SECTIONS 3258-3267 - California Statutes

CIVIL CODE

SECTION 3258-3267

3258. The county recorder shall number, index, and preserve all
contracts, plans, and other papers presented to him for filing
pursuant to this title, and shall number, index, and transcribe into
the official records in his office in the same manner as a conveyance
of land, all notices, claims of lien, payment bonds, and other
papers recorded pursuant to this title. He shall receive therefor the
fees prescribed in Article 5 (commencing with Section 27360),
Chapter 6, Part 3, Division 2, Title 3 of the Government Code.

3259. Except as otherwise provided in this title, the provisions of
Part 2 (commencing with Section 307) of the Code of Civil Procedure
are applicable to, and constitute the rules of practice in, the
proceedings mentioned in this title. The provisions of Part 2
(commencing with Section 307) of the Code of Civil Procedure,
relative to new trials and appeals, except insofar as they are
inconsistent with the provisions of this title or with rules adopted
by the Judicial Council, apply to the proceedings mentioned in this
title.

3259.5. (a) The owner of a private work of improvement shall notify
the original contractor, and any claimant other than the original
contractor who has provided a preliminary 20-day notice in accordance
with Section 3097, that a notice of completion or notice of
cessation has been recorded. The notice shall be sent within 10 days
after recordation of the notice of completion or notice of cessation.
Notification shall be sent by registered or certified mail, or by
first-class mail, evidenced by a certificate of mailing. Failure to
give notice to a contractor or claimant within 10 days of recording
the notice of completion or notice of cessation shall extend the
period of time in which that contractor or claimant may file a
mechanic's lien or stop notice to 90 days beyond the date that a
notice of completion or notice of cessation has been recorded. The
sole liability for failing to give notice shall be the extension of
the period of time in which that contractor or claimant may file a
mechanic's lien or stop notice.
(b) For purposes of this section, "owner" means a person who has
an interest in real property, or the person's successor in interest
on the date a notice of completion or notice of cessation from labor
is filed for record, who causes a building, improvement, or
structure, to be constructed, altered, or repaired on the property.
If the property is owned by two or more persons as joint tenants or
tenants in common, any one or more of the cotenants may be deemed to
be the "owner" within the meaning of this section. However, "owner"
does not include a person who occupies the real property as a
personal residence and the dwelling contains not more than four
residential units, nor does it include a person who has a security
interest in the property or obtains an interest pursuant to a
transfer described in subdivision (b), (c), or (d) of Section 1102.2.

3260. (a) This section is applicable with respect to all contracts
entered into on or after July 1, 1991, relating to the construction
of any private work of improvement. However, the amendments made to
this section during the 1992 portion of the 1991-92 Regular Session
of the Legislature are applicable only with respect to contracts
entered into on or after January 1, 1993, relating to the
construction of any private work of improvement. Moreover, the
amendments made to this section during the 1993 portion of the
1993-94 Regular Session of the Legislature are applicable only with
respect to contracts entered into on or after January 1, 1994,
relating to the construction of any private work of improvement.
(b) The retention proceeds withheld from any payment by the owner
from the original contractor, or by the original contractor from any
subcontractor, shall be subject to this section.
(c) Within 45 days after the date of completion, the retention
withheld by the owner shall be released. "Date of completion," for
purposes of this section, means any of the following:
(1) The date of issuance of any certificate of occupancy covering
the work by the public agency issuing the building permit.
(2) The date of completion indicated on a valid notice of
completion recorded pursuant to Section 3093.
(3) The date of completion as defined in Section 3086.
However, release of retentions withheld for any portion of the
work of improvement which ultimately will become the property of a
public agency, may be conditioned upon the acceptance of the work by
the public agency. In the event of a dispute between the owner and
the original contractor, the owner may withhold from the final
payment an amount not to exceed 150 percent of the disputed amount.
(d) Subject to subdivision (e), within 10 days from the time that
all or any portion of the retention proceeds are received by the
original contractor, the original contractor shall pay each of its
subcontractors from whom retention has been withheld, each
subcontractor's share of the retention received. However, if a
retention payment received by the original contractor is specifically
designated for a particular subcontractor, payment of the retention
shall be made to the designated subcontractor, if the payment is
consistent with the terms of the subcontract.
(e) If a bona fide dispute exists between a subcontractor and the
original contractor, the original contractor may withhold from that
subcontractor with whom the dispute exists its portion of the
retention proceeds. The amount withheld from the retention payment
shall not exceed 150 percent of the estimated value of the disputed
amount.
(f) Within 10 days of receipt of written notice by the owner from
the original contractor or by the original contractor from the
subcontractor, as the case may be, that any work in dispute has been
completed in accordance with the terms of the contract, the owner or
original contractor shall advise the notifying party of the
acceptance or rejection of the disputed work. Within 10 days of
acceptance of the disputed work, the owner or original contractor, as
the case may be, shall release the retained portion of the retention
proceeds.
(g) In the event that retention payments are not made within the
time periods required by this section, the owner or original
contractor withholding the unpaid amounts shall be subject to a
charge of 2 percent per month on the improperly withheld amount, in
lieu of any interest otherwise due. Additionally, in any action for
the collection of funds wrongfully withheld, the prevailing party
shall be entitled to his or her attorney's fees and costs.
(h) It shall be against public policy for any party to require any
other party to waive any provision of this section.
(i) This section shall not be construed to apply to retentions
withheld by a lender in accordance with the construction loan
agreement.

3260.1. (a) This section is applicable with respect to all
contracts entered into on or after January 1, 1992, relating to the
construction of any private work of improvement.
(b) Except as otherwise agreed in writing, the owner shall pay to
the contractor, within 30 days following receipt of a demand for
payment in accordance with the contract, any progress payment due
thereunder as to which there is no good faith dispute between the
parties. In the event of a dispute between the owner and the
contractor, the owner may withhold from the progress payment an
amount not to exceed 150 percent of the disputed amount. If any
amount is wrongfully withheld in violation of this subdivision, the
contractor shall be entitled to the penalty specified in subdivision
(g) of Section 3260.
(c) Nothing in this section shall be deemed to supersede any
requirement of Section 3260 respecting the withholding of retention
proceeds.

3260.2. (a) If an original contractor is not paid all moneys which
are owed pursuant to a written contract for a private work of
improvement within 35 days from the date payment is due pursuant to
the written contract, and there is no dispute as to the satisfactory
performance of that original contractor, the original contractor
shall have a right to serve upon the owner a "10-day stop work order"
that states that unless all amounts then due the original contractor
are paid within 10 days from the date notice is provided under this
section, the original contractor will stop work on the project. At
least five days before service upon the owner of a "10-day stop work
order," the contractor shall post, in a conspicuous location at the
job site and at the main office, if one exists, of the job site, a
notice that the original contractor intends to file a 10-day stop
work order pursuant to this section. A copy of the written notice
shall also be served upon all subcontractors with whom the original
contractor has a direct contractual relationship on the project at
the same time the notice is served upon the owner. Within five days
of receipt of written notice by an original contractor pursuant to
this section, the owner shall forward to the construction lender, if
any, at the address provided in the construction loan agreement, a
copy of the notice by first-class mail.
Upon resolution of the dispute or cancellation of the 10-day
notice by the original contractor, the original contractor shall
post, in a conspicuous location at the job site and at the main
office, and serve a notice to inform the subcontractors with whom the
original contractor has a direct contractual relationship of this
resolution or cancellation.
(b) The original contractor's right to stop work pursuant to this
section is in addition to any and all other rights the original
contractor may have under the law.
(c) Notwithstanding any other provision, the original contractor
or his or her surety, or subcontractor or his or her surety, shall
not be liable for any delays or damages that the owner or contractor
of a subcontractor may suffer as a result of the original contractor
serving the owner with a 10-day stop work order, and subsequently
stopping work for nonpayment if all of the posting and notice
requirements described in subdivision (a) are met. An original
contractor's or original subcontractor's liability to a subcontractor
or material supplier resulting from the cessation of work under this
section shall be limited to the amount of monetary damages the
subcontractor or material supplier could recover under the mechanic's
lien law for goods and services provided up to the date the
subcontractor ceases work, provided that (1) liability shall continue
for work performed and materials supplied up to and including the
10-day notice period and not beyond, and (2) this provision does not
apply to limit monetary damages for custom work, including materials
which have been fabricated, manufactured, or ordered to
specifications that are unique to the job.
(d) If the payment is not made within 10 days from the date the
notice was served, the original contractor or his or her surety, may
seek a judicial determination of liability for the amount not paid
for work performed in an expedited proceeding in the superior court
in the county in which the private work improvement is located.
(e) It shall be against public policy to waive the provisions of
this section in any written contract for private work of improvement.
(f) This section shall apply to any contract entered into on or
after January 1, 1999. However, nothing in this section shall be
construed to apply to retentions withheld by a lender in accordance
with the construction loan agreement.
(g) The stop work order specified in this section for private
works of improvement may be served as follows:
(1) If the person to be notified resides in this state, by
delivering the stop work order personally, or by leaving it at his or
her address of residence or place of business with some person in
charge, or by first-class registered or certified mail, postage
prepaid, addressed to the person to whom notice is to be given at his
or her residence or place of business address or at the address
shown by the building permit on file with the authority issuing a
building permit for the work, or at an address recorded pursuant to
subdivision (j) of Section 3097.
(2) If the person to be notified of the stop work order does not
reside in this state, by any method enumerated in paragraph (1) of
this subdivision. If the person cannot be served by any of these
methods, then notice may be given by first-class certified or
registered mail, addressed to the construction lender.
(3) Service pursuant to this paragraph by certified mail is
effective upon receipt. Service by registered mail is effective five
days after mailing.

3261. No mistake or errors in the statement of the demand, or of
the amount of credits and offsets allowed, or of the balance asserted
to be due the claimant, or in the description of the property
against which the lien is recorded, shall invalidate the lien, unless
the court finds that such mistake or error in the statement of the
demand, credits and offsets, or of the balance due, was made with the
intent to defraud, or that an innocent third party, without notice,
direct or constructive, has since the claim was recorded become the
bona fide owner of the property, and that the notice of claim was so
deficient that it did not put the party on further inquiry in any
manner.

3262. (a) Neither the owner nor original contractor by any term of
a contract, or otherwise, shall waive, affect, or impair the claims
and liens of other persons whether with or without notice except by
their written consent, and any term of the contract to that effect
shall be null and void. Any written consent given by any claimant
pursuant to this subdivision shall be null, void, and unenforceable
unless and until the claimant executes and delivers a waiver and
release. That waiver and release shall be binding and effective to
release the owner, construction lender, and surety on a payment bond
from claims and liens only if the waiver and release follows
substantially one of the forms set forth in this section and is
signed by the claimant or his or her authorized agent, and, in the
case of a conditional release, there is evidence of payment to the
claimant. Evidence of payment may be by the claimant's endorsement on
a single or joint payee check that has been paid by the bank upon
which it was drawn or by written acknowledgment of payment given by
the claimant.
(b) (1) No oral or written statement purporting to waive, release,
impair, or otherwise adversely affect a claim is enforceable or
creates any estoppel or impairment of a claim unless either:
(A) It is pursuant to a waiver and release prescribed in this
section.
(B) The claimant had actually received payment in full for the
claim.
(2) Nothing in this section precludes a stop notice claimant from
reducing the amount of, or releasing in its entirety, a stop notice
that has been served upon an owner. The reduction or release of a
stop notice, which shall be in writing, may be served in a form other
than the forms of release set forth in this section. Any reduction
or release of a stop notice:
(A) Shall not preclude the service of a subsequent stop notice
that is timely and proper.
(B) Shall release the owner from any obligation to withhold money
on account of the stop notice, to the extent of the reduction or
release.
(C) Shall be effective to release the claimant's right to enforce
the stop notice, to the extent of the reduction or release.
(D) Shall not operate as a release of any right that the claimant
may have, other than the claimant's right to enforce the stop notice,
to the extent of the reduction or release.
(c) This section does not affect the enforceability of either an
accord and satisfaction regarding a bona fide dispute or any
agreement made in settlement of an action pending in any court
provided the accord and satisfaction or agreement and settlement make
specific reference to the mechanic's lien, stop notice, or bond
claims.
(d) The waiver and release given by any claimant pursuant to this
section shall be null, void, and unenforceable unless it follows
substantially the following forms in the following circumstances:
(1) If the claimant is required to execute a waiver and release in
exchange for, or in order to induce the payment of, a progress
payment and the claimant is not, in fact, paid in exchange for the
waiver and release or a single payee check or joint payee check is
given in exchange for the waiver and release, the waiver and release
shall follow substantially the following form:

CONDITIONAL WAIVER AND RELEASE UPON PROGRESS
PAYMENT
Upon receipt by the undersigned of a check from
_________________________________in the sum of $
(Maker of Check) (Amount of Check)
payable to_______________________________________
(Payee or Payees of Check)
and when the check has been properly
endorsed and has been paid by the bank upon
which it is drawn, this document shall become
effective to release any mechanic's lien, stop
notice, or bond right the undersigned has on the
job of
_________located at____________________
(Owner) (Job Description)
to the following extent. This release covers a
progress payment for labor, services, equipment,
or material furnished to
_________________________________________through
(Your Customer) (Date)
only and does not cover any retentions retained
before or after the release date; extras
furnished before the release date for which
payment has not been received; extras or items
furnished after the release date. Rights based
upon work performed or items furnished under a
written change order which has been fully
executed by the parties prior to the release
date are covered by this release unless
specifically reserved by the claimant in this
release. This release of any mechanic's lien,
stop notice, or bond right shall not otherwise
affect the contract rights, including rights
between parties to the contract based upon a
rescission, abandonment, or breach of the
contract, or the right of the undersigned to
recover compensation for furnished labor,
services, equipment, or material covered by this
release if that furnished labor, services,
equipment, or material was not compensated by
the progress payment. Before any recipient of
this document relies on it, said party should
verify evidence of payment to the undersigned.
Dated:__________________________________ ________
(Company
Name)
By______
(Title)

(2) If the claimant is required to execute a waiver and release in
exchange for, or in order to induce payment of, a progress payment
and the claimant asserts in the waiver it has, in fact, been paid the
progress payment, the waiver and release shall follow substantially
the following form:

UNCONDITIONAL WAIVER AND RELEASE
UPON
PROGRESS PAYMENT
The undersigned has been paid and has received a
progress payment in the sum of $____ for labor,
services, equipment, or material furnished
to
_______________________________________on the job
of_______________________________________________
(Your Customer) (Owner)
located at______________________________and
(Job Description)
does hereby release any mechanic's lien, stop
notice, or bond right that the undersigned has
on the above referenced job to the following
extent. This release covers a progress payment
for labor, services, equipment, or materials
furnished
to
________________________through__________
(Your Customer) (Date)
only and does not cover any retentions retained
before or after the release date; extras
furnished before the release date for which
payment has not been received; extras or items
furnished after the release date. Rights based
upon work performed or items furnished under a
written change order which has been fully
executed by the parties prior to the release
date are covered by this release unless
specifically reserved by the claimant in this
release. This release of any mechanic's lien,
stop notice, or bond right shall not otherwise
affect the contract rights, including rights
between parties to the contract based upon a
rescission, abandonment, or breach of the
contract, or the right of the undersigned to
recover compensation for furnished labor,
services, equipment, or material covered by this
release if that furnished labor, services,
equipment, or material was not compensated by
the progress payment.
Dated:______________ ____________________________
(Company Name)
By__________________________
(Title)
Each unconditional waiver in this provision
shall contain the following language, in at
least as large a type as the largest type
otherwise on the document:
"NOTICE: THIS DOCUMENT WAIVES RIGHTS
UNCONDITIONALLY AND STATES THAT YOU HAVE
BEEN PAID FOR GIVING UP THOSE RIGHTS. THIS
DOCUMENT IS ENFORCEABLE AGAINST YOU IF YOU SIGN
IT, EVEN IF YOU HAVE NOT BEEN PAID. IF YOU HAVE
NOT BEEN PAID, USE A CONDITIONAL RELEASE FORM."

(3) If the claimant is required to execute a waiver and release in
exchange for, or in order to induce the payment of, a final payment
and the claimant is not, in fact, paid in exchange for the waiver and
release or a single payee check or joint payee check is given in
exchange for the waiver and release, the waiver and release shall
follow substantially the following form:

CONDITIONAL WAIVER AND RELEASE UPON
FINAL
PAYMENT
Upon receipt by the undersigned of a check
from_______________________________________in the
sum of $____ payable to _______ and when the
check has been properly endorsed and has been
paid by the bank upon which it is drawn, this
document shall become effective to release any
mechanic's lien, stop notice, or bond right the
undersigned has on the job of
______________________________________located at
(Owner) (Job Description)
This release covers the final payment to the
undersigned for all labor, services, equipment,
or material furnished on the job, except for
disputed claims for additional work in the
amount of $____. Before any recipient of this
document relies on it, the party should verify
evidence of payment to the undersigned.
Dated:______________ ____________________________
(Company Name)
By__________________________
(Title)

(4) If the claimant is required to execute a waiver and release in
exchange for, or in order to induce payment of, a final payment and
the claimant asserts in the waiver it has, in fact, been paid the
final payment, the waiver and release shall follow substantially the
following form:

UNCONDITIONAL WAIVER AND RELEASE UPON
FINAL
PAYMENT
The undersigned has been paid in full for all
labor, services, equipment, or material
furnished to
___________________________________on the job of
(Your (Owner)
Customer)
located at_______________________________and does
(Job Description)
hereby waive and release any right to a
mechanic's lien, stop notice, or any right
against a labor and material bond on the job,
except for disputed claims for extra work in the
amount of $ ________.
Dated:___ _______________________________________
(Company Name)
By_____________________________________
(Title)
Each unconditional waiver in this provision
shall contain the following language, in at
least as large a type as the largest type
otherwise on the document:
"NOTICE: THIS DOCUMENT WAIVES RIGHTS
UNCONDITIONALLY AND STATES THAT YOU HAVE BEEN
PAID FOR GIVING UP THOSE RIGHTS. THIS DOCUMENT
IS ENFORCEABLE AGAINST YOU IF YOU SIGN IT, EVEN
IF YOU HAVE NOT BEEN PAID. IF YOU HAVE NOT BEEN
PAID, USE A CONDITIONAL RELEASE FORM."

3262.5. (a) Any person or corporation which has contracted to do
business with a public utility, hereafter referred to in this section
as a contractor, shall pay any subcontractors within 15 working days
of receipt of each progress payment from the public utility, unless
otherwise agreed in writing by the parties, the respective amounts
allowed the contractor on account of the work performed by the
subcontractors, to the extent of each of the subcontractors' interest
in that work. In the event that there is a good faith dispute over
all or any portion of the amount due on a progress payment from a
contractor to a subcontractor, then the contractor may withhold no
more than 150 percent of the disputed amount.
(b) Any contractor who violates this section shall pay to the
subcontractor a penalty of 2 percent of the disputed amount due per
month for every month that payment is not made. In any action for the
collection of funds wrongfully withheld, the prevailing party shall
be entitled to his or her attorney's fees and costs.
(c) This section shall not be construed to limit or impair any
contractual, administrative, or judicial remedies otherwise available
to a contractor or a subcontractor in the event of a dispute
involving late payment or nonpayment by a contractor, or deficient
performance or nonperformance by a subcontractor.

3263. No act done by an owner in good faith and in compliance with
any of the provisions of this title shall be held to be a prevention
of the performance of any contract between the owner and an original
contractor by an original contractor, or to exonerate the sureties on
any bond given for faithful performance or for the payment of
claimants.

3264. The rights of all persons furnishing labor, services,
equipment, or materials for any work of improvement, with respect to
any fund for payment of construction costs, are governed exclusively
by Chapters 3 (commencing with Section 3156) and 4 (commencing with
Section 3179) of this title, and no person may assert any legal or
equitable right with respect to such fund, other than a right created
by direct written contract between such person and the person
holding the fund, except pursuant to the provisions of such chapters.

3265. The claim filing procedures set forth in Part 3 (commencing
with Section 900) of Division 3.6 of Title 1 of the Government Code
do not apply to actions commenced pursuant to Section 3210 of this
code.

3266. (a) This title does not supersede the Oil and Gas Lien Act,
Chapter 2.5 (commencing with Section 1203.50), Title 4, Part 3, of
the Code of Civil Procedure, and the provisions of that act shall
govern those transactions to which it applies rather than the
provisions of this title.
(b) This title does not supersede Chapter 12 (commencing with
Section 5290), Part 3, Division 7, of the Streets and Highways Code,
and the provisions of that chapter shall govern those transactions to
which it applies rather than the provisions of this title.

3267. Nothing contained in this title shall be construed to give to
any person any right of action on any original contractor's private
or public work payment bond described in Chapter 6 (commencing with
Section 3235) or Chapter 7 (commencing with Section 3247), unless the
work forming the basis for his claim was performed by such person
for the principal on such payment bond, or one of his subcontractors,
pursuant to the contract between the original contractor and the
owner.
Nothing in this section shall affect the stop notice rights of,
and relative priorities among, architects, registered engineers, or
licensed land surveyors and holders of secured interests on the land.