What Types of Liens Can Contractors Use to Ensure Payment in California?
As a contractor, understanding the various types of liens available to you is crucial to protecting your interests and ensuring you get paid for your work. A lien is a legal right over another person’s property until a debt or obligation is paid off, preventing the property from being sold or transferred.
There are several types of liens that contractors can use to protect themselves if a client fails to pay. Here are some of the most common options:
What Are the Most Common Types of Liens for Contractors?
Mechanics’ Lien
A mechanics’ lien is the most widely used lien by contractors. It can be used by subcontractors, laborers, and materials suppliers to place a claim on a property if they have not been paid for labor or materials provided for a construction project.
If the claim remains unpaid, the lien may allow the contractor to foreclose on the property. However, this option is not available for those involved in public works projects for the California State or local government.
Stop Payment Notice
A stop payment notice is another tool available to subcontractors, laborers, and material providers to stop payments on a construction project if they are not receiving payment. By filing a stop payment notice, these parties can freeze funds to ensure they receive what they are owed. Unlike mechanics’ liens, stop payment notices affect a portion of the construction funds and can also be used on public works projects.
Bond Claim
For public works projects in California, a payment bond is required for any contract valued at $25,000 or more. This bond guarantees that subcontractors, laborers, and materials suppliers will be paid for their work. If the general contractor fails to make payments, a claim can be made against the payment bond to recover the amount owed. This bond is an essential tool for ensuring fair payment practices on public projects.
Why Should Contractors Understand These Liens?
Understanding the different types of liens available is critical for contractors to protect themselves from non-payment. Filing and enforcing these liens can ensure that contractors are compensated for their labor and materials.
At TONG LAW, our experienced business law attorneys can help you navigate the complexities of liens and make sure you get paid for your hard work.
Author Bio
Vincent Tong is the CEO and Managing Partner of TONG LAW, a business and employment law firm located in Oakland, CA. Vincent is a fierce advocate for employees facing discrimination and wrongful termination. With several successful jury trial victories and favorable settlements, he has earned a strong reputation for delivering exceptional results for his clients.
In addition, Vincent provides invaluable counsel to businesses, guiding them on critical matters such as formation and governance, regulatory compliance, and protection of intellectual property assets. His depth of experience allows him to anticipate risks, devise strategies to avoid legal pitfalls, and empower clients to pursue their goals confidently.
Vincent currently serves as the 2021 President of the Board of Directors for the Alameda County Bar Association and sits on the Executive Board for the California Employment Lawyers Association. Recognized for outstanding skills and client dedication, he has consecutively earned the Super Lawyers’ Rising Star honor since 2015, reserved for the top 2.5% of attorneys. He also received the Distinguished Service Award for New Attorney from the Alameda County Bar Association in 2016. He is licensed to practice before all California state courts and the United States District Court for the Northern and Central Districts of California.