Construction Claims and Liens: Notice, Documentation, and Protection of Rights of Subcontractors and Suppliers

Description

Construction claims hinge on the delicate balance between the parties' contractual terms and the applicable state or federal laws and statutes. Parties must examine both matters to determine whether there is a claim and methods to provide timely notice of a claim. Parties must further consider how courts or arbitrators may interpret the agreement when parties operate outside of the contract's provisions and boundaries regarding notice.

AIA and other standard construction contracts set forth the procedures for proper notice of claims, including the timing and manner of delivery, who must receive notice, and what must be explicit in the notice. A party potentially impacted by a claim must consider preserving that claim and maintaining good contractual relations with other contractors and suppliers. Counsel must advise parties against relying on verbal communications and correctly documenting the elements for proving a claim at the time of its occurrence during the progress of the work on the project.

Liens arise from statutes in all 50 states. These laws vary greatly and in some states may require strict compliance to avoid inadvertent loss of lien rights. Counsel for all participants must be aware of who has lien rights and what types of work qualify under state law as improvements. Counsel must also be aware of the nuances of these statutes, which can require notice at the beginning of a project or periodically through the progress of the project to preserve lien rights. Learning the applicable lien law after it becomes apparent that a lien should be filed is oftentimes too late. Provisions with specific requirements to maintain rights include timing, notice, service of a claim of lien, and how foreclosure of the lien is accomplished. Loss of lien rights may leave subcontractors and suppliers with limited ability to collect on performed work, particularly in cases of insolvent or general contractors.

Parties must be wary of lien waivers and releases that include language which may limit claims or collection of damages. General counsel and subcontractors should be aware of the possible need to pursue a claim against a payment bond that would present an alternate right to recovery on a defaulted construction contract.

Listen as our authoritative panel discusses the nuances of filing notices of claim or liens to preserve the legal rights of subcontractors and suppliers. The panel will provide practical advice on preserving these claims while working on complex projects with potentially ongoing claims and subsequent lien issues.