Can a GC submit a lien against a homeowner before a final billing has been sent?
We are a GC and our client, the homeowner, has not paid us for several progress billings. Can we submit a lien against the client with an estimated total amount? Or could we submit a lien now with the current amount billed, and send a second lien in the future when we’ve calculated the final amount?
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In California, general contractors hired directly by the owner must file their lien claims after completion of the direct contract, but before the 90 days after completion of the improvement. Plus, that 90 days might be shortened to 60 if the owner records a Notice of Completion or Cessation. So, if a project is ongoing, it might be too early for a general contractor to file a mechanics lien. But, if the contractor ceases their work due to issues on the job - such as nonpayment - that could speed up the timeframe for when the contractor could file their lien. But, if all work has been performed and only the actual billing itself remains, a lien claim might be filed. Though, it's certainly good practice to actually bill a customer for work performed prior to filing a lien.
Note, though, that actually filing a lien claim isn't the only way to recover payment. For one, having an open discussion with an owner and explaining the financial harm caused by their nonpayment might be a good start. If they realize their refusal to pay is putting their own project in jeopardy, they might be more amenable to catching up on payments. If talking doesn't work, proceeding with something a little stronger might make sense. By sending a warning like a Notice of Intent to Lien, a contractor can show their owner that they're serious about payment and that they aren't afraid to do whatever is necessary to get paid. Owners hate lien claims, so knowing one may be on the horizon can really work to speed up payments.
Further, threatening a lawsuit might help speed things along, too. When an owner has repeatedly failed to make payments, an action like a breach of contract claim or a claim under California's prompt payment laws could be available. Much like lien claims, everyone hates lawsuits - so threatening one may be enough to compel payment.
If necessary, a prime contractor might cease their work or even terminate their contract and pursue a lien claim before the actual completion of all work, in a worst-case scenario. But, it'd be imperative to be sure that, under the circumstances, that wouldn't result in breach or other liability for the contractor.
For more information about payment recovery in California, these resources will be valuable:
(1) California Lien and Notice Overviews, FAQs, and Statutes
(2) How To Make A Claim Under Prompt Payment Laws
(3) What Is a Notice of Intent to Lien and Should I Send One?