California Law Revision Commission launches study to examine intersection of strata-property and builders-lien law
8 April 2016
By Kevin Zakreski
BCLI currently has two active projects examining issues in strata-property law and builders-lien legislation. As part of its own long-range study on California’s equivalent to the Strata Property Act, the California Law Revision Commission recently announced an interest in tackling issues that arise when strata-property and builders-lien law intersect.
As a starting point, CLRC has just released a staff memorandum entitled Common Interest Developments: Mechanics Liens and Common Area (PDF). The memorandum’s title reflects California’s vocabulary for these bodies of law. In British Columbia’s terms, a mechanics lien is the equivalent of our builders lien. A common-interest development is an umbrella concept, which embraces four types of multi-owner developments, including what California calls condominiums—the equivalent of a British Columbia strata property.
After setting out some background information on common-interest developments and mechanics liens (including the interesting fact that, in California, the right to a mechanics lien is guaranteed by the state constitution), the memorandum notes a general concern that arises from the intersection of these two areas of law:
many elements of mechanics lien law involve action that affects or is taken by the owner of the improved property. This poses no problem when property is owned by a single person or jointly by spouses (as is usually the case for a single detached residential dwelling). But determining the “owner” of improved property becomes more difficult in CIDs, because of the shared ownership structure that is inherent in that form of property ownership. The mechanics lien statute does not define “owner,” but case law indicates that anyone with “some” interest in the property could be considered an owner, “whether as fee owner, life tenant, remainderman, lessee, or whatever.”
Suppose that a paving contractor does work on a common area parking lot in a CID. Who is the “owner” of the improved property? In a community apartment project, condominium project, and some planned developments, the common area will be owned by all of the separate interest owners, in undivided interests. In stock cooperatives and some planned developments, the common area is owned by the managing association. Even where the common area is owned by the association, all of the owners arguably have a “some” ownership interest in the common area (as an incident of separate interest ownership).
Even if a lien claimant can determine who the owners are, the shared ownership common to CIDs could create operational problems and unexpected results.
The bulk of the memorandum consists of a discussion of those operational problems and unexpected results. Specifically, the memorandum raises the following issues:
- authorization of work: must it be given by every owner?
- preliminary notice of a claim: must it be given to every owner?
- service of lien claims: who must be served?
- land-recording issues, including identification of the property to be liened, recording the claim of lien, and the practice of recording “blanket liens”;
- sale of property to satisfy judgment: is foreclosure a practical remedy in the case of a lien against common property?
The memorandum closes with a preliminary consideration of possible solutions for further development. These solutions include deeming the managing association (equivalent to a BC strata corporation) the owner of common property and deeming a separate-interest owner (i.e., strata-lot owner) to be the owner of appurtenant exclusive use common property (i.e., limited common property).
CLRC is at a very early stage of consideration in this study. At this time, it is asking for public comment to help it decide whether “the problems described in this memorandum are serious enough to pursue further.”