I received a Demand for Payment from Escrow of the West. They would like to have the mechanics lien released but have not received the payment yet. The form requires me to provide the money owed to me plus interest.
The California Constitution (Article XV, Section 1) provides for a default rate of interest of 7
percent per annum. Alternatively, Civil Code section 3289 allows for interest at 10 percent for a breach of contract. Typically, where subcontractors and suppliers are concerned, there is no direct contract with the owner. The court in Palomar Grading & Paving, Inc. v. Wells Fargo Bank, N.A. held that in the case of innocent, noncontracting owners, claimants can only recover prejudgment interest at the constitutional default rate of 7%. The court, however, specifically left open the question of the applicable rate of interest where a culpable owner is involved, i.e., a lien is recorded a result of the owner’s breach of the construction contract.
If you had a direct contract with the owner, you may be entitled to the interest rate specified in your contract documents and, if none is specified, possibly at the rate of 10% per annum. You should speak to a construction attorney to review your specific situation.