Bonded Stop Notices Will Get You Attorney’s Fees on Private Work; Mechanic’s Liens Won’t
by Wahid Guirguis, Esq
Contractors frequently complain that a recovery on a mechanic’s lien is not a basis for recovery of attorneys’ fees. Undoubtedly you have heard your attorney say “in California, you cannot recover attorneys’ fees unless it is by statute or by contract.” Well, the mechanic’s lien statutes do not allow for recovery of attorneys’ fees. If you are an A license subcontractor, Your contract with the general contractor may provide for attorneys’ fees, but only against the general contractor.
This is why on private works, if the project you are working on has a lender, you should consider serving a bonded stop notice (soon to be called a Stop Payment Notice under the new changes in the law effective July 1, 2012), in addition to recording a mechanic’s lien. If the lender has funds to withhold and they are served with a bonded stop notice, the lender has to withhold the money (except as noted below). The bond, which you must obtain from an approved surety, must be in an amount of 125% of the value of your stop notice. Recovery on the bonded stop notice will include reasonable attorneys’ fees. This will continue to be the rule under the new changes in the law effective July 1, 2012.
When you serve your bonded stop notice, make sure you check the Notice of Election on your stop notice form and include a self-addressed envelope. If there is a payment bond on the project, the lender can elect not to withhold, but in that case the lender must use the self-addressed envelope and send you a copy of the payment bond, so that you can make a claim on the bond.
Wahid Guirguis is a Shareholder with Hunt Ortmann, a leader in California construction law. If you have any questions about this bulletin or stop notices and mechanic’s liens, please contact him at firstname.lastname@example.org.