Home>Levelset Community>Legal Help>The Bank has asked us for a Demand letter because of the Mechanics Lien filed on the property because the owner is now trying to re-fi his loan.

The Bank has asked us for a Demand letter because of the Mechanics Lien filed on the property because the owner is now trying to re-fi his loan.

I have two questions; One we are in California, On the Demand letter it states that in the event payment is not made timely, CA law requires that interest in the rate of 2% per month be added to the outstanding amount. On this Demand letter under the please immediately provide payment in the amount of $2,842.26(Materials) + (should I put in the interest of 2% here) to Diversified Minerals Inc. 2nd question is it ok, to put To: Subcontractor and/or Property owner on the same letter that is going to the bank? Thank you, Sherry Cooksey Diversified Minerals Inc.

1 reply

May 6, 2020

If you are a material supplier and not a subcontractor, you are not covered under the California prompt payment statutes for private projects. If you are a subcontractor (absent a contractual provision to the contrary) you would be entitled to 2% per month on the balance owed in lieu of interest for progress payments, commencing 7 days after receipt of payment by your customer. Subcontractors with a direct contractual relationship with the direct contractor are also entitled to 2% per month on the balance owed in lieu of interest for retention, commencing 10 days after receipt of payment by the direct contractor. This cannot be contractually waived. The trick would be figuring out when your customer was paid, and they would be the one of the hook for the penalty. If you are eligible, then include the 2% per month interest in your demand. It is also possible that your contract sets forth a penalty for late payment. It makes sense to copy all interested parties in your demand letter and to send it to all of them. Finally, remember that you only have 90 days from recording your lien before it expires unless you file a lawsuit to foreclose. If you need legal assistance, I am available for a free consultation. To schedule please send me an email at ryan@huntortmann.com

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