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collecting final payment

CaliforniaPayment DisputesRetainage
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Anonymous contractor
Jun 9, 2020

I am a sub contractor in a public project. after 3 years finally public entity has paid the final payment to general contractor, and even though general contractor has approved the total due, but still is claiming the last 2 change orders which is over 7000, were not approved and refusing to pay those 2. the total due at this time is over 35000, but he is trying to take that 7000 off and pay only 28000. we have proof from Public entity that those 2 are approved and paid. Do i have any option beside hiring a lawyer, at this time? or should i hire a lawyer?

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Anonymous contractor
Jun 19, 2020
First, note that a California GC can't withhold all payment just because of a dispute over some fraction of that payment. So, if the GC is disputing $7,000 and you're owed $35,000 - the GC must still pay the bulk of that $35,000 while the other amounts are being resolved. To be specific - a contractor is entitled to withhold 150% of the amount subject to a good faith dispute. Arguably, if the public entity has made it clear there's no dispute, the GC shouldn't be able to withhold anything. Still - 150% of $7,000 is $10,500. So, based on the information given above, that means the GC should pay out $24,500 ($35,000 minus $10,500) in the meantime. And, if the GC has been paid their retainage but failed to release the amount of retainage they were supposed to, then their sub is entitled to 2% interest per month until that payment is made - plus the GC will be responsible for the attorney's fees and costs they incur. For more general discussion on CA's retainage rules: California Retainage Guide and FAQs.

Recovering unpaid retainage on a California public works project

For one, making a claim against the contractor's payment bond might work. Granted, the issue leading to the withholding of payment could lead to the surety refusing the claim (and then having to enforce the claim). Still, a payment bond claim may be worthwhile - it could kick the contractor into gear and force them to pay what's owed. Further, sending a payment demand letter that threatens legal action could help. The penalties to improperly withholding funds can be steep (as mentioned above), so it should be easier for a contractor to do the right thing rather than fight a losing battle. So, if they know you're serious about getting paid and willing to do what it takes to make that happen, they might stop playing retainage games and make payment. Finally, it'd be wise to have a California construction lawyer assist with the process of recovering retainage. They'll be more familiar with CA's recovery processes, and they can navigate you through the minefield to ensure you're paid. Plus, the GC will be responsible for paying attorney fees and costs, if things get ugly. And, demanding that they pay for attorney fees even if things don't make it to court can help shoulder the load, too.
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