A legal blog for construction industry professionals
Frequently Asked Questions
Can a subcontractor get a copy of the owner’s contract with the general contractor? Absolutely! Almost all subcontracts make the owner’s contract with the general contractor a part of the subcontract. General contractors must supply such a contract upon request, and subcontractors have a right to receive and review those contracts. Subcontractors should review all documents referenced as “contract documents” in the subcontract so that the sub can fully assess the risks before signing the subcontract.
Can a subcontractor request financial records of the owner in order to determine the likelihood of getting paid on a project? Subcontractors should request such information from the general contractor before signing onto a project. Subcontracts frequently contain “pay if paid” or “pay when paid” clauses making payment from the general contractor contingent upon the general contractor’s receipt of payment from the owner. Therefore, the owner’s financial ability to pay is critical. Both the AIA contract forms and ConsensusDOCS forms allow general contractors to obtain project financing documents at the commencement of project. They also require the owner to notify the general contractor of any material changes in financing. Subcontractors have a right to view the information provided by the general contractor and should not be shy about seeking payment assurances.
How much time do I have to file a mechanic’s lien on commercial projects in Missouri and Kansas? As a general rule, general contractors, subcontractors, suppliers and design professionals have six months to file a lien after work is completed in Missouri. However, a 10 day notice of lien must be served upon the owner prior to filing the lien. In Kansas, general contractors have four months to file a lien. Subcontractors and suppliers have three months to file a lien after work is completed. The time deadlines may be extended to a total of five months after completion of work by filing a Notice of Extension. However, that notice must be filed within the original time deadlines to be effective.
If the time deadline to file a lien has expired or is about to expire, can I go out to a project and perform some minor work in order to extend the time deadline for filing? No, a punch list, warranty or gratuitous, unnecessary work cannot extend the deadline for filing a mechanic’s lien.
Can an early-completing subcontractor request and receive retainage before completion of the project? Yes, state statutes in Missouri and Kansas, on both private and public projects, allow an early completing subcontractor to seek retainage after its work is completed rather than waiting until the project as a whole is completed. Whether the retainage is released is left up to the discretion of the owner. However, the relevant statutes indicate that if the work has been completed satisfactorily, and the retainage can be released without further risk to the owner, discretion should be exercised in favor of releasing retainage.
I am an early-completing subcontractor, and my request for retainage has been rejected. Is my right to file a lien extended until the end of the project? No, a subcontractor must file a lien within the time deadlines set by state statute. Lien rights will terminate if not filed within the applicable deadlines.
The owner has not paid. The general contractor is filing a lien on the project and says it is including all amounts owed to subcontractors. Should a subcontractor do nothing and rely on the lien filed by the general contractor? No, it is important that subs and suppliers file their own liens regardless of the intentions, representations or acts of the general contractor. General contractors may not include the proper amounts and may fail to satisfy the requirements for filing a lien. In turn, this may cut out non-liening subs and suppliers if a settlement amount does not include the full amount owed (and it frequently does not). It is important that you are at the table to assure that your rights are protected, and the only way to assure that is to file a lien.
I have a long-standing relationship with an owner or a general contractor. I have been waiting on payment longer than usual, but I don’t want to rock the boat and file a lien on the project. What are my other alternatives? You may have a breach of contract claim against your long-standing customer, but waiving your lien rights is always a mistake. First, long-standing relationships do come to an end. Second, waiting for payment for an unusual length of time is a sign that your customer is having financial problems. Third, liens are the most powerful tool in your arsenal to obtain payment. While the “rock the boat” philosophy is common, you will gain respect, not disdain, for preserving and enforcing your lien rights.
Is it a waste of time for a subcontractor to try to negotiate the terms of the subcontract with the general contractor? No, general contractors frequently negotiate provisions in a subcontract. Of course, your ability to negotiate may depend somewhat on the size and importance of your scope of work, your experience with the general contractor, and the way you approach negotiations. As noted above you will gain respect, not disdain, for addressing unreasonable contract provisions. Even though general contractors may have already negotiated a contract with the owner and may be averse to a subcontractor taking on less risk than it is taking on in its contract with the owner, there are usually provisions which can be negotiated to lessen a subcontractor’s risk.
The general contractor has put up a payment bond on a project. How long must I wait to make a claim on that bond? Requirements for making claims on a payment bond vary, but it is important that you know those terms as early as possible, preferably at the commencement of a project. I recommend that you get a copy of the payment bond at the same time you get a copy of the owner’s contract with the general contractor. Make sure that you know the amount of time you have to make a bond claim in the event of nonpayment. When there are financial problems on a project, no one is eager to provide a copy of the bond. Also, many bonds have a 90 day period to make a claim. You do not want to delay enforcing your bond rights!