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Am I obligated to make a final payment with only the City Inspectors sign-off?

CaliforniaCash FlowPay ApplicationsPayment Disputes

It has always been after four progress payments, the final payment would be after City Inspectors sign-off and home owner inspection that the job was completed. Recently the GC requested a final payment after stating electrical was completed and the City Inspector signed-off the electrical, but the owner inspection found the electrical was not completed. Bare hot wires where outlets should have been installed and a circuit breaker that will not re-set, not powering the master bath or bedroom outlets. The GC is refusing to complete and/or correct the electrical or any other work until the final payment is made and is threatening legal action with a lien. Am I obligated to make this final payment with only the City Inspectors sign-off instead of making the final payment when the electrical is actually completed?

9 replies

Dec 16, 2022

That's peculiar that the city inspector signed off with the work not complete. But the entitlement to the final payment should be governed by the terms of your contract. Is this a residential project? In general, a contractor is not entitled to payment for work within its contracted scope on a residential project it has not performed. If the GC's contract here includes electrical work within its scope that it has not fully completed, and it's a residential project, the GC is likely not entitled to the full payment.

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Dec 16, 2022

The city inspector most likely did not look inside the media boxes during final inspection. This is a duplex under remodel and I am the owner. The electrical is under the scope of the project and I have made four progress payments expecting the 5th payment to be the final, but the GC is insisting on another progress payment because the City signed it off. He is now refusing to do anymore work until I pay him for the electrical. I have asked the City Inspector why it was signed off with exposed live wires and to ask the GC to complete the electrical. Am I obligated to make another progress payment?

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Dec 16, 2022

If you'd like to send the contract, I'd be happy to take a look. Feel free to email a copy to tjulander@ostergar.com. When was the work otherwise complete? Civil Code section 8812 requires you to pay retention within 45 days after project completion. But that code section also permits you to withhold funds in the event of a good faith dispute. One solution would be to estimate your cost to complete the work and repair any defects, withhold 150% of that amount pursuant to Civil Code section 8812, and pay the net amount. Then pay the balance of the 150% withheld when the GC completes the work.

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Dec 16, 2022

Unfortunitally there is no contract. The GC provided one after he started work on the project, which was reviewed and rejected by an attoney. The attorney suggested the AIA Construction Contract, but by this time the GC was already doing demo on the property and never provided the AIA contract. We have been working with an Excel spread sheet on payment schedule, a Word document detailing work to be done for payment and the permited drawings. This was a mistake on our part to allow him to continue without the AIA contract, but we had used him on other projects with no issue. We have noticed all his equipment has been removed from the property and it appears he has stopped work. The project is 99% complete and he has approximately $40K in invoices he needs to present when completed. 

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Dec 16, 2022

I'd withhold 150% of the estimate to complete the work and pay the net amount within 45 days of the GC's last day of work. If the GC harasses you for withholding any funds, you are clearly entitled to this remedy under California law. And you should have some leverage for the GC's violations of the Home Improvement Contract law for working without a contract and violation of the Business and Professions Code for not completing the project. 

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Dec 16, 2022

Would it be prudent to file a complaint with the CSLB or a Bond claim at this time? 

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Dec 16, 2022

That's a judgment call I wouldn't be able to give advice on without knowing more about the project and the contractor.

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Dec 16, 2022

Thank you for the responses you have provided. Can you tell me the cost of retaining your services if we determine they are needed and what documentation/information would you require if we need your services with this GC and the completion of our project?

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Dec 16, 2022

Sure thing. Can you give me your email address or phone number so we can discuss offline? Email me at tjulander@ostergar.com.

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