Steps for Contractors to Get Paid When A Client Refuses To Pay Their Bill

What Can a Contractor Do When a Client Refuses to Pay their Bill?

California limits the amount a contractor can charge before work is done, but what happens if the client breaches the contract and refuses to pay their bill? Luckily, California provides legal protections for work done by contractors who can enforce a “Mechanics Lien” against the property that the contractor improved by their work and labor.

There are strict and important deadlines required to file and enforce a valid mechanics lien, so you must act quickly to protect your rights!

Who Can Enforce a Mechanics Lien?

A mechanics lien is a “hold” on the property that can be filed by an unpaid contractor, subcontractor, laborer, or material supplier. The mechanics lien must be recorded with the county recorder’s office and can result in a foreclosure action or forced sale of the property as compensation for the unpaid debt.

Providing Owner with Preliminary Notice of Mechanics Lien

The first step to preserving your ability to claim a mechanics lien is to provide “preliminary notice” to the property owner. The contractor must serve this notice on the property owner, as well as the lender and general contractor. It is good practice to always serve the preliminary notice as soon as possible. The claim includes any work that is performed after the notice is served and also includes any work performed up to twenty (20) days before the notice is served, but any other work done over 20 days before the preliminary notice was served cannot be included.

Recording A Valid Mechanics Lien

A mechanics lien can only be recorded after the work that was included in the contract is completed. Even if the contractor leaves the project before it is complete, the work is deemed “completed” for purposes of filing a mechanics lien if no work is done on the project for a continuous period of sixty (60) days. After there has been no work for sixty days, the contractor can then record their mechanics lien. In either of these situations, the mechanics lien must be recorded within ninety (90) days of the completion of the work unless there is a recorded notice of completion, which alters the timeline.

When a notice of completion is filed, the deadlines are shortened. Once the notice of completion is filed, a general contractor must record their mechanics lien within sixty (60) days, and a subcontractor or supplier must record a lien within thirty (30) days. The owner of the property must receive the notice of completion within ten (10) days of the actual completion.

Serving Notice of the Recorded Mechanics Lien

The contractor must serve the property owner with a copy of the Claim of Mechanics Lien. The documents must include specific wording and must be served via certified mail, registered mail, or first-class mail. The contractor must show that the documents were served so a certificate of mailing and confirmation of receipt sent to the correct address is essential, otherwise, the lien may be unenforceable.

Deadline to File Lawsuit to Enforce Mechanics Lien

The contractor must file a lawsuit within ninety (90) days from the date of the recording of the mechanics lien in order to enforce the mechanics lien against the owner’s property. If the contractor misses the deadline, then the lien may be unenforceable, and the contractor may be required to remove the lien. If a contractor refuses to remove an unenforceable mechanics lien, the contractor may be required to pay for any attorney fees the owner incurs to remove the unenforceable lien.

These deadlines are very strict and must be followed to protect your right to recover for your work. There are some situations where the deadline may be extended, such as when the contractor and owner agree to extend the time. If the owner and contractor agree to an extended timeline, the new deadline is ninety (90) days after the expiration of the additional time, but the new deadline cannot be more than one year after the work was completed.

Consult With An Experienced Construction Litigation Attorney To Protect Your Rights

There are a lot of technical issues and expertise needed to enforce a valid mechanics lien.  Missing one deadline could be the difference between getting paid the money you are owed and being stuck with the bill. Trying to deal with the intricacies of a lawsuit by yourself is like doing surgery and could cause dire consequences.

Ghassemian Law Group has very experienced attorneys who can help you or your company when a client refuses to pay for your work and labor.  Call us as soon as a payment dispute arises so we have a better chance of properly enforcing your rights and guiding your case in the right direction.