What You Need To Know About
Construction Payment in California
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The California construction payment process is closely regulated. California leads the country in having clear regulations in many categories that affect the construction payment process, including clear regulations on lien waivers, retainage, prompt payment, and more.
Construction lenders, developers, general contractors, subcontractors, and suppliers must all pay close attention to the rules and best practices in California when making or receiving payment. Mistakes can be expensive, and sometimes, even criminal! Here’s an overview of what you need to know.
1. California Heavily Protects Contractors & Suppliers
California has a lot of consumer-like protection regulations designed to protect the payment rights of subcontractors, vendors, and suppliers. All of the state’s requirements and rules, therefore, have a bias toward protecting these parties and their ability to get paid. This includes very strict lien waiver limitations, prompt payment and retainage protections, and more. The biggest takeaway for anyone in the California construction industry is that close attention must be paid to every detail in the payment process, as the law will not likely tolerate lenders, developers, or general contractors convincing subcontractors and suppliers to sign contracts, waivers, and provisions that limit payment rights. And the state may even punish companies for trying.
2. California’s Lien Rights Culture Is Organized
Some states have very unorganized lien right cultures. All states give contractors the right to file a lien. But not all states have preliminary notice & lien waiver frameworks to organize those rights. California is the opposite. The California lien rights process is very organized. In fact, it’s a model for other states, and is what we like to call the “California-styled lien rights” process. The rules and the culture of lien rights protection in California has a clean preliminary notice, lien filing time period, and strict lien waiver framework. If you’re working in California, you’ll need to be familiar with this framework to survive.