Legal Question in Construction Law in California

I am not sure what you mean by a "zero dollar release". Is the contractor asking you to sign a release saying you have been paid in full when you have not been paid anything? Why would you do that? And why would not doing that hold up their billing? I think the contractor is trying to pull something over on you. The simple solution is for the owner or lender to issue joint checks in return for the release. If you give them a release, it could potentially bar a future claim if you don't get paid.

But, because I have no idea what it is they are asking you to sign, this response is just general info. You may want to consult with a local construction attorney. Most of us provide a brief no cost consultation.

I agree with Mr. Spirtos that this seems odd, however our agreement ends there since he clearly is unfamiliar with construction law. What you should be giving is a statutory Conditional Waiver and Release Upon Progress Payment. You can find that form on the CSLB's website here: http://www.cslb.ca.gov/Resources/MechanicsLien/ConditionalWaiverAndReleaseOnProgressPayment.pdf

If you will be getting a joint check you fill in the owner, general contractor, construction lender or whomever will actually be cutting the check. The amount should be the amount of the progress payment you are billing for, not "zero," and the "check payable to" should be you, or you and the framer if you are getting a joint check - in other words however you expect the check to be made payable. The rest of the form should be self explanatory. It only releases the amount paid, and only when payment actually clears the bank. If you never get paid or get shorted, the release never takes effect. This is the standard procedure for progress payments and you and the subs you supply to should be following it.

Dear Supplier: I'm not admitted in CA, hopwever, I've lectured and taught all over the U.S. The lawsen't too muich different. BEWARE OF SIGNING BLANK RELEASES OF LIEN!!!

Her's a page from my Botebook, urging you to provide a Conditional Waiver of Lien. You may wsh to tailor it to your state's specific requirements.

CONSTRUCTION LAWLETTER

For Industry Professionals, Managers, Trades & Suppliers

J. NORMAN STARK, ATTORNEY-AT-LAW

JURIS DOCTOR, B. ARCHITECTURE, B.F.A.

1109 Carnegie Avenue � Cleveland, Ohio 44115

Tel.: (216) 531-5310 x 7100 � Fax: (888) 833-5860

E-Mail: [email protected] � Homepage: www.Jnormanstark.com

Vol. 2010-6 Reprint June, 2010

MECHANICS� LIENS AND WAIVERS OF LIEN

Perfection of a valid Mechanics� Lien is a necessary prerequisite to assertion of the right to be paid. At least, one cannot credibly proceed to trial without it.

Many trades, persons and businesses affected should have previously noted and taken advantage of the Mechanics� Lien �Prompt Payment Act� provisions, which mandate that all contractors, subcontractors and materials suppliers must pay their subcontractors, suppliers and laborers within 10 days after receipt of funds. After 10 days, improperly withheld funds begin to earn interest at the rate of 18% per annum. In addition, after 30 days, the lower tier contractor or supplier may file suit and, upon judgment, may also obtain attorney�s fees. Importantly, this right to interest and attorney�s fees cannot be waived by contract or otherwise!

An affidavit to obtain a mechanic�s lien must be filed within 75 (calendar) days after the contractor or materials supplier last furnished or provided services or materials. Other important changes now require the filing (recording) of Notice of Commencement (�NOC�) by the Owner, or General Contractor. Also required is the service of a Notice of Furnishing (�NOF�) by each contractor, subcontractor, or materials supplier, when each first performs work or supplied materials. Timely service of the Notice of Furnishing on all parties is a mandatory prerequisite to obtaining a valid lien for all work and materials provided on a construction project!

Having perfected a valid lien, by timely recording the Affidavit and serving it on the proper parties timely, should now lead to speedy resolution by offer of payment in exchange for a signed Waiver of Mechanics� Lien.

WARNING: DON�T SIGN SUCH �STANDARD� LIEN WAIVER DOCUMENT WITHOUT LEGAL COUNSEL!!!

Among the many reasons for not executing such �ordinary� lien waiver is a subsequent denial or failure of payment. Additionally, the incentive to pay fully and timely by the debtor entity is gone.

A far better resolution may be obtained by executing a Conditional Waiver of Lien which provides that upon the condition of payment of the full amount due, the waiver is valid; otherwise, it isn�t worth the paper on which it was written and is of no legal effect.

The following form is suggested (first filling in the blanks):

WAIVER OF LIEN

To all whom it may concern:

In consideration of the sum of ________________Dollars, ($_______), and other valuable consideration to be paid, and specifically conditioned upon such payment timely and fully, the undersigned does hereby waive, release and relinquish any and all liens or claims for funds,, or right to lien or claim, for labor and/or materials, fuel and/or machinery, or all of them, furnished to date hereof, for the premises known and described as: (Street address, City, County, State ,Zip)______________________, County Auditor�s Permanent Parcel No.: ____ / _____ / ________.

Witness my / our hand and seal given this ___ day of _______, 2001, at (City)_______________, Ohio .

(Signature) ______________________, for (Firm, Entity, or Trade)____., by and through its Authorized (Director, Officer, Manager, Agent or Attorney).

* * *

In conclusion, the Lien Claimant, having performed fully as agreed, now has the right to (insist on) being paid, and should take every precaution toward preserving and furthering that goal, prudently.

* * *

A government which robs Peter to pay Paul can always depend on the support of Paul.

George Bernard Shaw

Author: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He has had experience in Construction, Real Property, Business, Litigation, Collections, and Construction-Legal Project and Crisis Management. His office is in Cleveland, Ohio.

Good luck! Sincerely, J. Norman Stark.

Author: Construction Claims Investigation Worklist

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