BILL NUMBER: AB 2627 CHAPTERED
BILL TEXT
CHAPTER 986
FILED WITH SECRETARY OF STATE SEPTEMBER 30, 1998
APPROVED BY GOVERNOR SEPTEMBER 29, 1998
PASSED THE ASSEMBLY AUGUST 31, 1998
PASSED THE SENATE AUGUST 28, 1998
AMENDED IN SENATE AUGUST 26, 1998
AMENDED IN SENATE JULY 7, 1998
AMENDED IN SENATE JUNE 22, 1998
AMENDED IN ASSEMBLY APRIL 14, 1998
INTRODUCED BY Assembly Member Brown
FEBRUARY 23, 1998
An act to add Section 3260.2 to the Civil Code, relating to works
of improvement.
LEGISLATIVE COUNSEL'S DIGEST
AB 2627, Brown. Works of improvement.
Existing law generally regulates the enforcement of mechanics'
liens and the use of stop notices for private works of improvement
and for public works. Existing law requires, except as otherwise
agreed to in writing, the owner of a work of improvement to pay to
the contractor, within 30 days following receipt of a demand for
payment in accordance with the contract, any progress payment due
thereunder as to which there is no good faith dispute between the
parties. Existing law entitles a contractor to a penalty if any
amount is wrongfully withheld in violation of this provision.
This bill would provide that if an original contractor is not paid
all moneys owed pursuant to a written contract for a work of
improvement within 35 days from the date payment is due pursuant to
the contract, and there is no dispute as to the satisfactory
performance of the contractor, the contractor has the right to serve,
as specified, a 10-day stop work order that states that unless all
amounts then due are paid within 10 days of notice, as specified, the
contractor will stop work on the project. The bill would require
the owner to notify the construction lender upon receipt of notice
from the original contractor, as specified. The bill would provide
that the contractor or his or her surety or subcontractor or his or
her surety shall not be liable for any delays or damages that the
owner may suffer as a result of the contractor serving the stop work
order and subsequently stopping work for nonpayment, and would
specify the contractor's or subcontractor's liability to a
subcontractor or material supplier. This bill would authorize an
expedited proceeding in the superior court in the county in which the
project is located regarding liability for the amount not paid for
work performed. The bill would also provide that it is against
public policy to waive these provisions in a written contract for
private work of improvement.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 3260.2 is added to the Civil Code, to read:
3260.2. (a) If an original contractor is not paid all moneys
which are owed pursuant to a written contract for a private work of
improvement within 35 days from the date payment is due pursuant to
the written contract, and there is no dispute as to the satisfactory
performance of that original contractor, the original contractor
shall have a right to serve upon the owner a "10-day stop work order"
that states that unless all amounts then due the original contractor
are paid within 10 days from the date notice is provided under this
section, the original contractor will stop work on the project. At
least five days before service upon the owner of a "10-day stop work
order," the contractor shall post, in a conspicuous location at the
job site and at the main office, if one exists, of the job site, a
notice that the original contractor intends to file a 10-day stop
work order pursuant to this section. A copy of the written notice
shall also be served upon all subcontractors with whom the original
contractor has a direct contractual relationship on the project at
the same time the notice is served upon the owner. Within five days
of receipt of written notice by an original contractor pursuant to
this section, the owner shall forward to the construction lender, if
any, at the address provided in the construction loan agreement, a
copy of the notice by first-class mail.
Upon resolution of the dispute or cancellation of the 10-day
notice by the original contractor, the original contractor shall
post, in a conspicuous location at the job site and at the main
office, and serve a notice to inform the subcontractors with whom the
original contractor has a direct contractual relationship of this
resolution or cancellation.
(b) The original contractor's right to stop work pursuant to this
section is in addition to any and all other rights the original
contractor may have under the law.
(c) Notwithstanding any other provision, the original contractor
or his or her surety, or subcontractor or his or her surety, shall
not be liable for any delays or damages that the owner or contractor
of a subcontractor may suffer as a result of the original contractor
serving the owner with a 10-day stop work order, and subsequently
stopping work for nonpayment if all of the posting and notice
requirements described in subdivision (a) are met. An original
contractor's or original subcontractor's liability to a subcontractor
or material supplier resulting from the cessation of work under this
section shall be limited to the amount of monetary damages the
subcontractor or material supplier could recover under the mechanic's
lien law for goods and services provided up to the date the
subcontractor ceases work, provided that (1) liability shall continue
for work performed and materials supplied up to and including the
10-day notice period and not beyond, and (2) this provision does not
apply to limit monetary damages for custom work, including materials
which have been fabricated, manufactured, or ordered to
specifications that are unique to the job.
(d) If the payment is not made within 10 days from the date the
notice was served, the original contractor or his or her surety, may
seek a judicial determination of liability for the amount not paid
for work performed in an expedited proceeding in the superior court
in the county in which the private work improvement is located.
(e) It shall be against public policy to waive the provisions of
this section in any written contract for private work of improvement.
(f) This section shall apply to any contract entered into on or
after January 1, 1999. However, nothing in this section shall be
construed to apply to retentions withheld by a lender in accordance
with the construction loan agreement.
(g) The stop work order specified in this section for private
works of improvement may be served as follows:
(1) If the person to be notified resides in this state, by
delivering the stop work order personally, or by leaving it at his or
her address of residence or place of business with some person in
charge, or by first-class registered or certified mail, postage
prepaid, addressed to the person to whom notice is to be given at his
or her residence or place of business address or at the address
shown by the building permit on file with the authority issuing a
building permit for the work, or at an address recorded pursuant to
subdivision (j) of Section 3097.
(2) If the person to be notified of the stop work order does not
reside in this state, by any method enumerated in paragraph (1) of
this subdivision. If the person cannot be served by any of these
methods, then notice may be given by first-class certified or
registered mail, addressed to the construction lender.
(3) Service pursuant to this paragraph by certified mail is
effective upon receipt. Service by registered mail is effective five
days after mailing.