If you are a subcontractor or supplier on a private construction project, you want to be proactive regarding your right to payment. As the maxim goes, “An ounce of prevention is worth a pound of cure.” Being proactive will hopefully help you maximize your ability to get fully and timely paid.
Below are tips:
- Pull up the Notice of Commencement for the project. The Notice of Commencement will tell you if you have construction lien or payment bond rights. If the Notice of Commencement doesn’t identify a payment bond, then you know you have lien rights.
- Serve the initial / preliminary notice to perfect lien or bond rights. Check out this chart relating to the required statutory notices to preserve your rights, whether you have lien or payment bond rights. For instance, if you have construction lien rights, you will want to ensure your Notice to Owner is timely served (within 45 days of initial furnishing). If you have payment bond rights, you may need to serve a Notice of Intent to look to the bond for payment. Oftentimes, a preliminary Notice to Owner/ Contractor will suffice. There are notice companies you can work with to assist you regarding your preliminary notices.
- Understand what your contract says. This means understand what your scope of work entails for the contract sum. Learn the notice provisions in your contract so that you are timely sending notice for changes or claims—amounts you believe increase your contract sum.
- Do not release your rights. When you sign progress payment releases or a final release, carve out those items that you are not prepared to release (such as claims for change orders, delays, etc.) Do not execute such a release that releases your payment rights.
- Consider sending a notice of intent to lien (if you have lien rights). This is not a statutory requirement and really depends on the circumstances of the job, but this is essentially a demand letter telling the owner that you plan on recording a lien if you are not paid.
- Timely record your lien (or, if payment bond rights, timely serve a Notice of Nonpayment). Again, check out this chart relating to the required statutory notice requirements. This chart will also explain when you need to timely sue to foreclose a construction lien or sue on a payment bond (absent something the owner or contractor does to shorten that time period.)
- Consult a lawyer to help you understand your rights and pursue your rights. A lawyer can assist you in this process relating to the preservation of your rights and the strategy to collect payment.
Please contact David Adelstein at email@example.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.