liens to Protect Owners
The 1885 version provided that a contract between and owner and a contractor over $1,000 had to be in writing and filed at the county recorder’s office. Twenty-five percent of the contract price had to be held by the owner in retention for thirty-five days from the date of completion of work. Presumably this would protect the owner against liens after payment since subs and suppliers had only thirty days to record a lien. If the owner did this then any liens would be limited to the amount held in retention and no lien could be placed on the property.
The problem with this new owner protection was that it did not harmonize with the new Constitutional status of the subcontractors’ rights. The Constitution didn’t say anything about limiting rights to twenty-five percent of the contract price. This was also corrected by the courts which held the limitation invalid and the legislature amended the law in 1911 to roughly what we have today. “The liens provided for in this chapter shall be direct liens and other than the contractor shall not be limited in the case of any claimant as to amount by any contract price agreed upon by the contractor and the owner except that it shall not exceed the reasonable value of the labor and materials, nor the price agreed upon by the claimant and the employer.” It provided that the subcontractor and materialmen should record their subcontracts in the county recorder’s office in effect as a Preliminary Notice before payment was due.
Conclusion
The Mechanics’ Lien laws have not changed much since 1911. It is available to a broad group of workers and is subject to strict time limits. Because it is of Constitutional origin the right to lien cannot be waived by agreement unless a certain form is used and only on condition of actual payment.