Making The Right Choice
Here are some blog posts you may find useful as part of our ongoing effort to be the best resource of information for our valued clients.
“Lien Law: What You Need to Know” 7/7/10
Disclaimer: this is not to be construed as legal advice. Contact your attorney for information regarding construction and/or lien law.
This is not meant to scare you or dissuade you from hiring a qualified contractor- just educate you so that you can make informed decisions and avoid mistakes others made…
Most homeowners do not know that they may be held responsible for paying their contractor’s bills to suppliers and/or subcontractors indirectly hired to work on, or materials provided to their property via a MECHANIC’S or SUPPLIER’S LIEN. For this reason it is critical to hire only contractors licensed by the California Contractors State License Board (www.cslb.ca.gov) to perform your solar photovoltaic installation, and to ask whether or not the contractor uses subcontractors for any portion of the work to be done.
It is important to have a basic understanding of how LIEN LAW works in California to protect yourself against the threat of liens against your property anytime you’re having work done on your house. If not, you risk “paying double” for materials used on your house- if your contractor fails to pay his bills; even if you’ve already paid your contractor in full!
Contractors who work on your house and vendors who supply equipment and materials used or installed at your home have “mechanic’s or supplier’s lien” rights- meaning if they don’t get paid, they can put a lien against your house- holding up a sale or refinance- until the lien is satisfied.
During a panel discussion of San Diego homeowners who have had solar photovoltaic systems installed, one homeowner described his ordeal with a supplier’s lien. The homeowner described a thorough vetting of multiple contractors before selecting the most qualified to install his solar array. The installation went fairly smoothly, and he paid the installer in full upon completion. Problem is, the contractor never paid their solar panel vendor for the panels purchased specifically for this homeowner’s installation. The homeowner, or his General Contractor (see list of terms at www.VCS.com) must have received the “20 DAY PRELIMINARY NOTICE” from the vendor within 20 days of the start of his solar installation, but just didn’t recognize the implications of it. Well, the solar installation company was bought by another company and did not pay all its the outstanding bills- so the solar panel supplier “perfected the lien” (construction law term meaning filed the necessary paperwork with the county), attempting to place a lien on the home in order to get paid… even though the homeowner had already paid in full per the installation contract for the work!
Now, there is a happy- though rare ending to this story: the supplier put the wrong installation address on the lien paperwork with the county and their case was thrown out. But what should you do to inform and protect yourself in order to enjoy a smooth and headache-free solar installation?
1. In order to have the right to place a lien on your house, the supplier or installer (usually a subcontractor) must provide you with a “20-DAY PRELIMINARY NOTICE”. This “pre-lim” (in industry-speak), is required by contractor law in the State of California. This is done to protect you, the homeowner since you likely are unaware: A. Where the contractor you hired.
2. When making progress payments to your contractor, request a “CONDITIONAL LIEN RELEASE” from any and all suppliers and subcontractors that have “pre-lim’d” your project (this form states that once the check clears, the vendor or supplier relinquishes lien rights to that portion of the job).
3. Once a progress payment has cleared, request an “UNCONDITIONAL LIEN RELEASE UPON PROGRESS PAYMENT” through your contractor for each vendor and/or supplier that “pre-lim’d” your project (obtain releases for all payments.
4. Final payments work the same way, though the documents specify the release is for final payment (in both conditional and unconditional cases ) indicating that there are no further invoices billed towards your project.
Lien releases are a normal part of working with a contractor to perform any sort of significant work on your house-be it roofing, plumbing, windows, painting, welding, solar, etc. It does not need to be intimidating or scary; the CSLB regulations are pretty straightforward and are in place to protect you. This outline is drawn from my construction project management experience and is meant to show that by keeping your documents in order, you can experience a smooth installation process.
