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Client is holding back funds for issues with installed doors

CaliforniaCollections Mechanics Lien Notice of Intent to Lien Notice of Termination Payment Disputes Prompt Payment Recovery Options

I’m a small California GC and about two months ago we installed some large patio doors (6’ and 9’) soon after, we noticed some overspray from the factory. We called, set up a service call and I then invoiced client for full cost of installed doors. Client then complained that door was difficult to lock, normal in new fiberglass patio doors, and has held back payment that was invoiced, around 6k. Two months later, manufacturers service tech comes out and brings the wrong panel to swap and adjusts the door to where they told me it was operating within parameters. Lots of other small things have also occurred and I need to get out of there ASAP but still have about 25k of areas left to do. With the Coronavirus alive and well here, emotions are crazy and I need to make the right decisions. Btw, we have a signed contract as well as 9 CO’s and counting.

1 reply

Jun 23, 2020

California customers are generally only entitled to withhold payment that's subject to a good faith dispute. And, the customer is only able to withhold 150% of the amount in dispute. So, if the customer is withholding more than that, they should be releasing at least partial payment - otherwise, they'll face interest penalties and legal liability. As far as the amounts being properly withheld - you can always make a claim against the customer if they're refusing to pay what's owed. And, simply threatening to make a claim might jar payment loose.

How to force a problem customer to pay what's owed

There are a number of different options for forcing payment. Let's break down a few of them.

Notice of Intent to Lien

If the customer won't pay what you're owed, threatening to file a mechanics lien claim might convince them to do the right thing and pay what's owed. Claimants often send Notices of Intent to Lien, with great results. A Notice of Intent to Lien lets the customer know that if they fail to make payment, you're prepared to file a lien against their property. And, because of the serious ramifications lien claims bring, the threat of a lien must be taken seriously. More on that here: What is A Notice of Intent to Lien And Should I Send One?

Sending a demand letter

Alternatively (or additionally), threatening to pursue legal action can be effective. Much like a Notice of Intent, sending a payment demand letter can lead to payment. Generally, a demand letter will include specific legal threats and a deadline for when payment must be made.

Legal claims

Finally, actually pursuing claims could force the customer to pay what's owed. Generally, though, a GC's mechanics lien can't be filed until the project is completed. Still, legal claims can be made - like breach of contract or under California's prompt payment laws. If you think legal claims might be the way to go, then contacting a California construction lawyer might be a good first step. You can find one here: Find a California Construction Lawyer. Additionally, note that for smaller claims, taking to California small claims court might be an option, too.

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