Legal Question in Construction Law in California

Re: Trying to deal with contractor.

What you did isn't necessarily insurance fraud. The insurance company was compensating you for the damage to the home. You are contracting with the contractor, not the insurance company, so its a stretch to say that you committed insurance fraud by not paying him. You could have just as easily put the money in your pocket, and not repaired the house. That then leads to other issues with your lender, but that's not the question you asked.

First, am I reading this correctly that the total job value was $23,000, and he demanded $15,000 up front? If so, Mr. Contractor has a bit of a problem. Contractors are only allowed to demand as an up-front deposit of 10% of the total job value or $1,000, whichever is more. He should have only been paid $2,300 up front. If the work is done, that is just a technical violation, but you can tell him that he is not exactly an angel in this transaction, and that you will contact the State Contractor's License Board regarding his violation of State Contracting laws.

Irrespective, he is entitled to his money, and he has a right, if not paid, to enforce his lien through a foreclosure. Will he do it over $7,000 - that depends upon the advice he gets. If he does, he has 90 days from the date on which he files his lien to file a lawsuit to enforce the lien through foreclosure. Alternatively, he can just sue you for the amount due under the contract, and go after bank accounts, wages, etc...

I'd suggest contacting an attorney and attempting to settle it through a little brute-force. You really don't have a defense to the foreclosure, so if you must, look for a way to borrow the money to pay him back.

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Re: Trying to deal with contractor.

There is no quick answer to this. He may take whatever money he can get from the lien, whether proper or not. There is no magic word I can tell you to tell the contractor that will change that. You need an attorney who knows how to meet the requirements for lifting the lien, and who knows how to bring a strong action for improper lien holding if that is what is needed. Give me a call if you want to retain me. Do not delay.

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Re: Trying to deal with contractor.

Mr. Gibbs is right. An insured can do whatever it chooses with the insurance proceeds. They are not earmarked for repairing the damage covered by the insurance. There may be limited exceptions but this is not the way insurance payouts normally work. You do, however, need to find some way to pay the remaining $7,000 balance before the contractor's threats are turned into action.