Article 3Distribution of Funds Withheld

Section § 8430

Explanation

This law explains how a lien, which is a legal claim against property for unpaid work, is valued. The lien can be based on either the reasonable value of the work done or the amount agreed upon in a contract, whichever is less. The contract price doesn't limit the lien amount unless stated in another specific section. Even if there's a change or issue in the contract, such as changes in terms or if the contract is canceled or breached, the lien can still include work done under those circumstances. However, in cases of rescission, abandonment, or breach, it cannot exceed the work's reasonable value.

(a)CA Civil Law Code § 8430(a) The lien is a direct lien for the lesser of the following amounts:
(1)CA Civil Law Code § 8430(a)(1) The reasonable value of the work provided by the claimant.
(2)CA Civil Law Code § 8430(a)(2) The price agreed to by the claimant and the person that contracted for the work.
(b)CA Civil Law Code § 8430(b) The lien is not limited in amount by the contract price for the work of improvement except as provided in Section 8600.
(c)CA Civil Law Code § 8430(c) This section does not preclude the claimant from including in a claim of lien work performed based on a written modification of the contract, or as a result of rescission, abandonment, or breach of the contract. If there is a rescission, abandonment, or breach of the contract, the amount of the lien may not exceed the reasonable value of the work provided by the claimant.
reasonable value of work contract price lien amount work of improvement written modification rescission abandonment contract breach claim of lien property lien unpaid work value construction contract contract alteration property claim Section 8600
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section § 8432

Explanation

This law says that if you're doing work on a construction project, you can't claim a lien on that project unless your work is specifically included in the main contract or an official change to that contract. If you knew, or should have known, that the project documents didn't include your work, then you can't file a lien. Additionally, if the contract or any changes to it were officially filed with the county recorder before you started work, it's assumed you knew about them.

(a)CA Civil Law Code § 8432(a) A lien does not extend to work, whether or not the work is authorized by a direct contractor or subcontractor, if the work is not included in a direct contract or a modification of that contract, and the claimant had actual knowledge or constructive notice of the provisions of that contract or modification before providing the work.
(b)CA Civil Law Code § 8432(b) The filing of a contract or modification of that contract with the county recorder, before the commencement of a work of improvement, is constructive notice of the provisions of the contract or modification to a person providing work on that work of improvement.
lien work authorization direct contractor subcontractor direct contract contract modification actual knowledge constructive notice county recorder work of improvement project documents claimant filing contract commencement of work construction project
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section § 8434

Explanation

If you're a main contractor or a subcontractor, you can only file a lien to claim the money you're owed under your contract. However, you need to first subtract any amounts claimed by other people who have a lien, based on work that's part of your contract.

A direct contractor or a subcontractor may enforce a lien only for the amount due pursuant to that contractor’s contract after deducting all lien claims of other claimants for work provided and embraced within that contract.
direct contractor subcontractor enforce lien amount due contract lien claims other claimants work provided contract balance deducting liens
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section § 9450

Explanation

When multiple people file a stop payment notice, and there isn't enough money to pay everyone fully, the available funds will be split among them based on the size of each person's claim compared to the total amount claimed by all. The order in which they filed or took action doesn't matter.

If funds withheld pursuant to a stop payment notice are insufficient to pay in full the claims of all persons who have given a stop payment notice, the funds shall be distributed among the claimants in the ratio that the claim of each bears to the aggregate of all claims for which a stop payment notice is given, without regard to the order in which the notices were given or enforcement actions were commenced.
stop payment notice insufficient funds claim distribution aggregate of claims ratio of claims distribution of funds enforcement actions insufficient payment order of notices payment claims claim proportion construction funds claimants payment notice hierarchy
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section § 9452

Explanation

This law states that if a person or company is owed money by a contractor, they can still claim the unpaid amount from the contractor or the contractor's insurance bond, even after payments are made as outlined in another section.

Nothing in this chapter impairs the right of a claimant to recover from the direct contractor or the contractor’s sureties in an action on a payment bond under Chapter 5 (commencing with Section 9550) any deficit that remains unpaid after the distribution under Section 9450.
claimant rights direct contractor contractor's sureties payment bond unpaid deficit distribution recovery Chapter 5 Section 9550 Section 9450 action on bond financial claims against contractors construction payment issues
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section § 9454

Explanation

If someone knowingly sends a false stop payment notice, or falsely claims work not included in a public works contract, they lose the right to any money distributed under Section 9450.

A person that willfully gives a false stop payment notice to the public entity or that willfully includes in the notice work not provided for the public works contract for which the stop payment notice is given forfeits all right to participate in the distribution under Section 9450.
false stop payment notice public entity willfully forfeits right distribution Section 9450 public works contract work not provided right to participate stop payment notice consequences misleading notice contractor penalties payment claims legal forfeiture
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)

Section § 9456

Explanation

If a subcontractor or supplier issues a stop payment notice on a public works project, their claim takes precedence over any payment assignments that the main contractor has made to others. This holds true regardless of whether the assignment was made before or after the stop payment notice was issued. Additionally, if a creditor of the main contractor tries to garnish payment from the public contract, their claim is lower in priority compared to the claimant with the stop payment notice.

(a)CA Civil Law Code § 9456(a) A stop payment notice takes priority over an assignment by a direct contractor of any amount due or to become due pursuant to a public works contract, including contract changes, whether made before or after the giving of a stop payment notice, and the assignment has no effect on the rights of the claimant.
(b)CA Civil Law Code § 9456(b) Any garnishment of an amount due or to become due pursuant to a public works contract by a creditor of a direct contractor under Article 8 (commencing with Section 708.710) of Chapter 6 of Division 2 of Title 9 of Part 2 of the Code of Civil Procedure and any statutory lien on that amount is subordinate to the rights of a claimant.
stop payment notice public works contract assignment of amounts direct contractor claimant rights garnishment creditor priority of claims statutory lien subordinate rights
(Added by Stats. 2010, Ch. 697, Sec. 20. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697 and by Section 8052.)