Managing Your Assets: Collecting for Your Construction Work
This brochure provides responses to common questions asked by construction industry professionals when seeking to collect for their construction work. Please remember that you should consult with your lawyer when faced with specific collection issues.
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When do I need to serve a preliminary 20 day notice?
The best rule of thumb is simple: when in doubt, serve one. Generally, however, it is not necessary to serve a preliminary notice to enforce your mechanicís lien rights when you contract directly with a private landowner in connection with a private work of improvement. In all other instances (i.e., when you contract with someone other than a private landowner), you should serve a preliminary notice.
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What if I am late in serving the
preliminary 20 day notice?
The general rule is that the preliminary notice must be served within 20 calendar days of when the labor, material or equipment is first supplied by you. However, even a tardy notice may "relate back" in time to cover your construction work for the immediately preceding 20 days as well as the construction work you perform after serving the notice. Thus, give notice as soon as possible.
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When do I record my mechanicís lien?
There are many rules concerning the time to record a mechanicís lien which are difficult to summarize briefly. The general rule is that a mechanicís lien must be recorded within either (a) 90 days of the completion of the work of improvement, if no notice of completion or notice of cessation has been recorded, or (b) 30 days after recordation of a notice of completion or notice of cessation, although a general contractor may have a longer period in which to record. For purposes of this general rule, the word "completion" has a special definition. Please note that this rule defines the latest date a mechanicís lien may be recorded. You are entitled to record a mechanicís lien at an earlier time, and may want to record one soon after your construction work has been completed if you have not been paid for that work.
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What if the time for recording my
mechanicís lien has passed?
Record your lien immediately anyway. There are many exceptions to the general rule about the deadline for recording a mechanicís lien, and your lawyer may be able to successfully argue that your mechanicís lien was timely. Also, remember that contractors, subcontractors, and labor and material suppliers are sometimes paid for their work even when a mechanicís lien truly was recorded "too late."
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How do I enforce my mechanicís lien rights?
To enforce your mechanicís lien rights, you must file suit to foreclose the lien within 90 days of its recording. Do not wait until the last minute to contact your attorney, as he or she may want to obtain a litigation guarantee, which is a several day process, to ensure that all proper persons are named in the action.
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What other rights do I have?
Generally, you have legal recourse for breach of contract against the person with whom you contracted. Remember, though, that it may be difficult or impossible to collect the sums owed to you from the person who hired you, and, even if you are successful, it could take months or years to be paid. For these reasons, you should find out whether there are other options available for enforcing payment. One option is to determine whether a payment bond has been posted and, if so, to assert a claim against that bond. Another option is to demand that the construction lender, if any, stop making further payments to the general contractor until you are paid.
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What about public works jobs?
You must serve a preliminary 20 day notice in connection with every public works job you undertake. Although you cannot record a mechanicís lien against public property, all public works jobs in excess of $25,000 are required to have a payment bond in place. This means you can serve both a stop notice on the public entity and a claim against the surety (i.e., the bonding company) to enforce your right to payment. Be aware that a lawsuit must be timely filed to enforce your stop notice and bond claim rights. Therefore, you should contact a lawyer to assist you with any stop notice or bond claim on a public works job.
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What about jobs involving the federal government?
Federal public works jobs are governed by the Miller Act, which has different enforcement procedures than are applicable to state public works jobs. One important difference is that a Miller Act claim must be filed in federal court.
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What are some common problems that I should avoid?
Obtain accurate information about the construction project. For example, verify the address of the property on which the construction work is being performed, as well as the name and address of the owner, general contractor and, if applicable, construction lender, as this information must be included in the preliminary notice.
Properly serve your preliminary notice and prepare a proof of that service so that you do not lose your mechanicís lien claim based upon a "technical defect" in service.
Determine whether a bond has been posted in connection with the construction project so that you do not overlook your right to assert a claim against that bond.
Whenever your construction project is the subject of a performance bond, check with the County Recorderís Office to determine whether that bond and the prime contract have been recorded because, if they have, your right to seek payment from the property owner may be adversely affected.
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