All contractors in the building trades are in business to get paid. On occasion, you may be struggling to get full payment even for work correctly performed and completed on time. What steps should you take to protect yourself?
Know your options.
Remedies available to contractors for non-payment typically include mechanics liens, claims on payment bonds, and enforcement of contract rights. Can you suspend work? If you do, will the Owner or an upstream contractor have claims against you? What remedies do you have if the Owner terminates the contract? Sometimes the answers to such questions require legal advice, but often they can be found in your contract. Did you agree to a “pay-if-paid” clause? Did you waive any rights that would otherwise be available to you? What does your agreement say about the method for resolving disputes? Notice and cure provisions can be tricky, and sometimes allow only a short time to take action. Be sure to read your contract before you sign!
Watch your calendar.
Compliance with timing requirements is critical for lien and bond claims. The time available to pursue these remedies is set by law and will vary depending on several factors. These include your relationship to the Owner (prime contractor, subcontractor, second-tier subcontractor), whether the project is private or public, and if public, whether it is state or federally funded. Municipalities may also have their own rules. Some laws require “service” of notice and other acts within a specific period of time after your last date of work; but others require “delivery” of notice within the specified time. Check carefully and do not estimate. Count the number of days before your deadline expires. If you do not take timely action, your claim will be lost.
Keep good records.
Be serious about carefully documenting your work and costs. Time cards, daily logs, purchase orders, invoices, delivery tickets, and proofs of payment are essential. Photographs and email messages or other communications can also be key. Always keep change orders and any other form of direction authorizing extra work or premium time. Check your contract for any documentation it requires you to keep. Paper may be a pain, but it will save the day when you need to prove your claim.