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Material supplier construction disputes

by | Apr 17, 2020 | Construction Law

A material supplier, on a construction project can  face a great deal of risk when supplying construction materials for a project. The difficulty for material suppliers can be in finding the means for getting a client to pay them. In situations where they’ve provided all the materials the client needs for construction or the project has concluded, a material supplier will need to record and perfect a mechanic’s lien or stop payment notice.

Obtain security for payment by serving a preliminary notice

In order to have a valid mechanic’s lien, a material supplier must serve a preliminary notice.  Service of a preliminary notice is required for all persons or entities equipment, or materials to the project, when they are not in direct contract with the owner and not exempt.  The preliminary notice must be served on the owner or reputed owner, the direct contractor or reputed direct contractor, and any construction lender or reputed construction lender. (California Civil Code §8200).

Preliminary notice must be served by personal service, certified mail, registered mail, or overnight delivery.  Notice should be served as soon as possible, it is suggested that a material supplier serve the preliminary notice either as soon as the contract or purchase order is entered into or when materials are first delivered.  A material supplier entitled to record a lien only for materials supplied within 20 days prior to service of the notice and, at any time thereafter (California Civil Code § 8204).  The notice should include a description of the materials to be provided and an estimate of the value of the materials to be provided.

Serve your mechanics liens or stop payment notice to as security for payment when payment is not promptly received

If the project is a private work and the subcontractor, contractor, or owner does not pay for the materials supplied, and the material supplier has served its preliminary notice, a mechanic’s lien should be recorded in the county recorders office in the county where the project is located.  The lien must be recorded within 90 days of the completion of the project, unless the owner has recorded a Notice of Completion, in which case the lien must be recorded within 30 days of recordation of the Notice.   A mechanics lien is a claim on a specific property for uncompensated construction work or supplies. In California, a mechanics lien uses the property that received the benefit of the materials as collateral. If you are attempting to settle a dispute with a client that refuses to furnish payment for completed work or supplies, you should contact an attorney with experience in construction disputes and commercial collections.

If the project is a public work, the material supplier will need to serve a stop payment notice on the public entity owner within the time frames state above.

If payment is not received within with 90 days of recording your mechanic’s lien, a material supplier will need to file suit in the Superior Court for the county in which the lien was recorded.  A Mechanic’s lien expires 90 days after its recorded, so take care to make sure suit to perfect the lien is timely filed or you will lose your security for payment.  Or public works projects, stop payment notices will also need to be perfected by filing suit in the Superior Court for the county in which the project was located.  Note that the suit to perfect your stop payment notice must be filed with 90 days after the last day to serve the stop payment notice.