Timing is everything when it comes to construction payment disputes. The California constitution and civil code provide significant remedies for contractors and suppliers who do not get paid what they are owed on a construction project. However, this is true only if the contractor or supplier carefully follows all of the rules that the legislature mandates for perfecting a claim.
I’ve frequently discussed requirements relating to preliminary notices because often it is a defective preliminary notice that precludes recovery in a construction dispute. But there are strict rules relating to mechanic’s liens as well. In most construction projects, if the contractor or supplier records its lien within 90 days of completing its work, the lien is valid and enforceable. Many times, however, there is a real question of when the work was completed.
In a recent case, Picerne Construction Corp. v. Castellino Villas (February 2016), the California Court of Appeals considered the question. In that case, Castellino Villas was an 11-building apartment complex. Various buildings in the complex were completed at different times, and the City of Elk Grove issued certificates of occupancy as each building was completed.
Picerne Construction recorded its lien within 90 days of the last work the company did on the project. Castellino Villas objected to the validity of the liens because certificates of occupancy had been issued for all building more than 90 days before Picerne Construction recorded its lien, and even punch list items on most of the buildings had been completed more than 90 days prior to recording the lien. Castellino argued that the work was substantially completed and only “trivial work” was done in the 90-day period. In fact, the only work that was done on the project 90 days before the lien was recorded was the placement of grip tape on some of the stair treads.
The appellate court acknowledged that various other courts have reached different results concerning the validity of mechanic’s liens on similar facts. However, the appellate court noted that opinions that found mechanic’s liens invalid were typically those written before the statute defining completion had been amended in 1926, or were opinions that relied on those older opinions. The appellate court ultimately concluded that completion of construction occurs when the contractor or supplier completes its work on the contract. And in doing so, it rejected opinions that found a construction project was complete when it was “substantially completed.”
The appellate court reasoned that public policy supports a finding that completion means completion of all of the work on the contract. Harkening back to the origination of mechanic’s lien statutes, the appellate court noted that law is primarily intended for the benefit of those who provide materials and labor to a construction project. Interpreting completion as completing the entire work on the contract provides workers and suppliers with the maximum time possible to assert their rights. Anything less would deprive a contractor or supplier of the benefit of the protection of the statutes.
This is the most carefully considered opinion on this issue in some time. Trial courts usually look to well thought out appellate opinions to support their decisions. We believe it likely that the standard for completion set forth in Picerne Construction Corp. v. Castellino Villas will be the standard used by trial courts in the future.