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Work Stop | 29

Work Stop
New Measure Aids Contractors
SACRAMENTO, CA

What should a contractor do when a project owner is late with payments? Stop work, and risk a lawsuit from the owner? Or continue to work and pay subcontractors, with no guarantee that the owner will pay for materials and work completed?

This was the dilemma landscape and building contractors faced as a result of a 1997 court decision that invalidated "pay if paid" clauses in construction contracts. According to the California Landscape Contractors Association (CLCA), while the ruling provided long overdue protection for subcontractors, it placed original contractors at greater risk.

A third option now exists. California Governor Pete Wilson signed AB 2627, a CLCA-supported measure that appropriately balances the rights of original contractors and subcontractors.

Authored by Assembly Member Valerie Brown (D-Sonoma), AB 2627 authorizes contractors to stop work on a project when there is no dispute as to satisfactory performance and the owner has not paid all amounts due under the contract within 10 days after being served with a Ten-Day Stop Work Order. The original contractor may serve the order after 35 days from the date the payment is due. The bill takes effect this January.