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THE LAW IS THE LAW, AND SOMETIMES IT ISN’T “FAIR”

Sometimes the law isn't as you would expect. In fact, sometimes the law can dictate a result that you think is unfair. Therefore, it is always best to have someone research what the law is, instead of assuming it says what you think would be fair. As an example, some might find the law regarding the recoverability of home office overhead damages counterintuitive....

Lien Laws & Out-of-State Construction Projects (Part V)

Today we conclude my series on differences in lien laws among the states you should consider when working in an unfamiliar state. We begin today with fraudulent liens. Florida has a statute addressing fraudulent liens, defined as liens in which: (1) the lienor has willfully exaggerated the lien amount, (2) the lienor has willfully included a claim for work not performed upon the property; or (3) the lienor has compiled his or her claim with such willful and gross negligence as to amount to a willful exaggeration.   Ramifications of fraudulent liens usually include voiding the lien and may include affirmative claims for damages against the lienor by the property owner. Some states make fraudulent liens a criminal violation, which may be grounds for disciplinary proceedings against the lienor’s construction license. Florida is an example of that.   Given the serious consequences of compiling a lien incorrectly, you should know the standards, ramifications, and defenses for fraudulent...

Lien Laws & Out-of-State Construction Projects (Part III)

In this third installment of my series of pitfalls in embarking on construction jobs in states in which you have not previously worked, we’ll consider differences between various state laws regarding preliminary lien notices and the claim of lien itself. First, the preliminary notices.

As a prerequisite to lien rights, almost every state requires lienors to send some form of preliminary notice to the owner early in the project. The preliminary notice introduces the lienor as a potential claimant from whom the owner must obtain releases of lien. However, the forms and requirements for service of these preliminary notices vary drastically from state to state. For example, in New Jersey, before filing a lien arising under a residential construction contract, a lien claimant must first file a Notice of Unpaid Balance and Right to File Lien within 60 days after the last date that work, services, material or equipment were provided for which payment is claimed.  In Wyoming, a prime contractor must post a notice on the construction site notifying lienors that a notice of the right to claim a lien must be served on the contractor. The lienor will lose its lien rights if it fails to comply.  And sometimes more than one notice is required, depending on the type of work and the classification of the lienor performing the work. Texas requires different preliminary notices, which may be governed by different time frames, depending, for example, on whether or not the lien involves specially fabricated goods. If you work in an unfamiliar state and don’t comply with these unfamiliar preliminary notice requirements, you could inadvertently lose your lien rights, even if you’re not paid at the conclusion of the job.

 

 

So, You Think You’re Protected Because You Have a Performance Bond

Well, you might not be. While you might have prudently thought ahead and gotten a performance bond from an entity downstream, to protect you from its defective work, the protection afforded by a performance bond only lasts so long. After some point, if you have not filed a lawsuit against the performance bond surety, you lose your right to make a claim and it is as if the performance bond never existed. As explained below, it might be relatively easy to determine the deadline for an owner to file a lawsuit against its general contractor’s performance bond surety, but calculating the deadline for a general contractor to file a lawsuit against one of its subcontractors’ performance bond sureties might not be so easy. A lawsuit against a performance bond must be filed within five years from the date the work at issue was completed and accepted, or the lawsuit will be...

Lien Laws & Out-of-State Construction Projects (Part II)

 

In the first part of this blog series, posted on August 4, 2011, we addressed differences between state laws on the protected class of construction lienors. Today, we’ll cover differences in contract provisions and required warnings or disclosures as prerequisites to lien.

 

As you venture out of state to find work, you should review the validity of the standard contracts your company sends to its clients, subs, and suppliers in light of local lien law requirements.

 

Most state statutes permit both oral and written contracts, but some states limit the enforceability of oral contracts. For example, many states (like Florida) require a contract to be in writing if a project cannot be performed in less than a year or involves the sale of goods exceeding $500. If you come from a state where all oral contracts are enforceable, you may be surprised if an oral contract is prohibited in another state.

 

“Pay if paid” clauses are also a big issue. Under these clauses, a contractor is not required to pay subs unless the contractor first received the corresponding payment from the owner. Some states freely enforce these clauses, while others prohibit them as against public policy; still others enforce them under limited circumstances.

 

There are many more examples of traps like these, so you must determine the enforceability of your company’s standard contracts before using them in unfamiliar states.