Legal Question in Construction Law in California
Does a General Contractor have to or need to supply to a client a Lien Release if they are paid in mile stone payments for specific milestone payments and their perspective dollar amounts ? I ask this question because I have a client who is requesting this eventhough I have already promised to give the client Unconditional Lien releases for my Subcontractors. I explained to my client that there would be a paper trail along with processed checks validating and proving that I had been paid each and every milestone payment along the way, and that I would be a fool or a laughing stock in court if I tried to go after a client for any compensation already paid for.
I would like to get you insight on this and ask also if this is something I am getting myself into harms way with this client if I appease them in this way?
2 Answers from Attorneys
I don't know the answer, but I would suggest that you try asking the Contractors State Licensing Board. I'm pretty sure they offer a competent and quick question-and-answer service for their license holders.
The client is entitled to an unconditional lien release for all amounts paid as the project progresses. Conditional lien releases can be used in some circumstances, such as where you are being paid by check and need to wait for the check to clear. The owner is entitled to lien releases from you, all suppliers and all subcontractors.
You are required by law to provide them, whether the owner asks or not. Very few contractors actually provide them, preferring to wait until the end of the project. That is a violation of Contractors License Law and could subject you to discipline by the CSLB.
The fact that you don't know this means that you are probably in violation of other CLL provisions. For example, the Home Improvement Contract statute requires, among other things, that you include a notice to the owner which explains the lien process and the owner's right to lien releases in return for payment. I suspect that required language is not on your contract, which is why you did not know. Don't feel bad, in 18 years of doing this, I rarely see a contract that complies with the CLL requirements.
It usually isn't a problem until you get an unhappy customer who goes to the CSLB. Even if you did everything perfectly and the owner has no legitimate complaint, the CSLB, who is your biggest enemy as a contractor, will use any contract violation to force you to give the owner whatever he or she wants.
Contact a local construction attorney and make sure your contract is legal.
As for this owner, give him or her the unconditional lien releases for the full amount they have paid so far.
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