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LCW represents and advises private schools and colleges in various business, construction, and facilities matters, including all aspects of construction projects from contract drafting and negotiations to course of construction issues. Through this Construction Corner, LCW will be giving private schools and colleges monthly helpful tips on a variety of topics applicable to campus construction projects. LCW attorneys are available should you have any questions or need assistance with any construction projects no matter what phase you may be in currently.
California Construction Payments: The What and Why of Conditional Waivers & Releases by Heather DeBlanc
In California, claimants who are not paid on your construction project can file a mechanic’s lien on your property. In order to alleviate this risk, schools should make sure that their general contractors are collecting waivers and releases upon progress payments and final payments.
The California Civil Code provides forms for these waivers and releases in Sections 8132, 8134, 8136, and 8138. In order to effectively release a claim, the waiver and release must be in substantially the form provided by the statute and signed by the claimant.
- Section 8132 governs a Conditional Waiver and Release Upon Progress Payment;
- Section 8134 governs an Unconditional Wavier and Release Upon Progress Payment;
- Section 8136 governs a Conditional Waiver and Release Upon Final Payment; and
- Section 8138 governs an Unconditional Waiver and Release Upon Final Payment.
In order for the conditional releases to be effective, there also must be evidence of payment either by the endorsement of a check or written acknowledgment of payment by the claimant.
The forms provided by these statutes are located at https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=4.&title=1.&part=6.&chapter=3.&article=
Schools should ensure that their construction contracts require a general contractor to provide unconditional waiver and releases upon each progress payment covering work for the prior payment application. This will avoid additional unanticipated claims as the project progresses. Upon final closeout, the school should collect an unconditional waiver and release upon final payment. Although schools could ask for conditional waivers and releases, they would also need to collect the required evidence of payment from the claimant, who is likely a subcontractor. This may prove difficult for the school.
Although many AIA and other form contracts include provisions for payment, these forms are not geared toward California laws. Schools should modify those contract provisions to ensure the contractor provides these forms to alleviate the potential risk of mechanic’s liens.
Stay tuned for a future Construction Corner article on the Timing of Progress Payments.