Mechanic’s Liens & Bond Claims are a Right, Not a Blanket
If you have supplied materials or labor to a construction project, you have a right to be paid. If you have complied with the state’s statute, you have a right to file a mechanic’s lien. You can’t see my face, but right now I am fired up!
Fired up over a right to lien? Not exactly.
Truth is, I read a great article this week, but the title of the article initially bothered me: “Lien and Bond Claims: A Subcontractor’s Security Blanket.”
The title bothered you? Yes, and I think it’s because I immediately pictured Linus, famous Peanuts’ character, helplessly clinging to his blanket for solace. That’s not what mechanic’s liens and bond claims are. They aren’t a weakness we cling to, hoping for payment!
Mechanic’s liens and bond claims are built on a firm foundation of law and the law is representative of strength, and if used properly, you will protect your Right. To. Be. Paid!
Pardon me as I step off my soapbox.
A Little Dramatic, I Know
Before my little soapbox moment, I did say “I read a great article this week.” And that is the truth. In his article, Marc J. Felezzola Esq., of Babst Calland, discusses the common mistakes made by subcontractors when trying to secure mechanic’s lien/bond claim rights.
Before he dives into the pitfalls, the attorney provides an overview of the rights afforded to those furnishing to private and public construction projects. As I read further, breezing through the general information on liens and bonds, I see it.
And then I realize, Felezzola isn’t using the term “security” in a weak manner. Rather, he reminds me that “security” is protection, safety or, as Google puts it, “the state of being free from danger or threat.”
“Thus, generally speaking a subcontractor or material supplier (collectively, a “subcontractor”) always should have security for the work it performs. For a private project, that security comes in the form of a mechanic’s lien. For a public project, the security generally comes in the form of a payment bond.”
Felezzola warns would-be claimants of the importance of complying with preliminary notice requirements and subsequent lien and bond claim requirements, and, he further cautions about waiving claim rights within a contract:
“Blanket lien waivers are enforceable in approximately 20 states, and in those states, signing a subcontract with a blanket lien waiver will automatically deprive a subcontractor of mechanic’s lien rights all of its work. Thus, in states where blanket lien waivers are valid, subcontractors who sign contracts containing them will have no payment security for their work unless the project is bonded.”
Another piece of advice? Don’t assume a payment bond has been issued on a public project. Yes, in most states, there are statutory requirements for contractors to obtain proper payment bonds. However, as Felezzola points out, there aren’t always consequences for folks that fail to obtain a bond.
“…[A]lthough all states have some law requiring prime contractors to post payment bonds as security for subcontractor work, not all of those laws provide consequences in the event the prime contractor does not actually post a payment bond. For example, although Pennsylvania law requires payment bonds for all public projects, the law provides no penalty in the event the prime contractor simply fails to post the requisite payment bond, and Pennsylvania courts have held a subcontractor has no redress against the government for failing to ensure the required bond was posted. Thus, at least in Pennsylvania, a subcontractor working on a public project may find itself working without payment security despite laws requiring payment bonds.”
As a best practice, always obtain a copy of the payment bond BEFORE furnishing or at the time you sign the contract.
A Security Blanket It Is
Felezzola is right. Liens and bond claims are a security blanket for those furnishing to a construction project. Just be careful; the security blanket only exists if you take the proper steps to secure your rights. If you fail to take the proper steps, that strong security blanket will quickly become a useless wet blanket.