An Administrator's Guide to California Private School Law

Chapter 17 – Construction

 All mechanics liens and related documents that have been recorded and any that may be expected;  Punch list items and amount needed to complete punch list items;  Work remaining on the project and amount needed to complete project;  Amount of total project funds remaining on hand and amount in retention, if there is an escrow;  Allowable back charges;  Liquidated damages against the contractor, and whether and how much the school is withholding for liquidated damages;  Delay damages that may be claimed by the contractor against the school; and  Whether the project has been completed and whether a notice of completion has been recorded. Schools are not required to record a notice of completion, so a school must determine whether or not it should file this notice. Filing a notice of completion may restart the time deadlines for filing stop payment notices, recording mechanics liens, and stop payment notice or mechanics lien litigation.

The school’s options in handling a mechanics lien or stop payment notice litigation will depend in part on its goals with respect to the project. The school’s goals may include one or more of the following:  Complete the project, including punch list items, if the project is not yet completed;

 Minimize liability for delay damages, stop payment notices, and other liens;  Maximize recovery of liquidated and other damages, and attorneys’ fees and costs for defense of the stop payment notice litigation;  Get out of the litigation early before incurring substantial litigation expenses; and  If the school cannot get out of the litigation early, resolve the litigation as economically, and efficiently as possible.

As previously discussed, the school may be able to avoid litigation to enforce a stop payment notice by obtaining a release of the stop payment notice from the subcontractor that issued the stop payment notice, accepting a stop payment notice release bond, or issuing a joint check. If the school is likely to remain in a stop payment notice litigation, the school must withhold sufficient project funds to cover all stop payment notices, liens, punch list items, remaining work that still needs to be completed, back charges, the school’s liquidated damages, and any other damages. If the school is involved in a mechanic’s lien litigation, it has the option to withhold the claimed lien amount during the action. 2432

An Administrator’s Guide to California Private School Law ©2019 Liebert Cassidy Whitmore 590