Paying a Claremont Contractor Safely: Draws, Retention, and Lien Releases

Money on a construction job moves in one direction, and once it is gone it is gone. Most of the disputes that wreck a Claremont build are not really about craftsmanship. They are about payment: what was paid, when, for what work, and whether the people who actually did that work ever saw any of it.

The mechanics here are boring and they are the whole game. Learn them once.

The schedule of values

Before the first dollar moves, the contract should contain a breakdown of the job into priced pieces: demolition, foundation, framing, rough plumbing, rough electrical, drywall, cabinets, finish carpentry, and so on down the list. That breakdown is the schedule of values, and it is the yardstick every later payment gets measured against.

A contract that says only "total price, paid in monthly installments" gives you nothing to argue with. If a payment is due and you cannot point to a line item and ask whether it is finished, you are paying on the calendar rather than on progress. Those two things drift apart fast.

Draws follow completed work

A draw is a payment released against work that exists. The sequence that keeps everyone honest is: the contractor requests a draw naming the line items claimed as complete, somebody looks at the job, the claim is verified, then the money moves.

The "somebody looks" step is the one owners skip, and it is the only step that matters. On a financed project the lender sends an inspector because the lender's money is at risk. On a cash-funded project nobody sends anyone unless the owner does. Walk the job. Take dated photographs. Compare what you see to the draw request, line by line.

A useful discipline: never let the money get ahead of the work. If the payments made to date exceed the value of what is standing on the lot, you have made an unsecured loan to a construction company, and you will find that out at the worst possible moment.

California also limits what a contractor may collect up front on a home improvement contract, and the cap is low. Verify the current figure and the current written-contract requirements directly with the Contractors State License Board rather than accepting a builder's characterization of them.

Retention

Retention is a fixed percentage withheld from every draw and released only after the job is finished and accepted. It exists because the last stretch of a construction job is the hardest stretch to get done. Punch items are small, unglamorous, and easy to abandon once the money is collected.

Retention gives the contractor a reason to come back. Write it into the contract, state plainly what triggers its release, and do not release it early as a favor. Every owner who released retention early to be pleasant has the same story about the door that never got adjusted.

Retention interacts with the closing sequence, so read it alongside punch lists and final walkthroughs. The list and the withheld money are two halves of one mechanism.

Lien releases: the part that actually protects you

Here is the fact that surprises people. In California, a subcontractor or a material supplier who was not paid can record a mechanics lien against your property even if you paid your general contractor in full. Your check to the general does not, by itself, discharge the plumber's claim.

The defense is a paper one. California provides statutory lien release forms, and there are four of them, arranged along two axes: conditional or unconditional, progress or final.

CONDITIONAL means the release takes effect only when the payment clears. UNCONDITIONAL means the signer gives up the claim outright, right now.

PROGRESS covers work through a stated date. FINAL covers everything.

The safe pattern is simple. Exchange a conditional progress release for each draw. Once that payment has cleared, collect the matching unconditional progress release. At the end, exchange a conditional final release for the last payment, then collect the unconditional final release once it clears. Never hand over money against an unconditional release you have not yet funded, and never sign anything yourself that you have not read.

The releases you want are not only from your general contractor. You want them from every party who sent you a preliminary notice.

Preliminary notices are not threats

Early in a job, envelopes start arriving from companies you have never heard of: a truss supplier, a concrete plant, an electrical subcontractor. These are preliminary notices, and their tone alarms first-time owners.

They are routine. A preliminary notice is how a party who has no contract with you preserves the right to file a lien later. Receiving one means somebody is working on or supplying your job. It is not an accusation.

Treat the stack as a checklist. Every company that sent a notice is a company whose lien release you want before you release final payment. If you never receive a notice from a trade you know was on site, that is worth a question rather than a shrug.

Joint checks, and when to use one

If a supplier or subcontractor tells you they have not been paid, the tool is a joint check made out to the general contractor and that party together. Both must endorse it. The money cannot be redirected on the way through.

Used occasionally, a joint check solves a specific problem. Used routinely, it means you have taken over the general contractor's job of managing his own trades, which is a signal about the contractor rather than about the payment method.

Keep the file

One folder, physical or digital: the signed contract, the schedule of values, every draw request, every proof of payment, every preliminary notice, every release, every approved change order, and dated photographs at each draw.

Change orders belong in that file for the same reason draws do. Scope that moves without paperwork becomes scope that is disputed later, which is a theme that runs through negotiating with builders on upgrades, credits, and closing costs.

If the job goes well, the file is a curiosity. If it goes badly, the file is the difference between a negotiation and a loss. Building it costs a few minutes per draw.

Where to go next

Payment mechanics sit inside a larger sequence. The rest of it lives on the Claremont new construction hub, and the natural companion piece is choosing a builder for a Claremont project, because the cleanest payment process in the world will not rescue the wrong contractor.

Anthony Grynchal has been licensed in California since November 2009.