Mechanics Lien Release Bond – What Happens Now? What exactly is a Mechanics Lien and Why Might it Need to be Released?
January 04, 2021 —
William L. Porter - Porter Law GroupMechanics Lien Release Bond – What Happens Now? What exactly is a Mechanics Lien and Why Might it Need to be Released?
California law entitles unpaid contractors, subcontractors, and material suppliers to record a mechanics lien on property where they performed work or supplied materials. The mechanics lien attaches to the real property as a legal interest and secures the right to payment for the work performed and materials supplied. If payment is not forthcoming the mechanics lien allows the property where the work was performed and materials supplied to be sold under court order to satisfy the debt. It is a powerful remedy against owners and their agents who do not pay for work performed and materials supplied to improve the owner’s property.
A Mechanics Lien Release Bond Frees Property from a Mechanics Lien
Owners typically do not wish to have their property sold out from under them. Fortunately for owners, there is a method by which a mechanics lien can be substituted for another interest and sale of the property thereby avoided. This method is through the use of a mechanics lien release bond. California Civil Code §8424 allows a property owner or contractor effected by a mechanics lien to record a mechanics lien release bond equal to 125 percent of the lien amount with the County Recorder where the mechanics lien has been recorded. The effect of this is to substitute the mechanics lien release bond for the mechanics lien itself, thereby relieving the property from the possibility of that property being sold to satisfy the debt. Instead, any payment made will come from the release bond.
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William L. Porter, Porter Law GroupMr. Porter may be contacted at
bporter@porterlaw.com
Prevailing Payment Bond Surety Entitled to Statutory Attorneys’ Fees Even if Defended by Principal
January 09, 2023 —
Garret Murai - California Construction Law BlogFor contractors involved in California public works projects the scenario is not uncommon: The general contractor awarded the public works project is required to obtain a payment bond for the benefit of subcontractors and suppliers and the payment bond surety issuing the payment bond requires the general contractor to defend and indemnify the surety from and against any claims against the payment bond.
In Cell-Crete Corporation v. Federal Insurance Company, 82 Cal.App.5th 1090 (2022), the 4th District Court of Appeal examined whether a payment bond surety, who prevails in a claim against the payment bond, is entitled to statutory attorneys’ fees when the party actually incurring the attorneys’ fees was the general contractor, pursuant to its defense and indemnity obligations, as opposed to the surety itself.
The Cell-Crete Case
General contractor Granite Construction Company was awarded a public works contract issued by the City of Thermal known as the Airport Boulevard at Grapefruit Boulevard and Union Pacific Railroad Grade Separation Project. We’ll just call it the “Project.” Subcontractor Cell-Crete Corporation entered into a subcontract with Granite for lightweight concrete and related work.
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Garret Murai, Nomos LLPMr. Murai may be contacted at
gmurai@nomosllp.com
HOA Foreclosure Excess Sale Proceeds Go to Owner
August 15, 2022 —
Ben Reeves - Snell & Wilmer Real Estate Litigation BlogOver the last few years, the Arizona Court of Appeals wrestled with the question of who should receive the excess proceeds from a foreclosure sale. We’ve blogged about some these past unreported decisions
here and
here. Those decisions, somewhat inexplicably, required excess sale proceeds to be paid to senior creditors. As we noted at the time, these unreported (and non-precedential) decisions did not seem to make much sense in the context of debtor/creditor rights. Thankfully, a reported opinion finally sets the record straight. Excess sale proceeds should be paid downstream.
In
Tortosa Homeowners Assoc. v. Garcia, et al., No. 2 CA-CV 2021-0114 (Ct. App. Aug. 1, 2022), the Court of Appeals held that after the foreclosing lienholder is paid in full, then the excess sale proceeds should be paid to claimants in the order of their priority after the foreclosing lienholder. In other words, if a junior lienholder forecloses, then any creditors behind (i.e., junior to) the foreclosing creditor should be paid, and if all such creditors are paid, then the rest should be given to the owner. Creditors senior to the foreclosing creditor should not be paid anything from the foreclosure sale. This makes sense from a policy perspective, because the senior creditor retains its lien against the property and the bidder presumably took the presence of the senior lien into account when it made its bid for the foreclosed property.
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Ben Reeves, Snell & WilmerMr. Reeves may be contacted at
breeves@swlaw.com
Keep Your Construction Claims Alive in Crazy Economic Times
May 25, 2020 —
Christopher G. Hill - Construction Law MusingsCoronavirus is dominating the news. Construction in Virginia is facing what is at best an uncertain future and at worst a series of large scale shutdowns due to COVID-19. The number of cases seem to grow almost exponentially on a daily basis while states and the federal government try and patch together a solution. All of this adds up to the possibility that owners and other construction related businesses could shutter and importantly payment streams can slow or dry up. Aside from keeping your contractual terms in mind and meeting the notice deadlines found in your contract, these uncertain economic times require you to be aware of the claims process.
Along with whatever claims process is set out in the contract and your run of the mill breach of contract through non-payment type claims, in times like this payment bond and mechanic’s lien claims are a key way to protect your payment interest. The law has differing requirements for each of these unique types of payment claims.
Mechanic’s liens are technical and statute based with very picky requirements. The form and content of a memorandum of lien will be strictly read and in most cases form will trump substance. Further, among other requirements best discussed with a Virginia construction lawyer, you must keep in mind two numbers, 90 and 150. The 90 days is the amount of time that you have in which to record a lien. This deadline is generally calculated from the last date of work (or possibly the last day of the last month in which you did work). File after this deadline and your lien will be invalid because the right to record a lien has expired. The 150 days is a look back from the last day of work or the date of lien filing, whichever is sooner in time. The 150 days applies to the work that can be captured in the lien. In other words, it dictates the amount of the lien.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Strategy for Enforcement of Dispute Resolution Rights
May 30, 2018 —
Whitney Judson - Smith CurrieArbitration and litigation each offer their own benefits and drawbacks to litigants looking to resolve a construction dispute. A careful analysis of these benefits and drawbacks may be helpful in determining whether to avoid or pursue either dispute resolution process. Arbitration is oftentimes regarded as the more economically feasible dispute resolution option and is therefore attractive to many construction dispute litigants. Although arbitration may prove to be less expensive than litigation in the long run, some litigants may prefer to file a case in court because the upfront filing fees in litigation are less expensive than the filing fees of arbitration.
Litigants may also prefer the decision makers of one process for dispute resolution over another. Arbitrators in a construction dispute oftentimes have a background in the construction industry, whereas a judge or jury may not. Strategy may dictate whether the preferable decision maker should have experience within the construction industry or be free of any construction industry knowledge and possible biases. The finality of decisions may also be a reason to strategically choose one dispute resolution process over another. Arbitration decisions are overturned only under very narrow and specific circumstances. The losing party in litigation however, has a right to appeal decisions to a higher court and has more options for recourse when the findings of the court are not supported by the evidence or the law.
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Whitney Judson, Smith CurrieMs. Judson may be contacted at
wtjudson@smithcurrie.com
Don’t Waive Your Right to Arbitrate (Unless You Want To!)
October 19, 2017 —
David Adelstein - Florida Construction Legal UpdatesDoes your construction contract require you to arbitrate (instead of litigate) disputes arising out of the contract? If so, and you want to arbitrate, you do NOT want to do anything inconsistent or adverse with your right to arbitrate. Arbitration can be waived and you do not want arbitration to be waived if you believe this is the best forum to resolve your construction dispute. For instance, actively participating in a lawsuit through the prosecution or defense of issues in the lawsuit is certainly inconsistent with your right to arbitrate. This will result in a waiver of your right to compel arbitration.
In a non-construction dispute—a dispute involving a law firm and its former partner—the law firm sued the partner. Chaikin v. Parker Waichman LLP, 42 Fla. L. Weekly D2165b (Fla. 2d DCA 2017). There was a partnership agreement that required disputes to be resolved by arbitration. The law firm sued the partner claiming he violated a previously entered employment agreement that did not require arbitration. When the partner counterclaimed, the law firm claimed that the counterclaim must be compelled to arbitration because the counterclaim arose out of the partnership agreement that required arbitration. Guess what? The trial court actually compelled the counterclaim to arbitration! Crazy! Clearly, any employment agreement and partnership agreement were intertwined such that the dispute would involve the same set of facts and any claims would have a significant relationship to the partnership agreement.
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David Adelstein, Florida Construction Legal UpdatesMr. Adelstein may be contacted at
dadelstein@gmail.com
Reminder: Pay if Paid Not All Encompassing (but Could it be?)
December 09, 2019 —
Christopher G. Hill - Construction Law MusingsOn numerous occasions, I have discussed the need to be careful with so called “pay if paid” clauses in construction contracts. While such clauses are enforceable in Virginia (when phrased correctly), there are exceptions and limitations (for instance in the Miller Act context).
One such exception (that I frankly would have thought to be obvious) is that such clauses do not protect a general contractor from paying all subcontractors. Such a clause only protects a general contractor from payment to those subs for whose work the general contractor has not been paid. In other words, if a general contractor has been paid by an owner for a particular subcontractors work, it cannot use the pay if paid clause to deny payment even in the event that other subcontractors were deficient in their work or the owner has failed to pay the general contractor in full.
In Precision Contractors Inc. v. Masterbuilt Companies Inc. (PDF) the Fairfax, VA Circuit Court reiterated this principal stating that nothing in the contract suggests that either party to the lawsuit had any intention to shift the risk of non-payment by the owner or non-performance of other subcontractors to the plaintiff (Precision).
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
Subcontract Requiring Arbitration Outside of Florida
August 07, 2018 —
David Adelstein - Florida Construction Legal UpdatesHave you entered into a subcontract that requires you to arbitrate disputes? If so, does the arbitration provision require you to arbitrate your dispute outside of Florida? If so, the case of Sachse Construction and Development Corp. v. Affirmed Drywall, Corp., 43 Fla. L. Weekly D1622e (Fla. 2d DCA 2018) applies and reinforces the notion: Read and consider what you sign!
In Sachse Construction, a drywall subcontractor entered into a subcontract for a construction project in Miami with an arbitration provision. The subcontract provided that it shall be construed in accordance with Michigan law and required that arbitration shall take pace in Michigan per the Construction Industry Rules of the American Arbitration Association.
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David Adelstein, Kirwin NorrisMr. Adelstein may be contacted at
dma@kirwinnorris.com
