Category: Insights

When working on federal public works construction projects there are no Stop Payment Notice or Mechanics Lien remedies available to … Continued

Mediation Mediation is a process in which a neutral person or persons facilitate communication between the disputants to assist them … Continued

Time and time again I receive calls from subcontractors and suppliers who find themselves faced with a customer who is either unwilling or unable to pay for labor or materials supplied for a private works project. As an attorney, the first question I usually ask is “did you serve a Preliminary Notice?” The second question I usually ask is “did you serve the Notice within twenty (20) days after first furnishing labor, service, equipment or materials to the job site?” The answers to these questions will often determine the ability to collect on the claim.

In the California building and construction industry, the “Preliminary Notice” is an absolute prerequisite for Subcontractors and Suppliers to protect their right to be paid for work performed and materials provided to a construction project.  Without the proper drafting and service of a Preliminary Notice, Subcontractors and Suppliers cannot protect their right to payment using such indispensable collection remedies as the Mechanics Lien, Stop Payment Notice and Payment Bond Claim.

The Private Works – Preliminary Notice form which contractors, subcontractors and suppliers had become accustomed to using for many years changed in 2004. Despite this change in law, many in the construction industry have still not started using the correct new form.  Changes in the law, championed by the American Subcontractors’ Association, gave a significant new benefit to subcontractors and suppliers by giving the subcontractor or supplier some expectation of actually receiving notice…

The California Mechanics Lien is one of the most valuable collection devices available to contractors, subcontractors and suppliers who are unpaid for work performed and materials supplied in relation to a California Private Works project. The mechanics lien allows the claimant to sell the property where the work was performed in order to obtain payment. The process starts with the recording of a mechanics lien in the office of the County Recorder where the property in question is located. As noted below, certain deadlines must be met.

The “Notice of Non-Responsibility” is one of the most misunderstood and ineffectively used of all the legal tools available to property owners in California construction law. As a result, in most cases the answer to the above question is “No”, the posting and recording of a Notice of Non-Responsibility will not prevent enforcement of a California Mechanics Lien.

For purposes of seeking payment on a construction related project in the California construction industry, the proper legal classification of the party seeking payment is of key importance. Whether one in contract with a prime contractor is a subcontractor or a material supplier determines the availability for mechanics’ liens, stop payment notices and payment bond claims. Generally, those in contract with subcontractors have the ability to assert mechanics liens, stop payment notices and payment bond claims against the owner, general contractor and/or sureties. On the other hand, those who supply materials to material suppliers are generally not entitled to assert a mechanics lien, stop payment notice or payment bond claim. The “rule” has generally been stated as: “A supplier to a supplier has no lien rights.” However, this rule is not always true.