An Express Article from the California Land Title Association
New Mechanics’ Liens Requirements
The Governor has signed AB 457 (Monning) which amends the filing procedures for mechanics’ liens. It passed the California State Legislature with broad support and is intended to enhance consumer protection and reduce payment disputes in the construction industry. The California Land Title Association calls the measure “a bill written with the best interests of homeowners in mind.” AB 457 amends the existing Mechanics' Lien Law to require service of Notice of Mechanics' Lien on the affected property owner or other specified party as a condition to recording a mechanics’ lien. It also requires the recording of lis pendens within 20 days of filing an action to foreclose upon a mechanics' lien. The failure to serve the Notice of Mechanics' Lien will cause the mechanics' lien to be unenforceable as a matter of law.
Short Pay Demand Statements
The Governor has also signed a new bill on payoff demands for short sales. A “short-pay demand statement” is a new form of demand created under SB 306 (Calderon). Entitled persons, which includes escrow and title companies, may submit a “short-pay request” for a “short-pay demand statement”, if they are in possession of a “short-pay agreement”. These terms are all defined in the bill.
Lenders are given 21 days from receipt of the short-pay request to either issue a short-pay demand statement, or indicate that they cannot issue such a demand since a short sale may not be approved. The short-pay demand may include the amount under which the lender is prepared to issue a reconveyance, together with any conditions imposed on the transaction. Should the lender condition the sale on the receipt of a closing statement or similar document from escrow, the lender must indicate within four days of receipt of the closing statement whether it is approved or disapproved, or escrow may proceed to close, provided that the statement is not clearly contrary to the terms of the short-pay agreement.
The bill also added language to require a notice of a sale of real property be recorded 20 days prior to the date of sale instead of the current 14 days.
More detailed information on these and other new laws will be included in the Annual CLTA Summary of Legislation published at the end of the year.