United States: Avoiding Common Pitfalls Of An Owner's Notice Of Non-Responsibility

Owners and lessors of commercial property are likely aware of the protections afforded them by California Civil Code section 8444. The statute allows an owner of real property who does not directly contract for or authorize work to avoid mechanics' lien claims by posting and recording a notice of non-responsibility. However, the protections of section 8444 are deceptively broad, and owners should be aware of the numerous ways in which the protections of section 8444 can be lost.

Pursuant to Civil Code section 8444, by posting and recording a notice of non-responsibility, nonparticipating owners are protected from mechanics' liens filed by claimants seeking payment for work on or materials supplied to the property, while claimants are also put on notice that they may not look for payment from the owner's interest in the property.

To qualify for protection under section 8444:

  • The party posting the notice of non-responsibility must be an owner of real property or a person claiming an interest in real property on which a work of improvement is situated.
  • The notice of non-responsibility must be signed and verified by the owner and must include: 1) the nature of the owner's title or interest, 2) the name of the purchaser or lessee performing the construction, and 3) a statement that the owner is not responsible for claims arising from the work of improvement.
  • Like other notices issued under the Civil Code, the notice must contain a description of the site and the name and address of the owner, direct contractor, and the lender, if any.
  • A notice of non-responsibility is not effective unless, within 10 days after the person giving notice has knowledge that the work of improvement has commenced, the person posts the notice in a conspicuous location at the site of the improvement and records the notice at the County Recorder's office of the county in which the improvement is located.

The requirements for a notice of non-responsibility are strictly construed, and any defect may result in liability for the non-participating owner. For example, if the notice is not properly verified, the owner will remain liable even if the lien claimant was aware of the notice of non-responsibility. The notice also cannot be preemptively recorded before commencement of construction—physical work must have commenced for the notice to be valid. Notably, even where an owner's lease specifically disclaims liability for any liens arising from a tenant's improvements, the owner will be liable for liens if the notice of non-responsibility is not given.

The statute is not intended to protect owners participating in the construction. Thus, even if an owner complies with the provisions of section 8444, California courts have found waiver of the statute in circumstances where an owner has authorized or somehow participated in the construction. For example, where an owner's lease with a tenant requires the tenant to make improvements to the leasehold, the owner cannot shield itself from the imposition of liens arising from the improvements. Indeed, in Howard S. Wright Construction Co. v. Superior Court, the court found that lease requirements to install telecommunication cable and to increase the electrical supply, among other things, resulted in the owner being treated as a participating owner. Thus, despite posting and recording a notice of non-responsibility, the owner was responsible for the mechanics' liens filed on the property. Put simply, tenant improvements must be optional.

An owner may also not avoid being treated as a participating owner by using a separate entity to contract for the work of improvement. For example, in Western Lumber & Mill Co. v. Merchants' Amusement Co., the owner of the property organized and controlled the lessee corporation making the improvements. As a result, the lessee was treated as the owner's agent, thus precluding the owner from escaping liability for mechanics' liens by filing a notice of non-responsibility.

While the protections in section 8444 appear absolute, the owner's actions in connection with construction may serve to vitiate the statutory protections and make the owner potentially liable to the lien claimant.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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