Long Answer: I’ve had a number of folks contact me in the past week or so inquiring as to whether they could file a lien against a federal or state project. While some companies have been doing state and federal works for years and know the claim procedures inside and out, the state of our economy has forced some outfits to experiment with federal and state projects for the first time.  I find that these companies know a good deal about mechanic lien laws as they relate to private projects, but are just uncertain how to file a similar claim on a public work.

By the way, if you’re not sure about whether a project is a state, federal or private project, check out this post:  The Difference Between Public and Private Projects. The Reader’s Digest version of this post however is this: look to who owns the property.  If the property is owned by the state, it’s a state project.  If it’s owned by a private company or person (including non-profits, churches and private schools), then it’s a private project.

If you’re unpaid for labor or materials furnished to a private project, your remedy is to file a mechanics lien against that project. As I posted about in a previous FAQ article, a mechanic lien is filed against the actual property where work or materials were furnished.  It creates a security interest of sorts – similar to a mortgage – in the property itself, and if you remain unpaid, and you file a lawsuit to enforce the lien, the courts may actually order the property sold to pay your debt.

Obviously, if on a state or federal project working on state or federal land, the State or US Government is not going to allow contractors or suppliers to obtain an interest in their land. Therefore, while there are remedies available to you on these projects, the remedy is not exactly like the private mechanics lien.  You’ll never get a piece of the property as compensation for your work.

To accommodate this protection of state and federal land, there are laws that require most state and federal projects to have a payment bond issued.  A payment bond is issued by a surety company and guarantees payment of all subcontractors, suppliers and professionals. A surety company is like an insurance company, and the bond itself acts like an insurance policy for payment of the laborers and materialmen.

So, if you’re unpaid on the project, rather than file a lien against the property itself, on state and federal projects you would file a lien against the payment bond.

While this sounds less secure, it is actually more secure.  A physical property can be over mortgaged, and there are all types of lien priority issues to determine whose claim ranks above the others. Payment bonds have no such problems.  If you timely make your claim, you’ll get paid, and surety bond companies are very,very rarely over leveraged.

These claims against the bond are called “bond claims,” “miller act claims,” and “little miller act claims.”  They are just as frequently referred to as simply state liens or federal liens.

Just like mechanic lien claims, filing a state or federal lien or bond claim is hyper-technical.  You must follow strict deadlines to file the claim, and in many instances, you’re required to deliver a preliminary notice at the start of your job.  The claim itself must contain certain data about your work and the project, and it must be delivered to certain parties in a certain way (i.e. certified mail, registered mail, restricted mail delivery, etc.).  Some states require state liens to be filed with the recorder, while other states don’t require an actual filing with the recorder, and only require filing with the agency commissioning work.

Zlien files state and federal bond and lien claims all across the country, and our LienPilot also manages the lien and notice deadlines and requirements for state and federal projects.  Want to learn more?  Comment below and I’ll be glad to answer any questions.

There is nothing ground breaking about this decision, but it does contain a nice long discussion of the Miller Act’s statute of limitation.  In case you don’t know about the Miller Act’s time limitations, read all about the Miller Act on our blog, or take a look at the court’s explanation here:

An action brought under 40 U.S.C. § 3133, “must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.” § 3133(b)(4).

(Remember too that certain parties must also file a Notice of Miller Act Claim within 90 days of last furnishing labor and/or materials).

But knowing this 1-year requirement is only half the battle.  You must also understand what starts the 1-year clock, or in other words, what the law means by “last of the labor was performed or material was supplied.”  Does that include warranty work?  punchlist work?  off-site project close-out work?  The Contracting King court explains:

The majority of circuits that have addressed this issue have held that remedial or corrective work or materials, or inspection of work already completed, falls outside the meaning of ‘labor’ or ‘material’ under [the statute of limitations]. Citing U.S. v. International Fidelity Ins. Co., 200 F.3 456, 459 (6th Cir. 2000).

To sum up how these Miller Act & Little Miller Act claims work, when you’re unpaid on a construction project commissioned by the state (including cities, counties and public boards) or federal government, you have a right to make a bond or surety claim under the applicable miller act law.

Make the claim correctly, and there is an insurance policy of sorts – a surety bond – against which you can collect, thus protecting you from a circumstance when someone in the contracting chain misappropriates money or goes belly-up.  Make the claim incorrectly, however, and you’re out-of-luck.

Let me say that again – if you make the claim incorrectly, you’ll be unable to recover!

A Story To Illustrate How Miller Act Claims Can Go Wrong

I recently had a client come to me to file a Little Miller Act claim in Washington.  Instead of using an attorney or Zlien’s service to file the Miller Act Notice, the client tried to do it on their own.  They sent the claim notice to the right place, and they sent it through the proper delivery method, and it was very nearly correctly done.

It was not correctly done, however, because it didn’t contain some required information. The notice didn’t identify the party who hired our client, nor did it correctly identify the total claim amount.

The surety received the claim, investigated it for a period of time just long enough to remove my client from the allowed claim period, and then sent a letter of rejection.  The claim was rejected because the notice did not meet statutory requirements.

The client came to us to have the claim properly sent, but the unfortunate reality is that it was too little, too late.

It’s Worth The Cost To Let Zlien File Your Miller Act Claim

Trying to save a small amount of money by drafting and sending the notice themselves had cost the client thousands and thousands, because their claim period was expired and the party they contracted with bankrupt.  And really, how much did they really save even if the claim was properly sent and all worked out?

Someone had to put the claim together, which cost the client labor resources. The person in the company putting the claim together wasn’t familiar with the procedure, and so she spent time researching miller act claims, miller act claim forms and the process of making the claim.  All the research and preparation had to take the employee at least 5-6 hours.  At $18 an hour, this is $108.  The employee probably bought a form online for the Miller Act Claim, which is another $20-30.

When the claim was ready to go out, it was sent to three recipients by certified mail, return receipt requested, which is $6 each, for a total of $18.

And while this process cost about $156 in raw costs, you have to remember about all the negative costs to the company.  What could have the employee been doing instead of this miller act claim?  If they work in accounting, they might have collected from someone else who owed money.  If they work in project management, maybe a project requirement was moved along that could lead to the client’s payment.  There could be hundreds or thousands in negative costs.

Zlien is experienced in preparing and delivering Miller Act claims federally, and in any state. It cost just $250, and we get the form properly prepared and delivered. We track the certified mail deliveries, and let you manage all the documents and delivery verifications online through out LienPilot manager.  And best of all, it takes you under 5 minutes to place an order and get your notice on its way with peace of mind.

You can get started right now, by making selections below and pressing next.

Instead, potential claimants must understand a completely different set of statutory requirements. If on a federal project, they will look to the “Miller Act.”  If on a state project, they will look to a “Little Miller Act.”

As a resource, Zlien has published a compilation of Little Miller Acts across the nation. The compilation is very easy to navigate, and once viewing a particular state, you are provided a table of contents for that state’s laws and the full text of the statute.

View it Here:  http://www.zlien.com/miller-acts/

What Is A Little Miller Act?

On state and federal projects across the entire United States, prime contractors are required to post bonds guarantying the performance of their contractual duties and/or the payment of their subcontractors and materials suppliers. If unpaid on these projects, the supplier or subcontractor can file a “lien” or “bond claim” against the bond. On federal projects, these bond requirements and claims are governed by the federal Miller Act. Each state has a “Little Miller Act,” which is a state statute based on the federal Miller Act.

Filing A Claim On A State or Federal Project

Now that you have easy access to the statutes, you may still be wondering just how you go about filing a claim against a federal or state project.  As we’ve explained in previous posts, the claim experience is quite different than on a private project.  Instead of actually liening the property, the claimant is making a claim against a project’s bond.

Here are some posts that explain these differences:

- Got A Public Project? Be Sure To Preserve Your Rights To Payment

- Is My Project Private, Federal, State…Or Something Different?

- The Difference Between Public and Private Projects

And remember that Zlien files bond claims on federal and state projects across the United States. For one low flat fee, you provide simple project information and we do all the leg work.  Click here to go through our Wizard and order now.

If on a federal project, the claim against the bond will be pursuant to the “Miller Act.” If on a state project, the claim against the bond will be pursuant to that state’s “Little Miller Act.”

While normally a very efficient system for getting claims paid, a problem arises when there is no bond to claim against.  This typically happens for one of two reasons: (1) The project cost is too low it doesn’t meet the minimum when bonds are required; or (2) A required bond just isn’t provided, contrary to the law.

Small Projects May Not Require Bonds

Not every county, state or federal project requires a bond. Depending on the applicable law, projects under $50,000 or $100,000 frequently do not require payment or performance bonds, leaving unpaid contractors without a bond claim remedy.

Under the federal Miller Act, for example, payment bonds are only required for projects that cost more than $100,000. 40 U.S. §3131. Those unpaid for construction materials or labor on these low-dollar projects will be unable to file a Miller Act bond claim

State and county requirements are very similar to the federal miller act (which is why it’s called the “little miller act,” after all). Many states, however, just have a different minimum project amount. In some states or counties, the minimum contract amount requiring a bond can be as low as $10,000 or $25,000.

Bonds May Not Be Provided Contrary to Law

The second reason why a bond may not be provided on a county, state or federal project is a lot more frustrating than the first reason. The problem is as easy to summarize as this: the law isn’t followed.

How, you may ask?  Well, in my own personal experience I have encountered a few situations that may serve as examples. Once, the US Army Corps of Engineers decided that the multi-million dollar project didn’t require a bond because it wasn’t the type of work that fell under the Miller Act provisions (it was). In another circumstance, a small county government just didn’t require it out of ignorance.  And finally, in the perhaps worst circumstance, a prime contractor provided a counterfeit bond and it was never examined or checked by the state.

In a fair world, there would be some remedy to these situations. When faced with these circumstances, however, the world is not always fair.

A great article about these circumstances was written on the Lorman website, titled:  Without a Net: Subcontractor Has No Recourse Against Municipality for Failure to Require Bonds. The article addresses a natural first-reaction to finding out that a bond was not required, specifically wondering: Can we file suit against the government entity for dropping the ball?

The issue of whether a municipality may be held liable to a subcontractor for failing to require proper bonding in accordance with a state Little Miller Act has long been a topic of interest. Although some state statutory schemes provide an express cause of action against the municipality for failure to require bonds, they are in the minority. In states not having an express right of action, the general rule is that the municipality may not be held liable for failing to ensure that proper bonds are in place.

– Federal Projects: Construction work performed on federal property. Contractors and suppliers are unable to file a lien against the federal land. However, these parties can typically file a claim against the prime contractor’s bond under the federal Miller Act.  We have written quite a bit about the Miller Act (category: Miller Act).

– State Projects: Construction work performed on state property. Just as contractors and suppliers cannot file a lien against property owned by the federal government, most states have restrictions against filing liens against state property as well. As such, claimants can typically file a claim against the prime contractor’s bond under the state “Little Miller Act.” We have written about these proceedings as well (category: State Bond Claims).

– Private Projects: Construction work performed on property owned by a private owner (remember, this may include work on a private university or on a public corporation’s property). Here, the contractor or supplier can file a traditional mechanic lien against the property itself.

– Something Different: So, it is possible that your project doesn’t fall into any of these categories? The answer, unfortunately, is yes. While there are a number of examples, I’ll direct you to a recent blog post by Vincent Pallaci on his New York Mechanic’s Lien blog:  Caution! Working on a private project on publicly owned land may leave you without lien rights.

Vincent’s post gives one example of these “something different” types of projects. It relates to a private project on a state property in New York. While New York has lien laws for private projects on private land, and public projects on public land, there is a gap for private projects on public land.

When reviewing your lien rights, look at your project and determine what type of project it is. That’s the first step in determining whether you have the right to lien or file a bond claim…and then how to actually do it.

Why Does It Matter?

Before explaining what distinguishes these projects from one another, let me talk a little about why it matters.

If unpaid on a private project, the laws in most states allow you to file a “mechanics lien” against the property.   This gives your company an actual interest in the real estate your labor or materials improved.   The lien must be filed within a particular period of time, and if the lien is not paid, you’re required to “foreclose” upon the lien to obtain payment, which could result in the property being sold at auction to obtain the funds to payoff your claim.

If unpaid on a public project, there is a much different experience.

Generally, your company is not able to file a “mechanics lien” against a public project because most states (and the federal government) prohibit any party from gaining an interest in public property.   As a result, most public construction projects may only proceed if a “payment bond” is issued.    In the event of non-payment on a public job, rather than file a lien the unpaid party will file a “claim” against the bond.   Instead of foreclosing on the property, the claimant will “foreclose” – so to speak – against the lien, eventually resulting in payment.

What is the Difference Between Public and Private Projects?

Easy.

99 times out of a 100, a project is private when owned by a private person or entity, and is public when owned by the government.

When the government is the United States or a federal agency, the applicable rules are found within the “Miller Act.”   We’ve written a good deal about Miller Act rules and claims here at the Construction Lien Blog.    When the government is the state or a state agency, the applicable rules are usually found within a “Little Miller Act” statute.    These vary state-by-state, a great resource on little miller acts across the country is linked below (and here).

Be very careful when performing work on a private school (i.e. private university) or for a non-profit agency, and even large public corporations.   We sometimes think of these types of organizations as “public” agencies, but that does not necessarily render them a “public construction project.”    Usually, such a designation is reserved for land and projects owned by the federal or state government.    If you’re unsure, it’s a good idea to ask, or to hire an attorney to research the question.

GREAT Resources for Public Lien Laws and Public Contracting Issues

Here are two great resources for folks looking to learn a little more about public contracting in general, and about bond / lien claims against public projects.

1)  Mike Purdy’s Public Contracting Blog:  Mike Purdy is a retired public contracting consultant out of Seattle, WA.  His frequently updated blog addresses public contracting questions and laws across the country.

2)  Law Office of David Bransdorfer Miller Act Summaries:   This website, offered by a New York law firm, provides summaries of the Miller Act, and each state’s version of the Miller Act.  It’s a great place to start researching the applicable public contracting claim / lien laws in your state.

What is a Miller Act Claim?

How do you file a Miller Act Claim?

Am I entitled to file a Miller Act Claim?

These are some of the questions answered by Scott Wolfe’s latest Legal Guide published on Avvo.com, titled “How To File A Miller Act Claim.” In the guide, Scott breaks the federal filing down into four steps, introducing the topic as follows:

If you furnished labor and/or materials to a federal construction project, and were not paid, contractors or suppliers may file a “Miller Act Claim” against the general contractor’s payment bond. You can file a claim on your own, through a filing service, or with an experienced attorney.

Click here to read all of Scott’s Legal Guides at Avvo.com.

The good news about the Miller Act’s requirements is that they are the same across the country.   As such, contractors on federal projects need only be familiar with one set of rules.   The bad news, however, is that the requirements are often misstated.

To make things easy, we created this chart.

]]> http://constructionlienblog.com/2010/02/chart-explaining-miller-act-claim-rights-and-deadlines/feed/ 3 http://constructionlienblog.com/2010/01/dont-know-who-bonded-a-state-or-federal-project-just-ask/ http://constructionlienblog.com/2010/01/dont-know-who-bonded-a-state-or-federal-project-just-ask/#comments Tue, 12 Jan 2010 08:30:21 +0000 Scott Wolfe Jr http://constructionlienblog.com/?p=1113 In nearly every circumstance, a general contractor on a federal or state project is required to maintain a bond for the work being performed.   These bonds protect the payment rights of subcontractors, sub-subcontractors and suppliers.    In the event any of these parties are not paid on the project, the unpaid party can typically file a claim against the surety who bonds the project as per the Miller Act or a state’s Little Miller Act.  (Read this great article from Construction Business Owner about bonds, generally).

Claims against sureties are beneficial because:  (1) It can reduce the prevalence of personality conflicts between the unpaid party and the general contractor; and (2) It is a guarantee that at the end of a proceeding, money will be there.

However, you can’t make a claim against a surety if you don’t know who the surety is.   And if you’re not on the best of a terms with a general contractor, you may fear that it won’t reveal the surety to you.

So, this begs the question:  how on earth do you discover the identity of a surety?

The answer is quite simple:  Just ask.  That’s right, just ask for it.

Who To Ask?

Under the Miller Act and most Little Miller Act statutes, the public agency in charge of the project is required to (and quite used to) disclose the identity of the surety to anyone who asks for it.

Using Google, you can generally always find the governing authority.   A governing authority will typically manage its contracts through:

(a) public works department;
(b) new construction department;
(c) purchasing department;
(d) capital projects department; or
(e) facilities department

Most of these governing authorities (almost all) will have a website that gives you some information about their public contracts.   Figuring out which department is in charge of the contract is generally a toss up, so you will likely need to navigate around government websites to find the best possible contact.

How to Ask

As I stated above, agencies are required to disclose the surety on the job….actually getting it, just depends on how difficult the agency will make it for you.

If a governing authority has a website, you will generally be able to find out at least a little bit of information about their projects. If the project is relatively new, they might still have bid postings, pictures, articles and reports posted.

Giving the agency a phone call will usually do the trick, but if you run into trouble, just send a certified letter making the request.  You can even have Zlien send this notice / request for you.   We’ll even figure out who to contact, saving your company valuable time and energy.