Procedures to preserve and determine the validity of certain liens and to make payments to prime contractors of public works contracts

This bill limits those who do not have to give notice of his or her claim to maintain the right to a construction lien for a commercial project to prime contractors and other claimants who have a contract with the prime contractor.

Currently, those persons who are not prime contractors and who are required to give notice to the land owner to maintain the right to a construction lien must serve the written notice on the owner or authorized agent within 60 days after providing the first services or goods.

This bill continues that requirement if the improvement involves four family units or fewer and is wholly residential in character. However, under the bill, if the improvement involves a commercial project, the persons who are required to give notice of a claim to maintain the right to a construction lien must serve the written notice on the owner or authorized agent within 45 days after providing the first services or goods.

Currently, no action may be maintained to enforce a construction lien unless the lien claimant files a claim for the lien with the office of the clerk of circuit court within six months from the date that the services or goods were last provided and then commences an action within two years of filing the claim. Current law requires the lien claimant to notify the owner of the land that he or she intends to file the claim for a lien. The lien claimant is also required under current law to serve a copy of the claim for a lien within 30 days after the filing of the lien claim.

Under this bill, after the lien is filed, the land owner or any other interested party may serve the lien claimant with a written demand that the lien claimant bring an action to determine the validity of the lien. Under the bill, if the lien claimant fails to bring that action within 90 days after being served with the demand, the lien is forfeited.

Under current law, certain contract, payment, and performance assurance requirements exist for contracts involving public improvements and public works.

Liens may also be obtained for those improvements if certain notice requirements are met. Currently, if the notice requirements are met, and the prime contractor does not dispute the claim within 30 days after service of notice of the claim by notifying the public agency and the lien claimant, the public agency is required to pay the amount of the claim and charge that amount to the prime contractor. If the prime contractor disputes the claim, current law requires the commencement of an action by the claimant or prime contractor to determine the validity of the claim.

This bill requires that if a valid lien exists regarding public improvements or public works, and the prime contractor admits the claim within 30 days after service of notice of the claim by notifying the public agency and the lien claimant, the public agency is required to pay the amount of the claim and charge that amount against what is owed to the prime contractor. If the prime contractor does not admit the claim within 30 days after receipt of the notice, this bill requires the commencement of an action by the claimant or prime contractor to determine the validity of the claim. In addition, under the bill, during the period that a claim is disputed the public agency may continue to make payments to the prime contractor provided the public agency withholds sufficient funds to pay the claim.