Business Law Related Construction Cases
Holding a Bachelor of Science degree in Construction Management from Colorado State University, Mr. Hinze is uniquely positioned to assist in resolving or litigating construction disputes.
In business law matters always use a written agreement for construction projects. Questions arise about construction work even with a written agreement. While saving money with an unlicensed contractor is tempting, it is also a recipe for disaster. Unlicensed contractors cannot legally enforce their agreements so they must protect themselves by getting money up front. This does not bode well for the owner.
Licensed contractors must maintain a bond (a type of insurance policy that provides money in the event of a covered dispute about the work). Also, the Contractors State License Board (CSLB) keeps records of the contractor’s status and complaints. The law regulates how much money a licensed contractor can demand up front. And the CSLB provides a place to resolve disputes over the contract prior to engaging in litigation or filing a law suit.
Mechanic’s Lien Enforcement and Defense
Mechanic’s liens are a business law approach that secure payment for licensed contractors and others who follow specific rules. The liens protect workers who perform work increasing real estate value. Mechanic’s liens arise from the California Constitution and the Mechanic’s Lien Law statutes the legislature passed. Mechanic’s Liens are involuntary, meaning that they attach to the owner’s land without his or her permission. Consequently, the person seeking to enforce one must follow a precise procedure to ensure the owner knows about the proposed work ahead of time. Also, time limits for recording the lien and perfecting it apply. Workers improving real property have only a short period to impose and enforce the lien. Failure to take all the necessary steps result in penalties for the lien holder in favor of the land owner.
Mechanic’s liens stack on top of other remedies. When the right to a Mechanic’s Lien exists, other claims usually exist too. These other rights generally involve breach of contract or some form of negligence or unjust enrichment. Mechanic’s Liens secure only the actual value of improvement to the property. They do not secure lost profit or other contractual or tort damages. Using the lien along with other claims helps ensure full payment. Misuse of Mechanic’s Liens can result in penalties to the one misusing the lien.
Stop Notices and Bond Claims
Business Law heavily influences the construction field. Both in relation to contracts and torts such as negligence. Stop Notices provide yet another remedy to Licensed Contractors and others who improve real estate. The legislature allowed for stop notices in the Mechanic’s Lien Law. A stop notice allows the claimant to secure payment from any balance remaining in a construction loan with a lender. Because it stops the distribution of construction money, the claimant has to provide a bond to protect the lender who must set aside the money.
In some contracts, especially government contracts, owners or general contractors give payment and performance bonds. In those cases an insurance company promises to pay if the owner or general contractor fails to. Collection on the bond often requires a lawsuit to establish the amount of money due.
Design Professional Liens
Design professionals provide services before work begins on real property. Without improvement to real property or structures on it, a mechanic’s lien cannot attach. But design professionals perform substantial work, and incur cost prior to work commencing. The legislature responded to this risk by creating the Design Professional’s Lien. This lien attaches to real property for the value of design work done that actually moved the approval process forward. Enforcing the Design Professional’s Lien requires a lawsuit to foreclose. The law also allows converting a Design Professional’s Lien into a Mechanic’s lien when work commences on the real property.