What is the current state of the law on interim protection for construction contractors in the event that a contractor loses a claim against a construction loan?
California, United States of America
The following excerpt is from Connolly Development, Inc. v. Superior Court, 132 Cal.Rptr. 477, 17 Cal.3d 803, 553 P.2d 637 (Cal. 1976):
This protective policy continues to serve the needs of the construction industry. As was pointed out in Cook v. Carlson, supra, 364 F.Supp. 24, 29: 'Labor and material contractors (in the construction industry) are in a particularly vulnerable position. Their credit risks are not as diffused as those of other creditors. They extend a bigger block of credit, they have more riding on one transaction, and they have more people vitally dependent upon eventual payment. They have much more to lose in the event of default. There must be some procedure for the interim protection of contractors in this situation.' Without such interim protection, the improvement may be completed, the loan funds disbursed, and the land sold before the claimant can obtain an adjudication on the merits of his claim.
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