California Rules for Bond and Lien Claims

General Considerations for Filing a Lien or Bond in California

There are three (3) ways for a Contractor or Material Supplier to ensure they are paid for their labor and/or material provided to a project:

1. The Mechanic’s Lien;
2. Stop Payment Notice; and
3. The payment bonds.

How to File a Mechanic’s Lien in California 

• Contractors in Place 4* or below do not have lien rights. 
• Material must be used or consumed at the project for a Material Supplier to have lien rights.

Preliminary Notice is Required

If you want to have lien rights, you must send notice within twenty (20) days of first supplying labor and/or materials. Notice must be sent to:

• Owner;
• Original Contractor (Place 1*); and 
• Construction Lender if there is one.
• If you are a Material Supplier that is supplying to more than one SubContractor on a project, they must give notice to each SubContractor.

The Preliminary Notice Must Contain:

1. A description of the work or material that you will be providing; 
2. An estimate of the total cost of your work and/or material;
3. Your name and address;
4. The date you first provided labor and/or materials; 
5. The name and address of the person who hired you;
6. The project name and address; and 
7. MUST CONTAIN A WARNING TO PROPERTY OWNER—see notice of claim for private projects. 

• Notice must be sent by personal delivery, certified mail, or some other way you can prove that service was ACTUALLY made.
• This notice should also be recorded with the County Recorder where the property is—that way they will send you notice when a notice of completion or cessation is filed for your project.
• To have a lien for residential work the Contractor must provide a “Notice to Owner” explaining the lien process before the contract is signed. 

When the Lien Must be Filed in California 

• For Place 1* Contractors a lien must be filed within sixty (60) days after a notice of cessation or completion is filed. If no notice of cessation or completion is filed, Place 1* Contractors must file their lien within ninety (90) days of completion of the work.
• For everyone below Place 1* a lien must be filed within thirty (30) days after a notice of cessation or completion is filed. If a notice of cessation or completion is not filed within ninety (90) days of final completion of the project. 
• What the Lien Must Contain:

1. How much you are owed;
2. Your name and address;
3. Name and address of the Owner; 
4. A description of the work done and/or material supplied; 
5. Name and address of the person who hired you;
6. Lien Must be verified; 
7. A proof of service affidavit; and 
8. A notice/warning required by law—see lien form.

When to File Suit to Enforce Your Lien in California 

• You don’t have a long time to contemplate if you should file suit to enforce your lien; it expires in ninety (90) days. You have ninety (90) days to enforce your lien from the day you filed it or it will expire. You must file a Lis Pendens within twenty (20) days of filing suit.

Attorney Fees

• There is no recovery of attorney fees to enforce your lien.

Stop Payment Notices in California 

• Can be used on both private and public projects. Must send a preliminary notice in order for your stop payment notice to be effective. On private projects, it is the same preliminary notice required to have a lien. For public projects, it’s the same notice, but it must be sent to the public agency doing the work. Send a $10 check along with your preliminary notices on public jobs. The agency is required to send notice that the project has ceased or is complete. 

Private Projects

• Anyone who is entitled to a lien except Place 1* Contractors. These individuals can send a stop payment notice to the Owner. Once the Owner receives the stop payment notice, they must withhold payment of the amount claimed from the Place 1* Contractor, if they do not withhold payment, they could face a personal judgment for the amount you sent a stop payment notice for.

Bonded Stop Payment Notices on Private Projects in California

• Bonded stop payment notices on private projects ss a notice to the Construction lender to stop payment. This is available to Contractors in all Places*. You must obtain and file a bond with a value of 125% of the amount you are owed. If you are not entitled to the amount, you claim you may lose your bond.

Stop Payment Notice on Public Projects

• This takes the place of a Mechanic’s Lien on a public project. Anyone who would be entitled to a lien, except Place 1* Contractors, can send a stop notice on a public project. The notice must be sent to the public agency that is having the work done. Once they receive your notice, they are required to withhold that amount from the Place 1* Contractor. 
• Must send the notice of stop payment on both types of projects within thirty (30) days of a notice of cessation or completion is filed. If neither a notice of cessation nor completion is filed, the stop payment notice must be sent within ninety (90) days of final completion.
• If a notice of cessation or completion is not filed within ninety (90) days of the last time you supplied your labor and/or material, it is good practice to send your Stop Payment Notice.

What a Stop Payment Notice Must Contain

A stop payment notice must contain:

1. How much you are owed;
2. Your name and address;
3. Name and address of the Owner; 
4. A description of the work done and/or material supplied; 
5. Name and address of the person who hired you;
6. Must be verified and signed by you; and 
7. A proof of service affidavit.

Action to Enforce Your Stop Payment Notice 

• An action to enforce your stop payment notice must be brought within one hundred and twenty (120) days of a notice of cessation or completion is filed. If no notice of cessation or completion is filed within one hundred and eighty (180) days after completion or cessation. 

How to File a Payment Bond Claim in California 

• A payment bond is required on all public projects more than $25,000.
• A preliminary notice is required to be sent to the Surety and the Bond Principal (Place 1* Contractor) within twenty (20) days of first supplying labor and/or materials. 
• The law allows a second chance if you missed the preliminary notice, you will still have a valid bond claim if you send written notice within fifteen (15) days of a notice of completion being filed.

Action on the Payment Bond

• Action on the payment bond can be brought any time after you last supplied labor and/or material, but must be brought generally speaking within six (6) months after a notice of cessation or completion is filed.

If you work in California, it is imperative that the information above is put into practice by your business. If you'd like to make sure you have a fool-proof strategy for filing your lien in California, listen in to this episode of The Quit Getting Screwed Construction Podcast. If you’d prefer to have someone else take care of filing your construction lien and bond claims, and do it the right way, contact a professional California lien lawyer who is experienced in construction law. Our sister company, The Cromeens Law Firm, has a lien and collections team ready to take care of it for you. Don’t work for free. Take the steps required to file a valid lien.

*The “places” referenced in the rules above correlate to the Construction Food Chain Chart from Karalynn Cromeens’ book,
Quit Getting Stiffed. The chart can be found here to use when following these lien and bond rules.