What are the laws a primary contractor maybe violating when it takes him too long to pay his subs

3 weeks ago

Hi,

We are a subcontractor to a primary contractor for a county project located here at City of Milpitas, Ca. We are done with the project second week of September but up to this time we were not paid with our services as indicated on the invoice we have sent them last Sept.

How can we collect our pay?
What are existing laws protecting subs regarding this type of Primary contractors?
What are the existing laws the primary has violated in this situation.

Your assistance to my questions would surely help us greatly.

Thank you.

warm regards

Senior Legal Associate Levelset

There are a number of different rules that mandate contractors make timely payments. And, there are typically several different options a claimant might be able to pursue in order to get paid. Let’s look at each idea separately – though they’ll definitely be intertwined.

Construction payment recovery options

There are a number of different tools that may be available for recovering construction payments.

Invoice reminders and demand letters

When unpaid for construction work, it’s often helpful to try and recover payment without initating a dispute. Sending something simple like an invoice reminder can often be enough to get paid or to at least get payment talks rolling. More on that here: How Invoice Reminders Help Contractors Get Paid Faster.

Of course, escalating things a bit will sometimes be necessary. Sending a document like a demand letter can let a customer know you’re serious about getting paid, while also not taking things to a formal dispute. Demand letters that include specific legal threats will often get a customer’s attention and bring them to the bargaining table. For further discussion: Demand Letters for Contractors – How To Write One That Gets You Paid.

Notice of Intent to Lien

A mechanics lien is the most powerful tool to force payment in the construction industry. As a result, the mere threat or warning of a lien claim will often be enough to get paid. Sending a document like a Notice of Intent to Lien can be a great opportunity to get paid without actually having to resort to a lien claim. It acts like a warning shot, stating that if payment isn’t made and made soon, a lien will be filed. What’s more, by sending the document to both your customer and the property owner, it’s possible to put some additional pressure on a contractor to do the right thing and pay what’s owed.

Here’s a great resource on Notices of Intent to Lien: What Is a Notice of Intent to Lien and Should You Send One?

Filing a mechanics lien

As mentioned above, mechanics liens are generally considered the most powerful tool for payment recovery in the construction industry. They work in a number of ways to force payment (we counted 17), but ultimately: a mechanics lien will put the property title in jeopardy, so owners and contractors will usually do whatever is necessary to get a lien removed from the title.

For more on how to utilize the California mechanics lien laws: (1) California Mechanics Lien Guide and FAQs; and (2) How to File A California Mechanics Lien – Step By Step Guide To Get You Paid.

Other payment recovery options

Of course, there are always options outside of the mechanics lien process – like breach of contract claims, prompt payment claims, sending debts to collections – the list goes on. For a little more discussion on potential recovery tools: Can’t File a Lien? Here Are Some Other Options For Recovery.

Laws protecting California subcontractors from slow payment and nonpayment

For one, the ability to file a mechanics lien is a very strong tool for subcontractors. And, since a subcontractor may be able to file a lien if they’re unpaid or being slow paid, that’s a law that can keep a contractor honest.

Further, as briefly discussed above, California has prompt payment laws on the books which require contractors to make timely payments to their subs and suppliers. And, when a contractor runs afoul of what’s required, they may be required to pay interest penalties. More on those laws here: California Prompt Payment Guide and FAQs.

Finally, if the contractor isn’t paying according to the terms of the contract – they may well be in breach of that contract. So, if push came to shove, a contractor could be liable for payment plus damages if a breach of contract claim were pursued.

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Managing Partner Gibbs Giden LLP

https://www.levelset.com/blog/california-prompt-payment-act/

This should be what you are looking for!

–CN

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