Timeline for Securing Construction Project Payments
Securing payment for construction work is essential for
maintaining a successful business. While most property owners and general
contractors pay on time, knowing how to protect your right to payment in cases
of delay is crucial. Here’s a handy timeline and steps to help you stay ahead:
1. For General Contractors: Leverage Your Contract
If you are a general contractor, your contract with the
property owner is often your strongest tool for ensuring timely payment.
Clearly outline payment terms, penalties for late payments, and dispute
resolution procedures in your contract. A well-drafted agreement can
significantly reduce disputes and provide legal recourse if payments are
delayed.
2. For Subcontractors: File a Preliminary Notice
Subcontractors and suppliers must protect their right to
payment by filing a preliminary notice (or pre-lien notice) within 20 days of
commencing work. This step is critical because:
•
It notifies the property owner and general
contractor of your involvement in the project.
•
It preserves your right to file a mechanics lien
later if payment issues arise.
If you miss the 20-day window, you can still file a
preliminary notice, but it will only cover work performed within the previous
20 days.
Pro Tip: Establish a policy of routinely filing
pre-lien notices on projects exceeding a certain dollar threshold, such as
$3,000, to ensure consistent protection across your projects.
3. Monitor Payment Milestones
While most clients pay on time, late payments occasionally
occur. Establish a system to:
•
Track payment due dates.
•
Send reminders for invoices approaching 30 days
past due.
•
Escalate action for invoices that remain unpaid
after 60 days.
4. 60 Days Past Due: Consider Next Steps
If an invoice is 60 days past due, it’s time to act
decisively:
•
Intent-to-Lien Letter: Send a formal notice of
your intent to file a lien. This often prompts payment without further legal
action.
•
Mechanics Lien: For larger amounts, proceed
directly to filing a mechanics lien. This places a legal claim on the property
and pressures the owner to resolve the payment issue promptly.
5. Filing a Mechanics Lien: Key Deadlines
Once a mechanics lien is filed in California (and many other
states), a 90-day clock starts. Within this timeframe, you must:
•
File a Lawsuit to Perfect the Lien: This
formalizes your claim and enables you to enforce it through legal means.
•
Record
a Lien Extension of Credit:
This is a signed notarized agreement with the Property Owner that
will extend your timeframe to enforce your lien for an additional 90 days.
•
Release the Lien if Not Pursuing: If you
choose not to pursue legal action, the lien must be released. Easy Law provides
lien release services at no extra cost if we recorded your lien.
6. Deciding Whether to Pursue a Lawsuit
Perfecting a mechanics lien requires filing a lawsuit.
Consider:
•
The cost of legal action versus the amount owed.
•
Your chances of recovering the debt.
If you decide to pursue a lawsuit, we recommend contacting
The Green Law Group for a free initial consultation. Their expertise in
construction law can help you evaluate your options and navigate the legal
process efficiently.
Final Thoughts
Timely payment is critical for the financial health of any
construction business. By following this timeline and adopting proactive
practices, you can safeguard your right to payment and minimize disruptions to
your operations. If you have questions about construction notices or liens,
Easy Law Construction Notices is here to help.
Easy Law Construction Notices is not a law firm, and nothing in this article should be construed as legal advice. If you are seeking legal advice regarding construction matters, you can contact The Green Law Group, LLP, for a free initial consultation.