Mechanics Lien Coverage
Mechanics Lien Coverage with Internal E.P.C.
Let’s talk about mechanics lien coverage because that comes up on most of our projects. We worked on a 20-megawatt solar project in Kern County a few years ago that was developed for Coronal Energy. In that case, the construction was done by an in-house E.P.C. contractor. At the end of the project, when we hit C.O.D., we had to have mechanics lien coverage issued on the owner’s policy for our investor. But we had issues because the construction was done by the internal E.P.C. We did not have a lot of the typical construction loan documentation, affidavits, releases that you would ordinarily have available to be able to get that coverage issued.
mitigate risk on insurance coverage
So, the way that we were able to solve that is we were able to work with the in-house E.P.C. Contractor and our developer sponsor to mitigate the risk on the insurance coverage down to just punch list items. And so, at the end, the number was a very small number that everyone was able to get comfortable with and we were able to get the coverage issued.
The mechanics’ lien is a right that California gives to workers and suppliers to record a lien to ensure payment.