Source: https://www.lhfconstructlaw.com/blog/2009/02/actions-a-contractor-can-take-to-help-survive-tough-economic.shtml
Timestamp: 2018-05-27 19:50:39
Document Index: 385499128

Matched Legal Cases: ['§3086', '§3093', '§ 3115', '§3116', '§3092', '§ 3115']

Actions a Contractor Can Take to Help Survive Tough Economic | Last & Faoro
On behalf of Last & Faoro posted in Mechanics Liens, Stop Notices and Payment Bonds on Tuesday, February 24, 2009.
First and foremost, contractors must be diligent in looking for the signs that a project maybe in trouble. Those signs include: (1) slow and delayed progress payments; (2) scheduling deadline slippage due to subcontractors who are not performing; (3) predecessor subcontractors and suppliers who are decreasing their manpower and slowing deliveries; (4) future phases and releases of the project being terminated; (5) the project lender being taken over or going out of business; (6) other projects that are being developed by the owner being terminated; (7) project subcontractors or suppliers going out of business; (8) the project lender starting the foreclosure process; (8) if part of the project is completed, the completed units are not being sold or rented; and.(9) if it is a public project, the public entity has had the funding for the project stopped or delayed.
1. Review the status of your preliminary lien notices: Mechanic's liens, stop notices and payment bond claims are unique remedies that are available to contractor to ensure that he or she will be paid. But to be effective, the contractor must comply with all of the applicable statutory prerequisites for recording and foreclosure of the lien. There are three prerequisites for enforcing such remedies. These are the timely service of a Preliminary 20-Day Lien Notice; the timely recordation and/or service of the lien, stop notice and/or bond claim; and the timely filing of a lawsuit to perfect such remedies. If you have yet to serve a 20-Day Lien Notice and you are obligated to do so, you should serve one if your work is not completed. By doing so, you can use the aforementioned remedies for the goods and services provided up to 20 days before the notice was served as well as for the period after the service.
Also, you must ensure that the 20-Day Lien Notice includes the proper names and address of the relevant parties. If the notice does not include the correct project owner name then the notice will be ineffective. If you are a subcontractor or supplier do not necessarily rely on information given to you by a general contractor, as it may be incorrect. The most reliable source for property owner information is at the recorder's office in the county where the project is located.
3. Review Contract Notification and Dispute Provisions: If a project is stopped you should consider how the delay will impact your future performance. For example, you may be forced to remove your equipment from the site and then bring it back, or your jobsite overhead costs may increase as the time it takes to complete the project is extended. If that occurs you maybe entitled to additional compensation. However, you must give notice to the other party. Many construction subcontract clauses require the subcontractors to give notice of change orders, delay/disruption claims and other disputed items. Those types of clauses typically condition the subcontractor's right to recovery on timely notification, followed with a timely, detailed, and documented claim.
Specifically, Civil Code §3086 states: "Completion" means, in the case of any work of improvement other than a public work, actual completion of the work of improvement. Any of the following shall be deemed equivalent to a completion: (a)The occupation or use of a work of improvement by the owner, or his agent, accompanied by cessation of labor thereon; (b) The acceptance by the owner, or his agent, of the work of improvement; (c) After the commencement of a work of improvement, a cessation of labor thereon for a continuous period of 60 days, or a cessation of labor thereon for a continuous period of 30 days or more if the owner files for record a notice of cessation.
Notice of Completion: When an owner records a valid Notice of Completion (i.e. 10 days after actual completion of work on the project) (Civil Code §3093): (a) Prime contractor in direct contract with the owner must record his or her lien within sixty (60) days of the recording of the Notice of Completion (Civil Code §§ 3115-3116); (b) All others must record their liens within thirty (30) days of the date the Notice of Completion is recorded. (Civil Code §3116).
Notice of Cessation: When an owner, after thirty (30) days of continuous cessation of labor, records a valid Notice of Cessation (this is the equivalent of recording a Notice of Completion). (Civil Code §3092): (a) Prime contractor in direct contract with the owner must record his or her lien within sixty (60) days of the recording of the Notice of Cessation; (b) All others must record their liens within thirty (30) days of the date the Notice of Cessation is recorded. (Civil Code §§ 3115, 3116).
In the current construction environment it is increasingly common for a contractor to learn that a project is going to be stopped or that the owner doesn't have the funds to pay for the work that has been performed. In such an event it the contractor must determine how the stoppage will impact there ability to collect for the work performed and how it can impact the overall cost of the project. It becomes important to document when the project was stopped so that key dates for recording liens, serving stop notices and/or bond claims can be calendared and subsequently acted on.