📋 Overview

You've completed work but the homeowner is refusing to pay, withholding final payment, or disputing the amount owed. California provides contractors with powerful collection tools, including the mechanic's lien, but strict deadlines and procedures must be followed. This guide helps you respond strategically to recover what you're owed.

Critical Deadlines

Mechanic's lien must be recorded within 90 days of completion. Miss this deadline and you lose your strongest remedy.

Preliminary Notice

Direct contractors don't need preliminary notice, but subs and suppliers must serve 20-day preliminary notice to preserve lien rights.

Valid Contract Required

For home improvement contracts over $500, you need a written contract meeting B&P Code 7159 requirements to enforce in court.

Common Payment Disputes

  • Final payment withheld - Homeowner refuses to release retention or final draw
  • Scope disputes - Homeowner claims work wasn't complete or differs from agreement
  • Quality complaints - Using alleged defects as excuse not to pay
  • Change order disputes - Homeowner denies authorizing extra work
  • Complete non-payment - Homeowner stops paying mid-project
  • Offset claims - Homeowner claims damages exceed amount owed
$450
Professional Demand Letter

Attorney-drafted demand letter on letterhead, preserving your lien rights and maximizing collection chances.

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🔍 Evaluate Your Situation

Before taking action, assess your documentation and legal position. Your remedies depend on having proper contracts and meeting lien requirements.

Contract Compliance Check

Requirement Why It Matters Risk if Missing
Written contract (over $500) B&P 7159 requires specific provisions May not be enforceable
License number on contract Required disclosure per B&P 7030.5 CSLB complaint risk
Change orders signed Required for extras per B&P 7159 Can't collect for extras
Permits pulled (if required) Work without permits = violation May forfeit payment
Active license during work B&P 7031 bars unlicensed collection Cannot sue for payment

📄 Documentation

  • ✓ Signed contract with full scope
  • ✓ Signed change orders for extras
  • ✓ Invoices sent with detail
  • ✓ Photos of completed work

📝 Lien Prerequisites

  • ✓ Preliminary notice (if sub/supplier)
  • ✓ Within 90 days of completion
  • ✓ Active license throughout project
  • ✓ Property ownership verified

B&P Code 7031 Warning

If you were unlicensed or your license was suspended at any time during the project, you cannot sue to collect payment AND you may have to return all money paid. This is strictly enforced. Verify your license status before taking action.

🛡 Your Collection Remedies

California provides contractors with multiple tools to collect unpaid amounts. Choose based on your situation and timeline.

Mechanic's Lien (Civil Code 8400+)

Record a lien against the property for unpaid work. This is your most powerful tool - it creates a security interest in the real estate and often forces payment. Must be recorded within 90 days of completion.

Best for: Significant amounts, homeowner has equity, within deadline. Forces action or blocks sale/refinance.

Stop Payment Notice (Civil Code 8500+)

If there's a construction lender, you can serve a stop payment notice requiring the lender to withhold funds. Available to subs and suppliers who served preliminary notice.

Best for: Active construction loan, you're a sub/supplier, funds still available.

Breach of Contract Lawsuit

Sue for the contract amount plus interest and attorney fees (if contract provides). Small claims up to $10,000 (or $5,000 for businesses). Unlimited civil for larger amounts.

Best for: When lien deadline passed, clear contract terms, homeowner has assets.

Payment Bond Claim

If there's a payment bond (required on public works, sometimes on private), you can claim against the bond instead of or in addition to lien rights.

Best for: Public works projects, bonded private projects.

Demand Letter Strategy

Often a well-crafted demand letter referencing your lien rights and legal options prompts payment without litigation. Most effective before recording a lien.

Best for: First step in all situations. Professional letter often resolves matter.

90-Day Lien Deadline

The mechanic's lien must be recorded within 90 days of your completion of work (or cessation of work). After recording, you have 90 days to file a lawsuit to foreclose. Missing these deadlines extinguishes your lien rights permanently.

⚖ Response Options

Choose your approach based on amount owed, relationship, and timeline.

Demand Letter + Lien Notice

Send professional demand letter stating amount owed and advising that you will record a mechanic's lien if not paid. Often prompts immediate payment.

  • Professional approach
  • Preserves relationship option
  • Creates paper trail

Record Mechanic's Lien

If demand fails or deadline approaching, record the lien with county recorder. Must then serve copy on owner within 10 days.

  • Secures your claim
  • Blocks property sale/refi
  • Requires lawsuit within 90 days

Small Claims Court

For amounts under $10,000 (or $5,000 for businesses filing as plaintiff), small claims is fast and cheap. No attorneys.

  • Low cost ($30-75 filing)
  • Quick resolution
  • Limited to $10K max

Negotiate Settlement

If homeowner has legitimate complaints, negotiate reduced amount in exchange for full release and no CSLB complaints.

  • Ends dispute cleanly
  • Avoids litigation costs
  • Protects license

Collection Cost Analysis

Example: $12,000 unpaid balance

Demand letter (attorney) $450-800
Record mechanic's lien $500-1,000
Lien foreclosure lawsuit $5,000-15,000
Small claims (if under $10K) $75-150
Collection agency (contingency) 25-40% of collected
NET RECOVERY GOAL Maximize value

Attorney Fee Clause

If your contract has an attorney fee provision, you can recover legal costs if you win. This makes it more economical to pursue through litigation and deters frivolous defenses.

📝 Sample Response Letters

Copy and customize these templates for your situation.

Initial Demand Letter
Re: Demand for Payment - [PROPERTY ADDRESS] This letter constitutes formal demand for payment of [$AMOUNT] owed for construction services provided at the above property pursuant to our contract dated [DATE]. The work was completed on [COMPLETION DATE], and our invoice dated [INVOICE DATE] remains unpaid. Despite multiple requests for payment, you have failed to remit the amount owed. Please be advised that under California Civil Code Section 8400 et seq., I have the right to record a mechanic's lien against your property for unpaid construction work. Such a lien will encumber your title and may affect your ability to sell or refinance the property. To avoid the recording of a lien and further collection action, please remit payment in full within [10/14] days. If I do not receive payment by [DATE], I will proceed with recording a mechanic's lien and pursuing all available legal remedies.
Response to Quality Complaint
Re: Response to Your Letter of [DATE] - [PROPERTY ADDRESS] I have received your letter raising concerns about the quality of work performed. I take all quality concerns seriously and am willing to inspect and address any legitimate issues. However, your refusal to make any payment is not an appropriate response. The contract balance of [$AMOUNT] is owed for completed work. Under California law, you may not withhold the entire contract price for minor or disputed items. I propose the following resolution: (1) I will inspect the property to evaluate your concerns on [DATE OPTIONS]; (2) You will release [UNDISPUTED AMOUNT] representing undisputed work; (3) We will establish a reasonable holdback for any legitimate warranty items. If you refuse to cooperate with this reasonable approach, I will record a mechanic's lien for the full amount owed and pursue legal remedies. Time is of the essence as lien deadlines are approaching.
Pre-Lien Final Notice
FINAL NOTICE BEFORE MECHANIC'S LIEN Re: [PROPERTY ADDRESS] Amount Due: [$AMOUNT] This is your final notice before I record a mechanic's lien against your property. Despite my previous demand letter dated [DATE], you have failed to pay the amount owed for construction services. If payment in full is not received by [DATE - typically 5-7 days], I will: 1. Record a Mechanic's Lien with the [COUNTY] County Recorder's Office 2. Serve you with a copy of the recorded lien as required by law 3. File a lawsuit to foreclose on the lien A mechanic's lien will appear on your title, prevent you from selling or refinancing your property, and result in additional legal costs that you may be required to pay. This is your last opportunity to resolve this matter without a lien. Contact me immediately to arrange payment.
Settlement Offer
Re: Settlement Proposal - [PROPERTY ADDRESS] In the interest of resolving our payment dispute without further legal action, I am prepared to offer the following settlement: Original Amount Owed: [$FULL AMOUNT] Settlement Amount: [$REDUCED AMOUNT] Discount: [$DISCOUNT / X%] In exchange for payment of [$SETTLEMENT AMOUNT], I will: - Waive the remaining balance - Not record a mechanic's lien - Provide a lien waiver and release - [Address any specific warranty items if applicable] This offer is contingent upon payment received by [DATE] and your signature on a mutual release agreement. If not accepted by this date, the offer is withdrawn and I will pursue the full amount through lien foreclosure. Please confirm acceptance in writing and I will provide payment instructions and release documents.

🚀 Next Steps

Take action promptly to protect your collection rights.

Step 1: Calculate Deadline

Determine your 90-day lien deadline from completion. Mark it on your calendar with a 30-day warning.

Step 2: Gather Documents

Compile contract, change orders, invoices, communications, and photos of completed work.

Step 3: Send Demand

Send professional demand letter via certified mail with return receipt requested.

Step 4: Prepare Lien

If no response, prepare mechanic's lien for recording before deadline expires.

Mechanic's Lien Requirements (Civil Code 8400+)

  • Record within 90 days of completion or cessation of labor
  • Serve copy on owner within 10 days of recording
  • File lawsuit within 90 days of recording to foreclose
  • Include required information per Civil Code 8416 (property, claimant, amount, etc.)

Small Claims Court Option

  • Limit: $10,000 for individuals, $5,000 for businesses as plaintiff
  • No attorneys: You represent yourself
  • Quick: Hearing typically within 30-70 days
  • Costs: $30-75 filing fee depending on amount

Collect What You're Owed

Don't let non-paying customers take advantage. Get professional help with your collection strategy.

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California Resources

  • Civil Code 8000-8494: California Mechanics Lien Law
  • CSLB Website: cslb.ca.gov - License verification
  • County Recorder: Where to record mechanic's liens
  • Small Claims Advisory: Your local court's self-help center