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3 potential remedies for contractors owed money

On Behalf of | Jan 8, 2024 | Construction Law

For California contractors facing payment issues, securing owed funds is necessary for sustaining their businesses. Various remedies are available to address non-payment or delayed payments.

Understanding these potential solutions empowers contractors to navigate financial challenges and uphold their rights in the construction industry.

1. Mechanic’s liens

Mechanic’s liens are tools that contractors in California can use to secure payments. By filing a mechanic’s lien, a contractor places a claim on the property he or she worked on, creating a legal right to seek payment from the property’s owner. This remedy serves as a powerful incentive for property owners to address outstanding payments. Otherwise, the presence of a lien can impede the sale or refinancing of the property.

2. Stop notices

Stop notices provide another effective remedy for contractors seeking payment. By issuing a stop notice to the project owner, lender or other relevant parties, a contractor can exert control over the flow of funds on a construction project. This notice notifies recipients that the contractor is missing money and prompts them to withhold funds to cover the outstanding payment. Contractors can use stop notices to encourage prompt payment and protect their interests.

3. Prompt payment laws

California’s prompt payment laws ensure timely payments in the construction industry. Contractors can use these laws to advocate for their rights. They can also use them to enforce deadlines for payment disbursement. Understanding the specific timelines and requirements outlined in prompt payment laws empowers contractors to take legal action if they fail to receive timely payments. By staying knowledgeable and assertive, contractors can use prompt payment laws to help prevent payment disputes.

According to Levelset, fewer than half of all American construction companies say they receive payments in full within 30 days. Having a clear understanding of their legal rights enables contractors to address payment issues and maintain financial stability within the industry.