Payment & collections
On a public works project a contractor generally cannot record a mechanics lien, because public property is not subject to one. The payment bond is the substitute, and on private projects it can sit alongside the lien and stop payment notice as a third route to payment. It also has a feature the other two lack: a claimant who failed to give preliminary notice is not automatically out. This guide, reviewed by Jayson R. Elliott, covers the private and public frameworks and the saving mechanism in Civil Code section 8612.
Before anything else, a distinction that causes real confusion — including because the two instruments happen to share a dollar figure.
The contractor’s license bond is required by Business and Professions Code section 7071.6 as a condition of holding a California license. It is $25,000, and under section 7071.6(b) the surety’s aggregate liability on claims outside a specified group of beneficiaries is capped at $7,500. It is not project-specific, it is not insurance for the contractor, and it is not a meaningful source of recovery on a construction payment dispute.
A payment bond is a project instrument. It is given by a direct contractor to secure payment to those who furnish work on that project, and its amount is tied to the contract rather than to a statutory flat figure. This page is about payment bonds. The licensing hub covers the license bond.
Civil Code section 9550 requires a direct contractor awarded a public works contract involving an expenditure in excess of $25,000 to give a payment bond, before commencement of work, to and approved by the officer or public entity that awarded the contract. The public entity is required to state in its call for bids that a payment bond is required for such a contract.
Two carve-outs appear in the same section. A design professional is not deemed a direct contractor for this purpose and is not required to give a payment bond. And section 9550 does not apply to a public works contract with a “state entity” as that term is defined in the Public Contract Code.
Under Civil Code section 9554, a public works payment bond must be in an amount not less than 100 percent of the total amount payable pursuant to the contract. It must be an actual bond rather than a deposit in lieu of a bond, and it must be executed by an admitted surety insurer.
That 100 percent figure is the practical answer to why the payment bond matters on public work. Unlike the license bond, it is sized to the project.
Civil Code section 9552 supplies the enforcement teeth. If a payment bond is not given and approved as required, neither the public entity awarding the contract nor any of its officers may audit, allow, or pay a claim of the direct contractor under that contract — and a claimant instead receives payment of a claim through the stop payment notice procedure.
For a subcontractor, that means the absence of a bond is not the end of the road; it redirects to the stop payment notice remedy covered on its own guide.
On private projects a payment bond is not universally required in the way section 9550 requires one on qualifying public work. Where a bond has been given under Civil Code section 8600, it operates as an additional security for claimants alongside the lien and stop payment notice remedies. A claimant on a bonded private project is therefore usually evaluating three routes rather than choosing one.
Civil Code section 8612(a) states the general rule directly: in order to enforce a claim against a payment bond under the private works title, a claimant shall give the preliminary notice provided in the section 8200 chapter. The public works framework imposes a parallel requirement — where a timely preliminary notice has been given, no further notice to the surety is required.
So the same document that protects the lien and the stop payment notice protects the bond claim. That is the argument for treating preliminary notice as unconditional job-start procedure.
Here is where the bond claim differs from the other two remedies, and it is the most useful thing on this page.
Under Civil Code section 8612(b), if preliminary notice was not given as required, a claimant may still enforce a claim by giving written notice to the surety and the bond principal within 15 days after recordation of a notice of completion. If no notice of completion has been recorded, that period is extended to 75 days after completion of the work of improvement. The public works framework contains a corresponding provision.
A missed preliminary notice is fatal to a lien claim and to a stop payment notice. It is not automatically fatal to a bond claim. A contractor who discovers the gap late should establish immediately whether a bond exists on the project, because this route may still be open when the others have closed.
The §8612 saving mechanism General rule: give preliminary notice under §8200 to preserve the bond claim (§8612(a)). If preliminary notice was not given: written notice to the surety and the bond principal within 15 days after recordation of a notice of completion (§8612(b)). If no notice of completion was recorded: 75 days after completion of the work of improvement. The written notice has its own form and service requirements — see §8614. This route does not exist for a mechanics lien or a stop payment notice.
Section 8612 does not stop at subdivision (b). Subdivisions (c) and (d) address claimants who have no direct contractual relationship with the contractor, and they condition the saving mechanism — subdivision (d) withdraws it where all progress payments other than those disputed in good faith have been made to a subcontractor who has a direct contractual relationship with the general contractor to whom the claimant provided materials or services.
Experienced California construction practitioners have described this language as ambiguous, and at least one has advised second-tier subcontractors and suppliers to give preliminary notice specifically to avoid depending on it. That is sound: the saving mechanism is a fallback with conditions, not an alternative procedure a lower-tier claimant should plan around.
Giving notice is not the same as suing, and the limitations period for an action on a payment bond is set separately from the notice deadlines above. It differs between the private and public frameworks.
This page does not state those periods, because they were not verified against the current code in preparing it and a wrong number here would be worse than no number. Any contractor with a live bond claim should confirm the applicable filing deadline with counsel rather than assuming it tracks the lien or stop payment notice timeline — it does not.
Private works
Public works
Bond required by statute?
No general requirement; §8600 bond may be given
Yes — §9550, contracts over $25,000
When given
By agreement
Before commencement of work
Amount
Per the bond
Not less than 100% of contract (§9554)
Surety
Per the bond
Admitted surety insurer (§9554)
Mechanics lien also available?
Yes
Generally no
Preliminary notice required
Yes — §8612(a)
Yes
Saving mechanism if notice missed
15 days after NOC / 75 days after completion (§8612(b))
Corresponding provision
If no bond given
N/A
Public entity may not pay the direct contractor; claimant uses stop payment notice (§9552)
Before you ask
Possibly. Civil Code section 8612(b) provides that if preliminary notice was not given, a claimant may enforce a claim by giving written notice to the surety and the bond principal within 15 days after recordation of a notice of completion, or within 75 days after completion of the work of improvement if no notice of completion was recorded. No comparable saving mechanism exists for a mechanics lien or a stop payment notice.
Civil Code section 9550 requires a direct contractor awarded a public works contract involving an expenditure in excess of $25,000 to give a payment bond, before commencement of work, to and approved by the officer or public entity that awarded the contract. Design professionals are excluded, and the section does not apply to contracts with a “state entity” as defined in the Public Contract Code.
Civil Code section 9554 requires a public works payment bond in an amount not less than 100 percent of the total amount payable pursuant to the contract. It must be an actual bond rather than a deposit in lieu of one, and it must be executed by an admitted surety insurer.
No. The license bond under Business and Professions Code section 7071.6 is a $25,000 condition of holding a license, with aggregate liability on most claims capped at $7,500 under section 7071.6(b), and it is not project-specific. A payment bond is a project instrument securing payment to those who furnish work, sized to the contract rather than to a flat statutory figure.
Civil Code section 9552 provides that if a payment bond is not given and approved as required by section 9550, neither the public entity nor any of its officers may audit, allow, or pay a claim of the direct contractor under the contract, and a claimant instead receives payment through the stop payment notice procedure. The absence of a bond redirects the remedy rather than eliminating it.
It is safer not to. Civil Code section 8612(c) and (d) condition the saving mechanism for claimants without a direct contractual relationship with the contractor, and withdraw it in circumstances including where progress payments have been made to the subcontractor the claimant supplied. Practitioners have described the language as ambiguous, so lower-tier claimants should give preliminary notice rather than plan around the fallback.
Keep reading
Breadcrumb + pillar parent
Preliminary notice prerequisite
“covered on its own guide” (§9552 redirect)
Lien unavailable on public works
“The licensing hub covers the license bond” (§7071.6)
Lower-tier claimant remedies
Licensure precondition to any collection action
Inline first mention: payment bond, license bond, surety, bond principal, admitted surety insurer, direct contractor
Attorneys section — end of article
If this describes your situation, an attorney affiliated with Bay Legal PC, CA Bar No. 332479, can review it with you.