An Administrator's Guide to California Private School Law

Chapter 17 – Construction

 The design professional records a mechanics lien for the amount of the unpaid design professional lien after 60 days of recording the design professional lien, but before that lien expires at 90 days; and  The mechanics lien states it is a converted design professional lien but shall be recorded and enforced as a mechanics lien. 2414

E. S TOP P AYMENT N OTICES In addition to mechanics liens, subcontractors or suppliers may serve a stop payment notice upon the school if the direct contractor or other entity fails to pay them for their services or materials. 2415 A stop payment notice is a claim against the project funds stating that the subcontractors or suppliers have not been paid by the contractor. A contractor directly hired by the school cannot serve a stop payment notice upon the school. 2416 The claimant can serve stop payment notices at any time during the project, but, to be eligible to serve a stop payment notice, the claimant must provide the school the same 20-day preliminary notice required by a mechanics lien claimant as described above. 2417 Additionally, the claimant must serve the stop payment notice before expiration of the time within which it must record a lien. 2418 The claimant must therefore serve the stop payment notice after the claimant ceases to perform work and before the earlier of the following times: (1) 90 days after completion of the work; or (2) 30 days after the school records a notice of completion or cessation. 2419 1. W ITHHOLDING P ROJECT F UNDS F OR S TOP P AYMENT N OTICES The school must withhold an amount sufficient to pay a claim from monies due or to become due to the direct contractor upon receipt of a stop payment notice. 2420 Stop payment notices only attach to project funds in the school’s possession and owed to the contractor. Stop payment notices do not apply to funds held by a school for future scheduled construction on the project, incomplete punch list items, or other disputed items. The amount to be withheld by the school is generally 125 percent of the amount of the stop payment notice. The 125 percent is not specifically set forth in any statute. It is derived from the requirement that stop payment notice release bonds are for 125 percent of the claimed amount. 2421 If the school fails to properly withhold money as required, it, or its directors, trustees, and board, may become personally liable to the claimant. 2422 The school also has the option to not withhold funds if the school previously recorded a payment bond of at least 50 percent of the contract price. 2423 The school must notify the claimant and provide it a copy of the payment bond within 30 days after receipt of its stop payment notice if the school will not withhold funds. 2424 2. R ELEASING P ROJECT F UNDS W ITHHELD F OR S TOP P AYMENT N OTICES Before releasing any payments withheld for stop payment notices, especially if a stop payment notice action is pending, the school should consult with legal counsel. As stated above if there is an improper release of payment, the disbursing officer and the school are liable to the stop

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 586