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In this blog, presented by SunRay Construction Solutions and Lynn P Thompson, Attorney, Biggs, Ingram, & Solop, PLLC, you will learn about some of these measures and their respective dos and don’ts, that will help you to get paid successfully.
Understanding Your Contract
The very first thing that you need to do is read your contract thoroughly. Often, people don’t know what their contract says. Here are a few common questions that pop up when dealing with contracts, and we have answered them for you.
What's the first crucial step when dealing with a contract?
The very first thing you need to do is thoroughly read your contract. It's common for people not to know what their contract says, so whether you're the owner, project manager, or superintendent, always ensure you read the contract.
Can you use any contract form, and what should you do before starting work on a project?
You may use a contract form you're familiar with or the one provided by the other party. However, it's crucial to go through it thoroughly before commencing work on the project.
Why is it important to be aware of notice provisions in contracts?
Contracts typically have notice provisions with specific requirements to preserve claims or notify about changes. It's essential to understand your rights and obligations outlined in that written document.
What additional step should you take when performing work on a property?
Request a copy of the legal description of the property where you'll be working to ensure clarity and understanding of the project context.
Why is it recommended to request a copy of the payment bond?
By law in Mississippi, if a prime contractor has provided a payment bond for the project, you're entitled to receive a copy upon written request within 30 days. It's advised not to wait until the end of the project or when facing a payment issue to make this request.
How to Secure Your Lien or Bond Rights?
To secure your lien and bond rights, there are certain prerequisites that you want to make sure you preserve.
- You need to know your position in relation to the owner. Are you the:
- Prime
- Subcontractor
- Sub-subcontractor
- Materialman/Supplier to Subcontractor
If you are a second-tier subcontractor or if you are a supplier to a second-tier subcontractor, then you do not have any lien rights or bond rights.
What Are the Key Considerations to Keep in Mind When Safeguarding Your Ability to File a Claim of Construction Lien or Bond Claim?
If you do have the lien/bond rights, here are some of the things that you need to consider preserving your capacity to file a Claim of Construction Lien or bond claim.
- Properly licensed on both sides of the contract - Under Mississippi law, both the contracting parties must have a Certificate of Responsibility if the project value is more than $50,000. Ideally, both parties should have the Certificate of Responsibility that is required for their work. If you do not have the required licenses, then you cannot be in a legal contract or have any lien rights.
- Proper payment to lower–tier contractors - Another prerequisite for having a lien right is ensuring you are complying with your payment obligations to them.
- Substantial compliance with contract - Before you file your lien claim, you must ensure that you are in substantial compliance with your contractual obligations. If there is any default on your side, there will be a strong defense that you have not substantially complied with.
- Timely notice of labor/materials provided - As per the Mississippi law, an owner is entitled to know who is providing what services on their property. This allows the owner to be aware of all the entities who could file a Claim of Construction Lien on the property.
- This is why, as per the Mississippi Lien Law, if the owner asks the prime contractor, in writing, to provide a list of all the subcontractors and suppliers that are furnishing labor and materials to the project, and if the prime contractor fails to provide that information, then the prime contractor will lose their lien rights.
- This applies to the subcontractors too, where if they do not provide a list of its suppliers and sub- subcontractors within a reasonable time to the prime contractor, the subcontractor will lose their lien rights.
- Typically, there is nothing that prevents first-tier subcontractors or prime contractors from voluntarily providing this information. You don’t need to wait for the request to come in. The best practice is to voluntarily provide this information.
What Are the Key Notice Requirements for Second-Tier Subcontractors and Equipment Suppliers?
If you are a second-tier subcontractor, or if you are an equipment supplier to a first-tier subcontractor, to preserve your lien right, you must give a written notice to the contractor and to the owner of your presence on the job.
- This written notice must be provided within 30 days of the first date when you provided labor/materials to the job.
- If you don’t provide this notice, then you will lose your lien rights.
- The notice must include the below information:
- Name, address, and phone number of the person giving the notice.
- A description of the labor, services, or materials being provided.
- Name of the project and its location.
- Name of the entity/person to whom the labor/materials are being furnished.
What If You Do Not Have a Written Contract?
Under the Mississippi Lien Law, contracts that are not in writing, i.e., oral contracts can still be enforced, and you will still have lien rights, even if there is no written contract. Your ability to recover on your lien or bond claim depends on the merits of that claim. This means that you need to keep your project documentation in good order. You also need to educate your field staff and office staff on all the documentation procedures.
- Ensure you have documented the date of work or materials delivery.
- Daily reports
- Project meeting minutes
- Scheduling
- Keep a track of the delivery dates of items/materials
- Advance notice and notice of impact
- Organized internal reporting
What Is the Right Way to Exchange a Release for Check?
During the project, you will be asked to sign releases to receive payments. The best practice is that you should always read the release before you go ahead and sign it. You need to thoroughly check key details, such as:
- What date does the release extend through?
- Is the property description correct?
- Are you signing a release for the correct project?
If there is some claim that you want to preserve, then you need to write it clearly on the release form. In Mississippi, although the lien waivers and release forms are not a statutory requirement, there is a form approved. For example, you have a form interim waiver and release upon payment form which is a progress payment form. Similarly, you will also have a release form for final payments.
The form will have the property description, date through which the release is affected, etc. A key part of the form you must pay attention to is the Notice section.
- This notice must be on the lien release form for it to be legal.
- The information stated in this section states that when you execute and submit this document, you shall be conclusively deemed to have been paid the amount that has been stated on the form.
- Even if you have not received the payment 60 days after the date stated in the release, in Mississippi, it is still deemed that you have been paid.
What Should Be Your Action Item?
- You need to either file an affidavit of non-payment within those 60 days stating that you have signed the lien waiver, but you haven’t been paid yet, or you file your lien within those 60 days period.
- Many construction professionals are not aware that if you sign a release waiver which does not have this Notice on it, it is not considered an effective waiver and the 60-day presumed payment also does not apply to you.
- Hence, if the prime contractor, owner, or subcontractor is using the approved lien release waiver form, make sure that you are paying attention to the Notice section and take the required action.
What Are the Lien or Bond Law Traps to Avoid?
When dealing with lien or bond matters, it's important to avoid common pitfalls. Here's what you need to know:
1. Waiving Lien Rights: Don't worry if your contract talks about giving up your lien rights upfront. In Mississippi, you can't be asked to waive these rights before you start working on the project.
2. Mark Your Calendar: Keep track of key dates like:
- When you sign off on progress payment waivers
- Delivery dates for materials or labor (file your lien within 90 days of finishing)
- Final payment waiver date
- The 60-day mark, which is crucial for filing your lien; missing this deadline means losing your lien rights.
3. Bond Claim Notice: If you're a second-tier subcontractor or supplier, let the contractor or surety know about your bond claim within 90 days of your last work. Missing this deadline means losing your bond claim.
Stay on top of these simple guidelines to protect your rights under lien or bond laws.
Important information to Remember
- If it comes down to filing your lien or affidavit of non-payment, then you must be well-prepared with all the required information, such as:
- The legal description of the property
- Where is the courthouse?
- What is the filing fee?
- Who will help you in filing the bond claim?
- If you must hire a counsel, then you shouldn’t wait until the last moment to hire someone as the counsel will need to perform several checks which will take time.
- What does the payment bond say? All the details are clearly set forth in the language of the bond, such as what are the bond requirements, what notices are required, description of the dispute, the amount due, who needs to receive the notices, etc.
Key Takeaways
Documentation is key: Ensure you haven't waived lien rights, possessed all required licenses, and promptly provided proper lien waiver release forms.
Timely action matters: Timely file your lien or affidavit of non-payment to strengthen your position.
Lien power for fast resolution: Filing a lien itself can often trigger settlements, highlighting its importance.
Compliance guarantees success: By strictly adhering to lien and bond requirements, you expedite payment collection.
Don't risk payment delays! Secure your rights with SunRay's legal experts. Call 800-403-7660 today and get paid what you deserve.
