How A Notice Of Nonresponsibility Destroy Your Mechanics Lien Claim?

Are you thinking of entering into a contract to do tenant improvement work? If so, your mechanics lien could be invalid if the tenant fails to pay you. California Civil Code sections 8442(b) and 8444 allow the property owner to record and post a Notice of Nonresponsibility document that would prevent a mechanics lien from attaching to the subject Property.

What must the Owner do properly execute a Notice of Nonresponsiblity under California Civil Code Section 8444?

1. The Owner must prepare a document that includes:
   • The nature of the Owner’s title or interest;
   • The name of tenant, purchaser under contract or lessee; and
   • A statement that the person giving notice is not responsible for claims arising from the work of improvement.
2. The document must be signed and verified.
3. Within 10 days of receiving notice of the construction, the Owner must both record and post the notice.
4. The notice must be displayed in a conspicuous location at the site. (See California Civil Code section 8114).

How can a contractor protect themselves before entering into a tenant improvement project?

First, do a record search at the County Recorder’s office to determine whether the property owner recorded a Notice of Nonresponsibility. Most counties allow for online records searches. Certain counties have a search function on their website that will enable you to enter the address of the Property and view all documents recorded for a specific address. Although it may take some digging, you should be able to find the most recent deed for the Property, which will provide you with the current Owner of the Property. Once you have identified the Owner of the Property, you enter the Owner’s name into the search box, and you will be able to determine whether a Notice of Nonresponsibility has already been recorded for the proposed tenant improvement. It is important to remember that an Owner with multiple tenants may have recorded multiple Notices of Nonresponsibility (i.e. one for each tenant improvement).

Second, when you visit the site before preparing a bid or estimate, take note if you see any documents that say “Notice of Non-Responsibility” posted at the site.

Third, contact the Owner and ask if Notice of Nonresponsiblity has been recorded or posted for your project.

What are some options if a Notice of Nonresponsibility has been properly recorded and posted at the Project site?

           One option is to have the tenant obtain a payment bond from a surety to ensure that the necessary funds will be available to you if the tenant fails to pay. Second, you can file a Stop Notice with the lender (if any) in order to prevent any further payments to the tenant, but the Stop Notice must be filed before all the loan funds are distributed. And lastly, if none of the above options work, you can turn to the Court system to pursue your claim against the tenant for breach of contract, quantum meruit, etc.   

Brian Junginger is a shareholder with McInerney & Dillon and focuses his practice on construction and real estate issues.