Withheld Final Payment, a Missed Lien Deadline, and a Supplier With No Preliminary Notice
You completed an $86,000 reroof under a written contract with a 1-year workmanship warranty; the owner paid a $10,000 progress payment, leaving $76,000 due on completion. Work was substantially complete June 1. The owner recorded a Notice of Completion on June 20. On July 10 the owner sent a list of "leaks at the chimney and two valleys" and is withholding $18,000 pending a full tear-off and replacement of the back slope. Your crew has been back twice; the chimney leak traces to masonry the owner declined to repair, which your proposal excluded in writing. A material supplier delivered $9,000 of shingles, never sent a preliminary notice, and is threatening a lien; your gutter subcontractor is owed $4,000 by you. Today is September 15.
1. Analyze your mechanics lien position as of September 15, and the supplier's.
Read the worked answer
- Your deadline: a direct contractor must record a lien within 90 days after completion of the work, or 60 days after the owner records a Notice of Completion, whichever comes first. The NOC was recorded June 20, so your lien deadline was approximately August 19. On September 15 that window is closed; a lien recorded now is late and will not survive a challenge.
- Preliminary notice: as a direct contractor in contract with the owner, you were not required to serve a 20-day preliminary notice (that requirement falls on subcontractors and suppliers, and on claimants serving a construction lender). So the notice is not your problem - the deadline is.
- The supplier: no preliminary notice means it cannot enforce a mechanics lien, though it can still sue you on the purchase contract. Its threat to lien the property is largely empty, but you should not tell it that as a negotiating tactic without checking whether it served notice on a lender.
- The subcontractor: if it served a timely preliminary notice, it can lien the owner and you may face a stop notice or a lien on the property, which will escalate the dispute.
- Your remaining remedies: breach of contract, account stated, and possibly a claim on the payment bond if one exists - not lien foreclosure. Get to a lawyer or a demand letter quickly and confirm the exact completion date from your records, because the 90-day clock runs from actual completion when no NOC is recorded.
2. How do you respond to the $18,000 withholding and the demand for a full tear-off of the back slope?
Read the worked answer
- Do not abandon the job or stop communicating. Abandonment converts a payment dispute into a licensing complaint and hands the owner the narrative.
- Respond in writing within days: acknowledge the complaint, state the inspection dates, describe what the crew found, and attach the proposal language that excluded the chimney masonry. Offer a specific next step - a joint inspection with the owner or a roof consultant, and repair of any item that falls within your workmanship warranty.
- Scope discipline: a full tear-off of the back slope is a demand for new work you were not contracted to perform, especially where the water entry traces to an excluded condition. Say so plainly, in writing, without insult.
- Money: demand payment of the undisputed balance with a written accounting, and state that you will pursue the balance through a demand letter and, if the amount fits the small claims or limited civil limit, through court. Homeowners may withhold only a reasonable amount for genuinely disputed work.
- Preserve your position: keep photos, daily logs, the change orders, and the signed exclusion. Pay or resolve the gutter subcontractor so you don't create a second front, and get lien releases as you pay.
- Licensing: confirm your license and every subcontractor's license are active - an unlicensed contractor cannot collect for the work in California, and that would end this dispute badly for you.
3. What should have been done differently in project administration, and what will you change going forward?
Read the worked answer
- Track the lien clock from day one. Calendar 90 days from completion and 60 days from any Notice of Completion, with a reminder 30 days out. That single habit would have preserved leverage worth more than the disputed amount.
- Get completion documented by the owner: a signed punch list and acceptance, with photos, dated the day you finish. An owner-recorded NOC you never saw is what killed the claim.
- Written change orders and written exclusions for pre-existing conditions, especially masonry, skylights, and decking - an exclusion in the proposal is only useful if the signed contract carries it forward.
- Preliminary notices on every job with a lender, and lien releases collected as a condition of each progress payment.
- Pay subs only against releases, and don't leave a subcontractor unpaid while you argue with the owner.
- Notice and cure language in the contract: a defined procedure for the owner to report defects and a defined period for you to inspect and repair, so a single email cannot become an $18,000 holdback.