Furnishing to a Public Project in California? Here’s What You Should Know about Bond Claim and Stop Notice Rights
Bookmark this post; here’s everything you should know about securing bond claim and stop notice rights on public projects in California!
How Do I Know if It’s a Public Project?
Generally, a public project is the improvement of public works or building under formal contract made by any government authority, e.g., the state, county, city, or political subdivision.
Whereas, a private project is generally for an improvement contracted by a private entity, e.g., a person, company, or corporation.
Do I Have to Send a Preliminary Notice?
Yes! Serve notice upon the prime contractor and the public entity within 20 days from first furnishing materials or services.
If you are contracting directly with the prime contractor, the preliminary notice isn’t required, but it is a best practice to always serve a notice upon all parties.
What if My Preliminary Notice is Late?
A late notice may be served, but the bond claim and/or stop notice, when later served, will only be effective for materials and services provided 20 days prior to serving the notice and thereafter. A late notice may also be referred to as a Trapping Notice.
Are Payment Bonds Required for California Public Projects?
In California, payment bonds are generally required for general contracts greater than $25,000. However, it is possible the project owner won’t require a bond.
As a best practice, always attempt to obtain a copy of the payment bond at the beginning of the project.
Unpaid? If a Payment Bond is Available, Serve a Bond Claim
If a payment bond was obtained, and you have not been paid for furnishing, you can make a claim against the bond. A bond claim should be served upon the surety and prime contractor within 15 days from the recording of a notice of completion or cessation, OR within 75 days from completion, if no notice of completion or cessation is recorded.
If the bond claim does not prompt payment, file suit to enforce the bond claim after furnishing materials or services, but within 6 months from the period in which stop notices may be filed.
STOP, in the Name of Unpaid Parties #SongTitleFail
In addition to a bond claim, you may proceed with a Stop Notice. A Stop Notice is a notice, to the party paying for the work of improvement, of money due, which can obligate that party to withhold sufficient funds to cover noticed amounts.
You should serve the stop notice upon the public entity within 30 days from the recording of a notice of completion or cessation, OR within 90 days from completion, if no notice of completion or cessation is recorded.
File suit to enforce the stop notice no sooner than 10 days from service of the stop notice, but not later than: 120 days from the recording of a notice of completion or cessation, OR 180 days from completion, if no notice of completion or cessation is recorded.
Notice of the action must be served upon the public entity within 5 days from filing suit.
Does California Have Prompt Pay Laws?
Yes, there are prompt pay laws in California. Generally, payment should be remitted within 7 days from receipt.
“7108.5. (a) A prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor’s interest therein.”
However, there are caveats – I encourage you to review the applicable statute or seek a legal opinion if you have questions.
Links to Prompt Pay Law in California
- Prompt Pay (CA Bus. & Prof. Code 7108.5)
- Prompt Pay (CA Civ. Code 8800)
- Prompt Pay (CA Public Contract Code 20104.50; Local Government)
- Prompt Pay (CA Public Contract Code 10261.5 through 10263; State Agencies)
- Prompt Pay (CA Public Contract Code 10853; State University)
Do you have additional questions related to bond claim and stop notice rights on public projects in California? Contact us!