When you’re working on a construction project, it’s almost a given that something over the course of work will not go exactly to plan. While in most cases it’s possible to get things back on track and complete work to everyone’s ultimate satisfaction, sometimes things go seriously awry. If you’re faced with an unhappy client who is refusing to pay or threatening to sue, it’s important to understand both your legal rights and best practices to improve your odds of prevailing, preferably without having to go to court.
Anyone who works on or provides materials for a construction project deserves to be paid, but failing to follow California’s mechanics lien procedures including serving a preliminary notice ( if you are a subcontractor or material supplier) can harm the legal rights that support your efforts to collect payment. A preliminary notice also called a 20-day preliminary notice, is a form served within 20 days of a claimant providing labor or materials to a private works project. This notice advises the owner that a subcontractor or material supplier is providing work or material on the project, and if not paid by the direct contractor will file a mechanic’s lien, give a stop payment notice, or assert a claim against a payment bond to assure payment of the owed amount.
A preliminary notice covers all labor and materials provided from 20 days prior to the date of the notice until the end of contributions to the project; ideally, it should be served prior to commencing work, but it can be served at any time. Without a preliminary notice, you cannot later file a mechanics lien, stop payment, or bond claim, increasing your risk of non-payment. Further, a late notice may limit the amount you’re entitled to collect. Thus, sending a preliminary notice should be a routine part of your process on every job, not something you consider after a problem has already arisen.
If a client files a lawsuit alleging construction defects, or damage resulting from construction defects, it can be in your best interests to have a construction expert review the project to provide supporting testimony. While you, as a construction professional, may be in a better position than a client to affirm that the work was performed in a good, workmanlike manner and that any damages were not the result of your actions (or conversely, negligence on your part), an expert witness is necessary to draw conclusions from the facts of the case. In addition, supporting opinions of an impartial third party are likely to be more persuasive to a judge or jury.
Should you be in the unfortunate position of needing an expert witness to support your legal defense, be certain that they are qualified and certified as an expert witness in the court where they will be testifying. The other side may seek to have your witness’s testimony disqualified if they are not and/or cannot be qualified as an expert in your jurisdiction. If you have an experienced construction attorney, they will make sure you have a good expert on your side.
It can make a significant financial difference if a client attempts to sue you for construction defects as opposed to resulting damage from construction defects. Construction defects, or bad workmanship, are not covered by your general liability insurance, so if they obtain a judgment against you, it will be up to you to pay out of your own pocket. The resulting damage from construction defects, on the other hand, can trigger insurance coverage; in that case, your insurance company would provide an attorney to defend against the claim. For example, if a client claimed that improperly installed flashing around a chimney led to rain penetrating the structure, causing water damage and mold, that would qualify as resulting damage from a defect. Often, insurance companies will settle such claims rather than take them to court. In addition to maintaining all required insurance coverage, you should consult an attorney to ensure that your company is structured properly to protect your assets to the extent possible in the event of a defect claim.
If you were hired by a homeowner’s association to do work on the common area of a condominium building and you didn’t get paid, you may be unsure of who you can file a lien against. Should you be going after the association only, or do you also have a right to file liens against the individual unit owners?
California law allows contractors to file liens against the unit owners as well as against the association responsible for the common areas under these circumstances. However, to do so, you must apportion the lien if it is a lump sum, allowing each unit owner to either bond around that apportionment or pay off the apportionment and release the lien on their unit. This can lead to a large and costly amount of legal work if the building includes many units. An experienced construction attorney can help you determine the most cost-effective means to pursue payment in this situation.
By the time a contractor has been hit with a legal claim or has started to look into how to go after a delayed or withheld payment, the best opportunities to protect their rights may have already passed. Ghassemian Law Group, with attorneys who have decades of experience in construction law, can help guard against legal missteps that could leave you exposed before trouble arises, as well as vigorously defend your rights should you be dragged into a legal dispute. To learn more about how our experienced construction law experts can help before something goes wrong, contact us here today.
This article is informational only and meant to provide guidance. It is not meant to be legal advice and it does not create an attorney-client relationship. For what to do in your specific situation, please consult with a qualified Construction Law attorney.
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