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3 tools to remedy a construction payment dispute

by | Apr 28, 2022 | Construction Law

If you provide services or materials for a construction project, you rely on promised payments to keep you in business. When facing a payment dispute, you have multiple ways to remedy the situation in California.

Consider these three tools that can help you recover unpaid funds.

1. Mechanics liens

As an unpaid party, you can use a mechanics lien to place a claim on a property until you receive overdue funds. If nonpayment continues, you can force a foreclosure in order to receive compensation.

A mechanics lien attaches to the property’s title and is a matter of public record. You cannot take out such a lien against a public works project.

2. Bond remedies

A payment bond is a contract that guarantees unpaid parties on a construction job receive compensation. In California, the prime contractor must take out a payment bond for any public works project over a certain value. You can make a bond claim if you have a payment dispute relevant to the project.

3. Stop notices

A stop notice is a tool that halts funding of a construction project until the sender of the notice receives the unpaid funds. A stop notice only applies to currently outstanding balances and does not guarantee future payments. This is a commonly used method for public works projects, as mechanics liens are not allowed.

These formal means of inducing payment can be highly effective, but you may want to pursue other tactics first. Carefully consider the likelihood of payment, your relationship with other stakeholders and the impact on your reputation when determining which approach to follow.