How A Notice Of Nonresponsibility Can 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. This is because California Civil Code sections 8442(b) and 8444 allow the Owner of the property to record and post a document called a Notice of Nonresponsibility. If properly prepared under Section 8444, a Notice of Nonresponsibility will prevent the mechanics lien from attaching to the property.

What must the Owner do to have a valid Notice of Nonresponsibility?

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. California Civil Code section 8114.

How can a contractor protect themselves?

First, do a record search to determine the Owner of the property and whether a Notice of Nonresponsibility has already been recorded.  The easiest way to do this to search the Recorders Office for the county in which the Property is located. Certain counties have a search function in their website that will allow you to enter the address of the Property and view all documents that have been recorded for the address. Although it may take some digging, you will likely be able to find the most recent deed for the Property that will show the current Owner. Your results will also likely show whether a Notice of Nonresponsibility has already been recorded. 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 prior to preparing a bid or an estimate, make sure to 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?

One option is to have the tenant obtain a payment bond from a surety to insure that the necessary funds will be available to you if the tenant fails to pay. Second, you can file a Stop Notice with the owner or lender in order to prevent any further payments to the tenant, but this stop notice must be given before all funds have been 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 an associate with McInerney & Dillon and focuses his practice on construction and real estate related issues.