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Security Payment Remedy for Large Construction Projects

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Published on : Apr 28, 2015

California offers large payment remedies for construction projects. Some of which such as the mechanics lien are better known and used often. Of the less known are notice for stop payment. 

However, there is one remedy for statutory payment which is never heard of.  This is called large projects security requirement.

As per the security requirement for large projects, the owners need to guarantee payment for direct contractors and is applicable under the following clauses; if the combined value of fee interest and contract is more thah US$5 million and if the combined leasehold interest and fee interest come to be over US$1 million. 

As per the first clause, the owner who contracts a work for improvement of a property carries a fee interest and signs a improvement construction contract for the property if its value is more than US$5 million. 

As per the second clause, the owner who contracts for improvement of a property owns lesser value of the fee interest which includes leasehold interest. The owner enters into a improvement construction contract if the value of the property is above US$1 million. 

Security can be asked for only large projects. It has exceptions which are based on the type of the project and the owner of the property. It does not hold for residences that are single family type and housing developments that are prone to density bonus.

The other exceptions related to owners does not hold good if it is a publicly traded company and if it is a private company that has a net worth of more than US$5o million.