The construction industry has always been vulnerable to payment problems, in good times and bad, and recent economic times have become a stark reminder that keeping attention to payment issues allows a greater opportunity of getting paid in the future. Mechanics liens and stop notices can be immensely helpful legal tools to remedy any non-payment for services rendered. Archer Norris attorneys have many years of experience representing owners, general contractors, subcontractors, architects, engineers, designers and suppliers in the construction industry in these payment matters.
Focus on Mechanics Liens
As one of the few legal protections provided by the California Constitution to one who improves another’s property through labor, materials or equipment, a mechanics lien is one of the most powerful tools for getting paid.
When work on a piece of property has been completed and payment has not been received, contractors, subcontractors and suppliers can record a mechanics lien on the improved property. This means that the owner of the property will not have a “clean title” as the mechanics lien applies to both the structure and the land on which the structure sits.
Focus on Stop Notice Claims
For construction on government-owned or public property, mechanics liens are not available to secure payment for labor and materials. Instead, stop notices are used by contractors (other than the prime or general contractor) to notify the owner/government agency that a subcontractor has not been paid for work performed. A stop notice provides the claimant with certain enforceable rights directly against un-disbursed construction loan proceeds. In such cases where a timely and properly served stop notice claim is presented, the public entity must set aside sufficient funds due to the contractor to satisfy the claim, pay interest and provide for the public entity’s reasonable cost of litigation.
Stop notices are also available for private projects where there are funds held by a construction lender or owner. While mechanics liens attach to the real property, stop notices attach to the funds held by the lender or owner. This can be useful when the real property is no longer valuable enough to satisfy a mechanics lien(s).
Focus on Payment Bond Claims
Many large construction projects and public works projects require that the owner and/or general contractor post payment bonds. If a contractor and/or subcontractor do not get paid, these types of bonds serve as a source of funds to get paid.
Subcontractors and other lower-tier parties may not always be aware that a payment bond has been issued and it is always a good idea to get this information early in the project.
Legal Protection Using Liens, Stop Notices and Bonds
The creation, preservation and enforcement of mechanics liens and stop notices require a series of specific action items, including procedures that must be performed prior to commencement of work, which are strictly enforced.
Only legal counsel well-versed in the handling of mechanics liens and stop notices will successfully protect the interests of those seeking to enforce their legal rights. Because legislation governing mechanics liens and stop notices varies from state to state, it is important to understand the proper procedures.
Offering On Point Counsel for Mechanics Liens and Stop Notices
Working in conjunction with our construction and business practices, our Liens, Stop Notices and Bonds Practice Group provides advice and litigation support to owners, contractors and construction professionals, particularly regarding prosecution and defense of mechanics lien claims. We have both challenged and defended mechanics lien actions in state courts throughout California.
Counseling and Educating our Clients
As part of our counsel in this area, we monitor pertinent legislation. We also provide complimentary informational seminars to large subdivision developers and their staffs as well as contractors and others in how to use and defend against mechanics liens.