Posts Tagged ‘Bond Claims’

Knowing A Project’s Final Settlement Date Is Key For State Bond Claim Deadlines

On February 13, 2012  By Scott Wolfe Jr

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One frustrating thing about the mechanic’s lien and payment bond claim laws across the nation is that they are all different. In particular, the lien claimant’s deadline to file a mechanic’s lien or payment bond claim varies state-to-state. Since this post is part of our State Bond Claim Blog Series, it will focus on claim deadlines for state payment bond claims. However, the discussion really cross-applies to mechanic liens on private projects.

When working on a federal construction project governed by the US Miller Act, figuring out the claim deadline is simple.  Regardless of where you are it’s always the same: 90 days from last furnishing labor and materials to the project. Not only is the lien claim consistent across all projects, but it’s easy to determine. Every lien claimant knows when they last furnished to a project, so calculating the deadline simply requires you add 90 days to that.

Some states follow the Miller Act and require state payment bond claims to be filed within a certain number of days from last furnishing labor and/or materials (usually 90). However, it’s a mistake to assume this is the case, as there are a lot of states that take a completely different and more difficult approach: to require the claim be filed within a certain time period after acceptance of the entire public work.

Why It’s Important To Know A Project’s Final Settlement Date To File A State Payment Bond Claim

Some states require payment bond claims be filed within a certain time period after the public project is finally accepted by the public body commissioning the work. If you don’t know when this final acceptance date is, therefore, you may miss the payment bond claim deadline and file a tardy claim.

That means it is important to know two key pieces of information:

1. What exact day starts the clock; and
2. When that day is.

Let me explain.

For the first piece of information – what day starts the clock – you should understand that each state adopting this “from completion” deadline actually adopts it in their own unique way. In some states, the deadline counts from the public body’s final acceptance of the project, while in other states it may start from final completion, substantial completion or just “completion.”

For the second piece of information – knowing when that day is – knowing what circumstance starts the day counting, and the court interpretations of what indicates the happening of that circumstance, can be key when you’re crunching days to fit your payment bond claim in the statutory limits. Ask yourself these questions:  What if warranty work or punch list work is still being performed, does that mean the project is not complete? Is the project accepted when a public body accepts the work orally or in a letter, or is a formal filing required?

What Suppliers and Subcontractors Should Do If They Don’t Know When A Project is Completed

I’ll be honest with you – I hate the states that require mechanic lien or payment bond claim filings within a certain period of time from when the entire project is completed. While there are theorical arguments favorable to the structure, it just doesn’t work on a practical level because so many laborers, subcontractors and suppliers never know when the project is actually completed.  This has two consequences: (1) Those with lien claims lose their rights without knowing it, and without any way of knowing it; (2) Claimants file liens late because they just have no idea whether it will be timely or not.

Hate it as much as I want, the framework exists in multiple states on both state and private works. Therefore, let me give you four best practices to manage these lien deadline types:

Count Your Deadline From Last Furnishing

The easiest and most obvious way to deal with these deadline types is to simply ignore them, and to calculate your payment bond claim deadline from the last date of your furnishing to the project.  If a payment bond claim is due within 90 days from a project’s completion or acceptance, simply count 90 days from your last furnishing and consider that the deadline.

Usually, if you use the time period and calculate from your last furnishing date, the debt will be old enough to justify action. Plus, it’s important in collections to take action earlier, not later.

Calculating your deadline in this way will nearly guarantee that your payment bond claim will be timely.

Request The Project Schedule

When you’re working with a subcontractor or the prime contractor on a state construction project in one of these “from completion” states, request a copy of the project schedule at the start of your furnishing. You can look at these schedules and see the estimated substantial completion date.  You’ll want to use this date as the start of payment bond claim period.

While project delays may delay the completion of the project (and remember, the project could be abandoned), this is a pretty accurate way to calculate a fairly safe payment bond claim deadline.

Take Advantage Of State Laws That Let You Ask For Notice of Completion

Recognizing the problem contractors and suppliers face in determining a project’s completion date, some states fill in the gap by providing parties a right to request that information directly from the public entity commissioing work or the prime contractor. When this right is available, the subcontractor or supplier can deliver a notice to the public entity or prime contractor at the conclusion of their work, and this creates an obligation on the receiving party to notify the sending party at the conclusion of work.

While this sounds great, it doesn’t always work in practice because prime contractors and public entities overlook sending the notice, and the statutory remedy for breach of this obligation is less than optimal. In many cases, you cannot resurrect a tardy payment bond claim from the dead.

Look Online For Project Updates

I leave this suggestion for last because it’s probably the least usable. Nevertheless, many counties and states (especially states) have a website that is dedicated to providing updates on the state’s public works. Many of these sites provide accurate information about when the project is completed.

If you can locate a project page for the project where you’re working, it may be worth monitoring that site to figure out when the project is completed.