If you are owed money for labor or materials furnished to a state or federal construction project, the most effective way to preserve your right to payment – and ultimately to get paid – is to file a payment bond claim.
Recover Payment from The State or Federal Government
Unlike on privately owned construction projects, you are unable to file a mechanic’s lien if unpaid on a state or federal project. The rationale is simple: you cannot obtain a privilege against state or federally owned property, as the law prohibits private citizens from seizing and selling real estate owned by the government. Instead, payment bonds are issued at the start of most state and federal projects, and any unpaid parties can file a claim against the payment bond. So, instead of having your claim secured by property (as it would be on private project), your claim is secured by a bond, issued by a government-approved surety.
Payment bond claims are sometimes preferable to mechanic’s lien claims, because payment bonds are never over-mortgaged. If there’s a payment bond on the project and you timely assert your claim, you have an excellent chance at getting paid. The key is making sure your payment bond claim is asserted properly and timely.
While there are many “forms” in the marketplace, it can be a huge mistake to file a payment bond claim without legal representation. The Miller Act (which governs bond claims for federal projects) and corresponding state bond laws are complex, with many rules that must be strictly followed for the bond claim to have legal effect. Having an attorney prepare your bond claim means you can get legal advice about your specific rights, the dollar value of your claim, the type of claim you should file, what information must be included, and more.
What is a Construction Payment Bond?
A construction payment bond is a contract bond that guarantees that suppliers, laborers and subcontractors get paid for their work and materials, even if the primary contractor fails to fulfill this obligation directly. Such a bond is usually issued alongside a performance bond that assures there is money to pay a substitute if the work of a contractor never gets done.
When issued for federal or state government projects, these bonds are governed by statute.
For federal projects, the Miller Act states that prime contractors on many federal government constructions projects must put up bonds to guarantee they will perform their duties and pay their subcontractors and suppliers. Each state has similar provisions requiring the relevant government authority to post a bond for projects of a certain size. Suppliers and subcontractors would be unlikely to accept work on government projects without the assurance that they can file a bond claim if the general contractor doesn’t pay as agreed.
Filing Correctly Matters
The Miller Act provides the rules for filing a bond claim on a federal project. For state government contracts, each state has adopted its own set of rules regarding bond requirements and the filing of a bond claim. These laws vary slightly from state to state, but all contain time limits for filing, and all have requirements about where the claim must be filed, what notice must be given, and what information must be included.
As a result, the process of filing a bond claim can very complex and time consuming. Governmental bodies often act slowly and won’t act at all unless a properly completed claim is filed. Trying to get what you’re owed from a construction payment bond can take time away from the work you really want to be doing – growing and sustaining your business.
Choose Experienced Legal Counsel
Choosing the right legal counsel to help you file your bond claim can mean the difference between success and failure. With an experienced lawyer on your side, you benefit from his or her expertise and advice, something you won’t have if you try to go it alone. Public bond laws are designed to protect companies like yours, but that doesn’t mean getting paid is easy. With the right help, however, you can get the payment owed to you. Let the Smiley Law Firm assist you with your bond claim today.