SECTIONS 3110-3112 - California Statutes

CIVIL CODE

SECTION 3110-3112

3110. Mechanics, materialmen, contractors, subcontractors, lessors
of equipment, artisans, architects, registered engineers, licensed
land surveyors, machinists, builders, teamsters, and draymen, and all
persons and laborers of every class performing labor upon or
bestowing skill or other necessary services on, or furnishing
materials or leasing equipment to be used or consumed in or
furnishing appliances, teams, or power contributing to a work of
improvement shall have a lien upon the property upon which they have
bestowed labor or furnished materials or appliances or leased
equipment for the value of such labor done or materials furnished and
for the value of the use of such appliances, equipment, teams, or
power whether done or furnished at the instance of the owner or of
any person acting by his authority or under him as contractor or
otherwise. For the purposes of this chapter, every contractor,
subcontractor, sub-subcontractor, architect, builder, or other person
having charge of a work of improvement or portion thereof shall be
held to be the agent of the owner.

3110.5. (a) (1) This section shall apply only to an owner who
contracts for a work of improvement for construction, alteration,
addition to, or repair upon, property, whether the contracting owner
is the owner of a fee simple absolute interest in the property or the
owner of any lesser interest in the property. For purposes of this
section, a lessee of real property shall be considered to be the
owner of a fee simple absolute interest in that real property if and
only if: (A) the initial term of the lease is at least 35 years and
(B) the lease covers one or more lawful parcels under the Subdivision
Map Act (Division 2 (commencing with Section 66410) of Title 7 of
the Government Code) and any applicable local ordinances adopted
pursuant thereto, in their entirety, including, but not limited to,
parcels approved pursuant to certificate of compliance proceedings.
For purposes of this section, the owner of a fee simple absolute
interest shall not be deemed to be the owner of less than a fee
simple absolute interest by reason of any mortgages, deeds of trust,
ground leases, or other liens or encumbrances or rights to occupancy
that may encumber the fee simple absolute interest. If the owner
contracting for the work of improvement is an owner of an interest in
the property which is less than a fee simple absolute interest, this
section does not require the owner of the fee simple absolute
interest who does not contract for the work of improvement to provide
any security pursuant to this section or to comply with any of the
other obligations of an owner under this section. If the owner
contracting for the work of improvement is an owner of the fee simple
absolute interest in the property, this section does not require the
owner of an interest in the property which is less than a fee simple
absolute interest who does not contract for the work of improvement
to provide any security pursuant to this section or to comply with
any of the other obligations of an owner under this section.
(2) An owner contracting for a work of improvement is subject to
this section only if one of the following conditions is satisfied:
(A) The owner contracting for the work of improvement is the owner
of a fee simple absolute interest in the property upon which the
work of improvement is to be made, and the value of the contract for
the work of improvement is more than five million dollars
($5,000,000).
(B) The owner contracting for the work of improvement is the owner
of an interest which is less than a fee simple absolute interest,
including a leasehold interest, in the property upon which the work
of improvement is to be made, and the value of the contract for the
work of improvement is more than one million dollars ($1,000,000).
(b) If an owner of property, whether an owner of a fee simple
absolute interest or any lesser interest therein, contracts for any
work of improvement for construction, alteration, addition to, or
repair upon, the property, and the contracting owner is subject to
the requirements of this section, as determined by subdivision (a),
the contracting owner shall supply to the original contractor, if a
lending institution is providing a construction loan, a copy
certified by the county recorder of the recorded construction
mortgage or deed of trust that shall disclose the amount of the
construction loan. In addition, if the contracting owner is not the
majority owner of the original contractor, the contracting owner
shall provide security for the contracting owner's payment
obligations under the construction contract. The security shall be
used only when the contracting owner defaults on his or her
contractual obligations to the original contractor. The security for
the contracting owner's payment obligations under the construction
contract shall be provided by one of the following means:
(1) A payment bond, as defined in Section 3096, in the amount of
either (A) not less than 25 percent of the total amount of any
construction contract that is subject to this section where the
construction contract provides that the work of improvement is
scheduled to be substantially completed within six months following
the commencement thereof, or (B) not less than 15 percent of the
total amount of any other construction contract that is subject to
this section, which payment bond shall be payable upon default by the
contracting owner of any undisputed amount under the contract that
has been due and payable for more than 30 days. The payment bond
shall be from a California admitted surety which is either listed in
the Department of the Treasury's Listing of Approved Sureties
(Department Circular 570) or that has an A.M. Best rating of A or
better and has an underwriting limitation, pursuant to Section 12090
of the Insurance Code, greater than the value of the contract amount
of the bond.
(2) An irrevocable letter of credit from a financial institution,
as defined in Section 5107 of the Financial Code, inuring to the
benefit of the original contractor in the amount of either (A) not
less than 25 percent of the total amount of any construction contract
that is subject to this section where the construction contract
provides that the work of improvement is scheduled to be
substantially completed within six months following the commencement
thereof, or (B) not less than 15 percent of the total amount of any
other construction contract that is subject to this section. The
maturity date of the letter of credit and other terms of the letter
of credit shall be determined by agreement between the contracting
owner, the original contractor, and the issuer of the letter of
credit provided that the contracting owner shall be required to
maintain the letter of credit in effect until the contracting owner
has satisfied all of its payment obligations to the original
contractor.
(3) (A) An escrow account, designated as a "construction security
escrow account," maintained with an escrow agent licensed under the
Escrow Law, as set forth in Division 6 (commencing with Section
17000) of the Financial Code, or with any person exempt from the
Escrow Law pursuant to paragraph (1) or (3) of subdivision (a) of
Section 17006 of the Financial Code, which construction security
escrow account shall be located in California and in which the
contracting owner shall deposit funds in the amount provided in
subparagraph (B); provided that the original contractor shall not be
obligated to accept a construction security escrow account as
security unless the contracting owner establishes to the reasonable
satisfaction of the original contractor (which may be established by
a written opinion of legal counsel for the contracting owner), that
the contracting owner has granted the original contractor a
perfected, first priority security interest in the construction
security escrow account and all funds deposited by the contracting
owner therein and the proceeds thereof. The funds on deposit in the
construction security escrow account shall be the sole property of
the contracting owner, subject to the security interest in favor of
the original contractor. The escrowholder shall be instructed by the
contracting owner and the original contractor to hold the funds on
deposit in the construction security escrow account for the purpose
of perfecting the original contractor's security interest therein and
to disburse those funds only upon the joint authorization of the
contracting owner and the original contractor, or in accordance with
an order of any court which is binding on both the owner and the
original contractor. This section does not require any construction
lender to agree to deposit proceeds of a construction loan in a
construction security escrow account.
(B) Prior to commencement of the work under the construction
contract, the contracting owner shall make an initial deposit to the
construction security escrow account in the amount of either (i) not
less than 25 percent of the total amount of any construction contract
which is subject to this section where the construction contract
provides that the work of improvement is scheduled to be
substantially completed within six months following the commencement
thereof, or (ii) not less than 15 percent of the total amount of any
other construction contract which is subject to this section. In
addition, if the construction contract provides for a so-called
retainage or retention to be withheld from periodic payments to the
original contractor, the contracting owner shall deposit all amounts
withheld as retainage or retention in the construction security
escrow account at the same time the contracting owner makes the
corresponding payment to the original contractor from which the
retainage or retention is withheld provided, however, that in no
event shall the amount required to be maintained on deposit in the
construction security escrow account exceed the total amount of
future payments remaining to be due the original contractor under its
construction contract (as the same may be adjusted by agreement
between the contracting owner and the original contractor). If the
amount of funds on deposit in the construction security escrow
account equals or exceeds the total amount of future payments
remaining to be due the original contractor, the contracting owner
and the original contractor shall authorize the disbursement to the
original contractor of funds on deposit in the construction security
escrow account to pay progress payments then due the original
contractor under its construction contract (in whole or in part), but
in no event shall either party be obligated to authorize the
disbursement of any funds that would cause the amount remaining on
deposit in the construction security escrow account following that
disbursement to be less than the total amount of future payments
remaining to be due the original contractor after application of any
funds disbursed to the original contractor. The contracting owner and
the original contractor shall authorize the disbursement to the
contracting owner of any funds remaining on deposit in the
construction security escrow account after the original contractor
has been paid all amounts due under its construction contract. The
contracting owner and the original contractor shall authorize the
disbursement of funds on deposit in the construction security escrow
account in accordance with the order of any court which is binding on
both of them. The contracting owner and the original contractor may
agree in the construction contract upon additional conditions for the
disbursement of funds on deposit in the construction security escrow
account provided that the conditions shall not cause the amount
remaining on deposit in the construction security escrow account to
be less than the amount required pursuant to this subparagraph.
(c) For the purposes of subdivision (b), if the price under the
construction contract is not a fixed price, the amount of security to
be provided shall be determined with reference to the guaranteed
maximum price, if there is one, or if there is no guaranteed maximum
price, the amount of security shall be determined with reference to
the contracting owner's and original contractor's good faith estimate
as to the total cost anticipated to be incurred under the
construction contract. If any contracting owner that is required to
provide security under this section with respect to a construction
contract fails to provide that security or fails to maintain that
security as required, the original contractor may make written demand
on the contracting owner to do so, and if the contracting owner
fails to provide and maintain that security within 10 days after the
original contractor makes written demand on the owner, the original
contractor may suspend work until the required security is provided
and maintained in accordance with this section.
(d) This section does not affect provisions in this code providing
for mechanics' liens, stop notices, bond remedies, or prompt payment
rights of a subcontractor, including the original contractor's
payment responsibilities as set forth in Section 7108.5 of the
Business and Professions Code and Section 10262 of the Public
Contract Code.
(e) This section does not apply to the construction of
single-family residences, including single-family residences located
within a subdivision, and any associated fixed works that require the
services of a general engineering contractor, as defined in Section
7056 of the Business and Professions Code, any public works projects,
or housing developments eligible for a density bonus pursuant to
Section 65915 of the Government Code. As used in this section, the
term "single-family residence" means a real property improvement used
or intended to be used as a dwelling unit for one family.
(f) This section does not apply to either of the following:
(1) Any contract where the contracting owner is either a qualified
publicly traded company or a wholly owned subsidiary of a qualified
publicly traded company, provided that the obligations of the
subsidiary under the construction contract are guaranteed by the
parent which is a qualified publicly traded company. As used in this
section, the term "qualified publicly traded company" means any
company having a class of equity securities listed for trading on the
New York Stock Exchange, the American Stock Exchange or the NASDAQ
stock market and the nonsubordinated debt securities thereof which
are rated as "investment grade" by either Fitch ICBA, Inc., Moody's
Investor Services, Inc., Standard & Poor's Ratings Services or a
similar statistical rating organization which is nationally
recognized for rating the creditworthiness of publicly traded
companies. If at any time prior to final payment of all sums due
under the construction contract the nonsubordinated debt securities
of the qualified publicly traded company are downgraded to below
"investment grade" by one of the referenced rating agencies, the
contracting owner of the property will no longer be exempt from the
provisions of this section.
(2) Any contract where the contracting owner is either a qualified
private company or a wholly owned subsidiary of a qualified private
company, provided that the obligations of the subsidiary under the
construction contract are guaranteed by the parent which is a
qualified private company. As used in this section, the term
"qualified private company" means any company that has no equity
securities listed for trading on the New York Stock Exchange, the
American Stock Exchange or the NASDAQ stock market, and that has a
net worth determined in accordance with generally accepted accounting
principles in excess of fifty million dollars ($50,000,000). If at
any time prior to final payment of all sums due under the
construction contract the net worth of the qualified private company
is reduced below the level referenced in this section, the owner of
the property will no longer be exempt from the provisions of this
section.
(g) It is against public policy to waive the provisions of this
section in any contract for any private work of improvement to which
this section applies.

3111. For the purposes of this chapter, an express trust fund to
which a portion of a laborer's total compensation is to be paid
pursuant to an applicable employment agreement or a collective
bargaining agreement for the provision of benefits, including, but
not limited to, employer payments described in Section 1773.1 of the
Labor Code and regulations thereunder, shall be entitled to assert
the same rights and claims as laborers performing labor upon, or
bestowing skill or other necessary services on, a work of
improvement, to the extent of the compensation agreed to be paid to
that express trust fund for labor on that improvement only.

3112. Any claimant who, at the instance or request of the owner (or
any other person acting by his authority or under him, as contractor
or otherwise) of any lot or tract of land, has made any site
improvement has a lien upon such lot or tract of land for work done
or materials furnished.