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IF CONTRACTOR DOESN'T INCLUDE THE SUBCONTRACTOR ON THE JOINT CHECK PROCESS, may we hold payment?

CaliforniaPayment DisputesPrompt Payment

Hello, We (the subcontractor) have been trying to collect our November payment from the contractor for quite some time now. The contractor decides to mail out joint checks for only our suppliers portion that is owed, in other words, we were not included in this draw. Our November billing was not paid in full. May we hold the joint checks from being mailed out to our suppliers until we get paid?

1 reply

Apr 6, 2018
This is a good question, and it's not one we get often here at the Construction Legal Center. First, I'll note that withholding payment from suppliers might not accomplish much. Holding the checks will simultaneously harm those suppliers down the chain while creating little leverage in the way of forcing payment from the contractor. An unpaid party will still be able to leverage their state's prompt payment laws, retainage laws, and ultimately their mechanics lien rights if payment isn't made by their contractor - regardless of whether the unpaid party's subs or suppliers have been directly paid. Anyway, as for the letter of the law, Cal. Bus. & Prof. Code Section § 7108.5(a) states "A prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing..." On one hand, this prompt payment law appears to state that payments should be pushed down the chain within 7 days - but on the other hand, if a subcontractor has not received their progress payment, it appears that they might be able to wait to send payments down the chain until they, themselves, have been paid. Rather than holding payments hostage, though, it may be more fruitful to demand payment from the contractor, to send a threat such as a Notice of Intent to Lien, or otherwise consider leveraging the California mechanics lien statute to force payment of what is due.
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