Articles

New Legislation Allows Original Contractor to Stop Work for Non-Payment

In my law practice I am often asked by contractors if they can stop work due to the owner's failure to pay. My answer has generally been "It depends" and "It is risky".

The California legislature has now stepped into the arena to provide some guidance in the form of a statute (Civil Code §3260.2) authorizing certain contractors to stop work in certain situations and further enabling them to seek a determination of owner's liability in an expedited proceeding.

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The new statute, which applies to contracts entered into after January 1, 1999, allows contractors who have a direct contract with the owner on a private work of improvement whose payments are 35 days late, with no dispute as to performance, the right to serve a "10-Day Stop Work Order" (indicating work will stop in 10 days unless payment is made) after complying with certain posting and notice requirements set forth in the statute.

If payment is still not made, the contractor can seek a judicial determination of the owner's liability an "expedited proceeding".

These provisions cannot be waived.

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The rules as to the timing, content, service and/or posting of the notices and the Stop Work Order itself must be followed. If you intend to exercise these rights, it is strongly recommended that you contact an attorney to guide you through the process.

Mr. Kershner is with the Law Offices of Gary Kershner, a member of the Exchange since 1955. The law firm acts as general counsel in litigation and non-litigation matters for a variety of small and medium-size businesses. Mr. Kershner can be reached at (510) 832-6500. This article provides general information about a current legal issue. If you have a specific legal question or need legal advice, you should contact an attorney.