When is your project 'complete' under California law?

CONSTRUCTION CORNER

In California there are a number of statutory payment remedies available to assist contractors in getting paid including mechanics liens, stop payment notices and payment bond claims. The deadline to assert these payment remedies depend for the most part on when the project was completed.

So, for example, direct contractors and subcontractors have 90 days from completion of the project to record a mechanics lien, serve a stop payment notice, and file suit to enforce a claim on a payment bond on a public works project if no notice of completion or cessation is recorded.

But when exactly is a project "completed"?

The Civil Code's Definition of "Completion"

Fortunately, the Civil Code provides that answer and it depends on whether the project is a private works project or public works project. For private works projects, Civil Code Section 8180 defines "completion" as the occurrence of any of the following events: (1) actual completion of the work of improvement; (2) occupation or use by the owner accompanied by a cessation of labor; (3) cessation of labor for a continuous period of 60 days; or (4) recordation of a notice of cessation following cessation of labor for a continuous period of 30 days.

There is one caveat, however: If a private works project is subject to acceptance by a public entity, completion occurs on acceptance by the public entity.

For public works projects, Civil Code Section 9200 defines "completion" as the occurrence of the earliest of the following events: (1) acceptance of the project by the public entity; or (2) cessation of labor for a continuous period of 60 days.

Picerne Construction Corp. v. Castellino Villas

Even though the Civil Code defines "completion," ambiguities continue to exist, and court battles continue to be waged. Picerne Construction Corp. v. Castellino Villas, 244 Cal. App. 4th 1201 (2016), is a recent example which highlights the disagreements and difficulties in identifying completion. (Note: Picerne involved the predecessor statute to Civil Code Section 8180 - Civil Code Section 3086 - but it is still instructive of the disagreements which can arise over the definition of "completion.")

In Picerne, general contractor Picerne Construction Corporation entered into a construction contract with developer Castellino Villas for the construction of an apartment complex in Elk Grove. The project consisted of 11 separate apartment buildings, separate garages, a clubhouse and other facilities.

When it was not paid, Picerne recorded a mechanics lien and later filed suit, and a court battle later ensued over whether Picerne had timely recorded its mechanics lien with Picerne and Castellino each pointing to events in support of their positions. Those events included:

* Elk Grove's issuance of several certificates of occupancy - the first on May 3, 2006, and the last on July 25, 2006. Picerne and several of its subcontractors, however, continued to work on the project after July 25, 2006. This work included straightening out valleys on the roofs, installing nailers and hips on the roof edges, and nailing trim.

* On Aug. 28, 2006, Castellino signed a document accepting buildings 1, 3, 4 and 5 through 11 as being complete. At the time, Picerne was still completing punch list work on buildings 2 and 5, including the installation of grip tape on stair treads.

* On Sept. 8, 2006, Castellino issued a document titled "Owner's Acceptance of Site" and Castellino began renting apartments at the development in October 2006.

* On Nov. 28, 2006, Picerne recorded its mechanics lien and later filed suit.

* On April 30, 2007, Picerne recorded a notice of completion stating that the Project was completed on April 20, 2007.

Picerne prevailed in the trial court. On appeal, Castellino argued that Picerne had not timely recorded its mechanics lien because Picerne had not recorded its mechanics lien within 90 days of "substantial completion" of the project, which Castellino argued was the date Elk Grove issued its final certificate of occupancy on July 25, 2006.

At the time, former Civil Code Section 3106 defined "completion" as:

"Completion" means, in the case of any work of improvement other than a public work, actual completion of the work of improvement. Any of the following shall be deemed equivalent to a completion: "(a) The occupation or use of a work of improvement by the owner, or his agent, accompanied by cessation of labor thereon. (b) The acceptance by the owner, or his agent, of the work of improvement. (c) After the commencement of a work of improvement, a cessation of labor thereon for a continuous period of 60 days, or a cessation of labor thereon for a continuous period of 30 days or more if the owner files for record a notice of cessation." (Current Section 8180 eliminated the "acceptance by an owner" trigger for "completion.")

In support of its argument, Castellino argued that cases had held that "any trivial imperfection in the said work, or in the construction of any building, improvement, or structure, or the alteration, addition to, or repair thereof, shall not be deemed such a lack of completion as to prevent the filing of any lien. And, here, Castellino argued only minor, trivial work was left to be completed (i.e., the roof work and grip tape).

The Court of Appeal, however, disagreed. Pointing out that Section 3106 defined "completion" as "actual completion" not "substantial completion," the court explained: "[T]he mechanic's lien statute is intended to inure primarily to the benefit of persons who perform labor or furnish materials for works of improvement, and it is to be liberally construed for the protection of laborers and material suppliers, with doubts concerning the meaning of the statute generally resolved in favor of the lien claimant. Interpreting completion as actual completion gives lien claimants the maximum amount of time to assert their rights before such rights are cut off, whereas interpreting completion as substantial completion could cut off mechanic's lien rights much earlier."

And, here, explained the Court of Appeal: (1) Picerne was installing grip tape on the stair treads after July 25, 2006, and this was original contract work not merely corrective or repair work; and (2) the roofing work performed after July 25, 2006, was not warranty work because Castellino did not begin renting apartments until October 2006. In short, held the court, "the roof and stairway work performed after July 25, 2006, is not comparable to adding a few strokes of paint or turning a screw."

Picerne highlights that even though defined under the Civil Code ambiguities and disagreements still arise over when "completion" occurs, that when they do courts will often determine when "completion" occurs using a very a fact-dependent approach, and that when in doubt California's liberal construction of the statutory payment remedies in favor of claimants will often guide that determination.