Whether you are a general contractor, a sub-contractor, or a supplier, those in the construction industry are are uniquely aware of the difficulty of coming by work in these harsh economic times. You are also equally aware that even though work may be available, receiving payment from the owner, the general contractor, or the sub-contractor can be a difficult task. The purpose of this blog is to discuss the best way to ensure that not only does the project proceed properly, but also, that you receive payment for your work and/or materials.
If you are in the position of a general contractor, the most important thing for you to do is to not allow the owner to get too far ahead of you when it comes to payment. Obviously, it is typical that invoices or payment applications require payment within 30 days. A good suggestion, however, would be to request an amendment for the contract to require payment within two weeks. As a general contractor, although a project may be appearing to proceed smoothly, it is suggested that you closely monitor the timing of payment from the project owner. Although you may not wish to disturb the project owner, as long as you are cordial they will understand your concerns about payment.
You can manage this by threatening to stop work if the payments are not timely rendered, as well as memorializing all issues with the timing of payment. As you should be aware, you can only file Construction Liens within 90 days from the last date you provided materials or services. As such, you should always remember that should the project stall or should the project owner claim financial issues that you should timely file the Lien. Although the goal is to complete the project, your principal goal is to get paid for the work that you have completed to date.
If you assume the role of a sub-contractor or supplier, it is important that you not allow the general contractor get too far ahead of you, just as a general contractor cannot allow an owner to get too far ahead of him. Although you may not want to disturb the balance between you and the general contractor, it is suggested that if payment issues arise that you document those issues with a letter to the general contractor, which you can provide a copy to the project owner. This way, if the project owner is unaware of payment issues, Joint Check Agreements can be worked out to ensure payment. Once again, you must be aware of the Construction Lien laws and your right to file a Lien. Your right to file a Lien is dependent upon whether or not you are a first tier sub-contractor or supplier or a second tier. This designation is dictated by the Lien statute. As a practical matter, like a general contractor, one of the best approaches to ensure payment is to not allow the general contractor to get too far ahead of you. Although the goal is to complete the project, like a general contractor your goal is to ensure you get paid for the work you performed.
Hopefully, this short little guide will provide you some guidance in ensuring that you are paid for the work you perform in these difficult economic times, as increasingly project owners and general contractors are finding financing issues while in the midst of a project due to nervous banks or other financial institutions. If you have questions regarding the above blog post, feel free to contact me in my firm’s Lawrenceville, New Jersey office to discuss this matter in more detail.