ATT: Landlords/URGENT – Call your State Senator re: AB 2416

warning-sign200Assembly Bill 2416 authored by Assemblyman, Mark Stone, passed the Senate Appropriations Committee last week. This bill must be defeated. It would permit certain nonexempt employees to record liens against your real property for alleged unpaid wages from their employers.

For example, employees of any janitorial, security, landscaping, pool service or any other contractors could record liens against your property at which they provided labor and were not paid by the companies that employed them. AB 2416 will impose liability upon and generate litigation against commercial property owners including apartment owners who had no role in the hiring, supervising, or payment of their tenant’s contractor’s workers and who had no idea that the workers were not paid. In many cases, owners will have no way to defend themselves against the claim that someone else’s employee was not paid.

Notably, there is an exemption and AB 2416 is not applicable for labor performed under a collective bargaining agreement. Therefore, labor unions are pushing this law because it would encourage owners to hire companies that are pro-labor.

AB 2416 provides that an unpaid worker must bring an action to enforce his/her recorded lien against your property within 45 days. The bill would enable the property owner to release the lien by obtaining a surety bond. Without a surety release bond, the employee wage lien that is recorded against your property could prevent a sale, refinance, or any other transaction unless the lien is paid off or released.

The process of obtaining release bonds can be time consuming and expensive. Bonding companies usually require cash collateral for 100% of the amount of the bond.

Finally, the more important question is how does an owner defend against this type of case when the owner had no role in hiring, managing, or paying the tenant’s contractor’s employees. How would the owner know that the lien and the employees claim isn’t fraudulent. Particularly, if the “employer” has closed down its business or filed bankruptcy.

This could also cost tenants in commercial buildings and/or propertymanagement companies who manage apartment buildings because the owner could require the tenants in commercial buildings and property management companies for apartment buildings and/or homeowners associations to post additional security for potential unpaid wage claims.

Comment: If you own commercial property or apartment buildings or are a member of a board of directors for a homeowners association that employs a property management company, you should be concerned for the potential ramifications if this bill passes. I would urge all of you in that situation to contact their local Senator and/or Assemblyman and let them know how you feel about this one further attempt to erode property owner’s rights in California.

This law could also be a breeding ground for fraudulent claims used as a shakedown of property owners. Sometimes it is less expensive to pay a bogus claim that is relatively small than to hire a lawyer, post the bond, and litigate a claim for wages in an amount that makes it financially unfeasible to contest. Just another cottage industry to have to worry about.

Scott Souders is a real estate attorney who has practiced real estate law in excess of 38 years in Southern California.

Disclaimer: The Real Estate Law Update cites cases or statutes which are summarized and should not be relied upon without fully reading the cases or statute in the advance sheets and shepardizing the same and consulting with your own attorney.