Show Me the Money: Know and Protect Your Lien and Bond Rights

Real Estate, Land Use & Construction Law

Show Me the Money: Know and Protect Your Lien and Bond Rights

Sep 28, 2009 | Real Estate, Land Use & Construction Law

The current state of the economy makes clear that cash-flow is king in the construction industry. As our last post discussing the failed Granby Tower project in Norfolk demonstrates, even very high profile projects can suffer disastrous failures if the players have not addressed financing issues appropriately. For both general contractors and subcontractors, the first key to protecting yourself is to know the applicable rules of the game regarding mechanic’s liens and payment bonds.

  • Know the timing requirements – failing to comply can and often will be fatal to your claim
  • Know the precise contents of required bond and lien notices – again, failure is not an option
  • Do not assume that all states are the same – with regards to both liens and bonds, you must know the applicable rules for each state in which you are doing work, and states differ substantially on form, content, and timing of required notices
  • For bonds, obtain copies of the bonds before you start work as a subcontractor – on private jobs, the bond terms will control and your notices need to comply with the bond or again your claim may fail
  • Do the research before the last second – you do not want to find out no day 91 that your lien notice was required on day 90; it is best to know the requirements before the job starts
  • Associated corollary – if possible, spare your lawyer the heart attack and get them involved early, before the last second!

Perhaps from a perspective of self-preservation, but also in the interests of potential claimants, I will choose to end by amplifying on the last point a bit. Lien claims, for example, are highly complex, extremely technical, and quite challenging. A modest flaw may prove fatal to the claim. Knowing this, it is in your best interest as a lien claimant to give yourself the best chance for success by not waiting until the last minute to evaluate, document and pursue lien claims. Placing a last minute rush on an issue increases the difficulty of obtaining required information, reviewing applicable materials, and accurately preparing, filing and transmitting required notices and documents.

Given the current prevalence of cash-flow, collections, bonds and lien issues, we will be spending some more time in future posts discussing some of the regional variances amongst Virginia, Maryland and the District on lien and bond claims. We will also highlight a number of specific potential issues with liens and discuss some recent cases surrounding the same.

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