Tag Archives: New Hampshire Construction Attorney

Federal Subcontractors – Understanding the Basics of Your Rights Under the Miller Act.

By on May 31, 2016

By Jennifer Lynn

     Subcontractors commonly inquire as to what they can do to ensure they receive payment on a project. For federally-owned construction projects, subcontractors can look to the Miller Act as a source of security. The Miller Act, codified as 40 U.S.C. §§ 3131-3134, requires general contractors on federal projects to provide performance bonds and payment bonds to the awarding authority where the prime contract exceeds $100,000. The general contractor’s payment bond must list a “satisfactory” surety and cover the total amount of prime contract. 40 U.S.C. § 3131(b)(2).

     The primary purpose behind the Miller Act is to provide security to subcontractors. Because federal projects are immune from lien claims, the Miller Act provides an alternative to a traditional lien, which instead calls for subcontractors to file claims against the general contractor and its surety under the payment bond. See U.S. ex rel. Metric Electric, Inc. v. Enviroserve, Inc., 301 F.Supp.2d 56, 66 (D.Mass. 2003). As with any claim for payment, the subcontractor must establish that it is owed payment in order to establish an enforceable claim under the bond.  In addition to establishing a basic right to payment, subcontractors must meet other specific requirements to secure the benefits of the Act.

Who is Protected Under Miller Act Payment Bonds?

     The Miller Act requires payment bonds to secure the claims of “all persons supplying labor and material in carrying out the work provided for in the contract.” 40 U.S.C. § 3131(b)(2). “All persons,” for purposes of the Miller Act, applies to (1) first-tier subcontractors, which are contractors who directly contract with the general contractor; (2) second-tier subcontractors, those contractors with a subcontract with a first-tier subcontractor; (3) first-tier suppliers, which are suppliers who contract with the general contractor; and (4) second-tier suppliers that have a contract with a first-tier subcontractor but not a first-tier supplier. See U.S. ex rel. Water Works Supply Corp. v. George Hyman Constr. Co., 131 F.3d 28, 31 (1st Cir. 1997).

     Third-tier and more remote subcontractors and suppliers cannot recover under the Miller Act. Subcontractors and suppliers too remote to file a claim under the Miller Act can file ordinary claims for nonpayment for breach of contract or quasi-contract.  The Miller Act does not alter contractors’ rights in connection with claims for nonpayment, but rather provides security for payment to the “persons” covered by the Act.

What Must a Subcontractor Do to Obtain Security Under the Miller Act?

     Much like comparable statutes for state-owned construction projects, subcontractors must wait the requisite time to file a Miller Act bond claim and may need to provide initial notice to the general contractor. All subcontractors must wait 90 days after they last furnished labor or material to the project[1] before they may file a claim under a Miller Act payment bond. 40 U.S.C. § 3113(b)(2). The wait period serves the purpose of setting aside a reasonable amount of time for the subcontractor to receive payment for completed work. Bond claims filed before expiration of the notice period will be considered premature.

     Second-tier contractors must comply with the 90 day wait period and must also provide written notice of its claim to the general contractor. The notice must be in writing; it must be received by the general contractor within the first 90 days after the second-tier subcontractor last furnished labor or material on the project; it must state “with substantial accuracy” the amount claimed unpaid and due and the name of the party to whom the material or labor was supplied or performed (i.e. the first-tier subcontractor); and it must be delivered by a method that provides verification of delivery (i.e. certified or registered mail) or served by a U.S. marshal. 40 U.S.C. § 3133(b)(2).  The required notice must specifically demand payment from the general contractor.  See U.S. ex rel. John D. Ahern Co., Inc. v. J.F. White Contracting Co., 649 F.2d 29, 31-32 (1st Cir. 1981). The notice requirement is strictly construed, and failure to fully comply will bar the subcontractor from raising a recoverable bond claim.

     Subcontractors must file their claim on the bond within 1 year after the day of last furnishing labor or material on the project, 40 U.S.C. § 3133(b)(4), in the federal court in the district in which the project is located. 40 U.S.C. § 3133(b)(3)(B). Failure to file within the 1 year period will result in an absolute bar against the subcontractor’s bond claim. While a claim will be filed “in the name of the United States for the use of the person bringing the action,” 40 U.S.C. § 3133(b)(3)(A), the claim is a private one brought by the subcontractor and the federal government is explicitly exempt from liability to the subcontractor.

     The above summary covers the general parameters for subcontractors to file a bond claim on federally-owned public construction projects. Because each project presents a different set of facts, the process and outcome to recover for nonpayment and filing under the Miller Act will vary. If you are uncertain regarding your company’s ability to recover payment for its work on a federal construction project, or if your company has complied with the regulations or process governing Miller Act claims, you should contact a Massachusetts construction attorney to achieve the best possible outcome.

[1] For more information about “last date of work” and how it is calculated, read Payment Bonds on Federal Construction Projects – Last Date of Work.

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Contractors: Do You Know Your Rights Under the New Hampshire Residential Construction Defect Dispute Resolution Statute?

By on April 12, 2016

New Hampshire has enacted a dispute resolution statute for residential construction defect claims made by homeowners that, among other things, provides contractors notice and opportunity to resolve alleged construction defects prior to a disgruntled owner instituting litigation against them.  Despite its obvious benefits to residential contractors, many contractors fail to preserve the right to rely on the statute in contracts with homeowners.

The residential construction dispute resolution law’s stated purpose is “to encourage the out-of-court resolution of disputes between homeowners and contractors relative to residential construction defects.”  NH RSA 359-G encourages the resolution of residential construction defect claims by mandating a procedure that homeowners must follow prior to instituting litigation against a contractor, provided that the contractor preserves its right to rely on the statute in its written contract with the owner.

Assuming the right to rely on RSA 359-G has been preserved, the homeowner must provide notice of any claim of an alleged defect to the contractor no later than sixty days prior to filing an action against the contractor in court.  The homeowner’s notice to the contractor must contain a description of the alleged defect(s) “in detail sufficient to explain the nature of the alleged construction defect and the result of the defect … [and] provide to the contractor any evidence in possession of the homeowner that depicts the nature and cause of the construction defect.”  In other words, the homeowner’s notice must contain more than a simple notification to the contractor that there is a problem.  In so doing, the statute requires homeowners to provide contractors with adequate notice of the actual issue(s) for which the homeowner claims a defect and not simply a notice that there are alleged defects in the work.

Provided that the contractor receives adequate notice from the homeowner, the contractor must, within 30 days, respond in writing to the homeowner disclosing any information the contractor has regarding the specific alleged defects and:

  1. Offer to settle the claim made by making repairs, paying money to the homeowner or both, without performing any inspection of the claim;
  2. Offer to inspect the claim; or
  3. Reject the claim.

Generally speaking, if a contractor offers to inspect the claim, the contractor will have 15 days to do so and then another 15 days to provide written notice to the homeowner of the contractor’s findings from the inspection.  In the written notice the contractor must:

  1. Make a written offer to fully or partially remedy the construction defect at no cost to the homeowner, and provide the anticipated schedule to complete repairs;
  2. Make a written offer to settle the claim by payment;
  3. Make a written offer to resolve the issue by payment and repair; or
  4. Issue a written statement that the contractor will not remedy the defect.

After the homeowner elects to accept or reject the offer made by the contractor, the matter may proceed with payment, repairs or to the courts if the contractor rejects the claim and the homeowner disagrees.

Importantly, if the homeowner accepts the contractor’s offer to remedy the alleged defects and the contractor does so, the homeowner is barred from later bringing suit against the contractor for issues related to the defect.  Similarly, provided that the contractor has preserved its right to assert 359-G, this dispute resolution mechanism provides the exclusive remedy for homeowners to utilize in the first instance.  Actions filed in court prior to exhausting the remedies in 359-G shall be stayed until such time as the homeowner has complied with the statute. 

RSA 359-G provides contractors and homeowners with a great tool to resolve disputes before they ripen into time-consuming and costly litigation.  The statute provides a common sense framework for the parties to a residential construction contract to address perceived deficiencies in the work in a prompt and orderly fashion without initial resort to a legal process that is ill-equipped to deal with residential construction defect issues efficiently.  Savvy contractors and homeowners do well by insisting that RSA 359-G be incorporated into their contracts. 

It is important to note that RSA 359-G contains many other meaningful timing, notice and additional requirements that are beyond the basic operation of the statute addressed here.  In order to gain a full understanding of the statute, how to preserve your rights under the statute, and how the statute operates in any particular situation, homeowners and contractors would be wise to consult with a New Hampshire construction attorney regarding the particulars of the situation. 

Punch List and Remedial Work May Not Extend the 120 Day Period to Secure a Mechanic’s Lien in New Hampshire

By on February 8, 2016

A recent ruling in the Rockingham County Superior Court offers further guidance to contractors regarding the extent of the right to maintain a mechanic’s lien in New Hampshire.  In the matter of Fabcon Precast, LLC, v. Zirkelbach Construction, Inc., et al. Strang Scott attorney Corey N. Giroux secured a discharge of the plaintiff’s mechanic’s lien as untimely for its client, Zirkelbach Construction, Inc., of Florida, despite the plaintiff performing work within the statutory 120 period to perfect a mechanic’s lien.

The plaintiff, Fabcon Precast, LLC, secured a mechanic’s lien against the subject project, on an ex parte basis, in September of 2015.  Fabcon completed its scope of work on the project in January of 2015, and issued a sworn payment application to the general contractor indicating that it had completed 100% of its scope of work on the project at that time.  Subsequently, in May of 2015, Fabcon returned to address punch list items related to its scope of work.  While on site to complete the punch list work, Fabcon’s workers performed some limited work that they had failed to perform initially that was properly part of Fabcon’s original scope of work on the project.

In order to secure a mechanic’s lien against the project, it was necessary for Fabcon to perfect its mechanic’s lien within 120 days of its last date of work on the project.  Thus, in order for its September 2015 attachment to be proper, Fabcon relied upon the punch list work and other work performed in May of 2015 to support its right to the mechanic’s lien.  Fabcon argued that its punch list work, and the “new” work performed – that is, the work it failed to perform that was part of its subcontract — was sufficient to support its mechanic’s lien pursuant to NH RSA 447, New Hampshire’s mechanic’s lien statute.

On behalf of its client, Strang Scott argued that the September 2015 lien was defective because Fabcon’s work in May of 2015 was insufficient to support the mechanic’s lien and therefore insufficient to extend the 120 day statutory period to perfect its lien.  In particular, it was argued that Fabcon’s sworn payment application in January 2015, which averred that Fabcon had completed 100% of its work in January 2015, commenced the running of the 120 period for Fabcon to perfect its lien, despite the subsequent performance of punch list, remedial, or original scope work by the plaintiff.  The Court agreed. 

The Court directed the plaintiff “could have preserved its right to extend the lien by representing [in January] that it still needed to complete some work.”  “Because it represented that the work was 100% complete, the Court finds that the work performed …. was remedial.  The 120 days [to perfect the plaintiff’s lien] began to run on January 15, 2015.”

This ruling should be instructive for subcontractors and general contractors alike.  Subcontractors should be careful to avoid representing to general contractors that they have fully completed their scope of work if punch list or other work remains to be performed on their subcontracts.  General contractors should take care to insure that their payment applications contain sworn statements from subcontractors as to the extent of the work performed or which payment is sought.  Contractors with questions regarding the extent, duration or nature of their mechanic’s lien rights would be well-advised to consult with their New Hampshire construction attorney.

Subcontractors: Do You Really Know What You’ve Waived in Your Lien Waiver?

By on April 27, 2015

Many subcontractors treat lien waivers interchangeably:  that is, if you’ve seen one, you’ve them all.  More and more, treating lien waivers in this manner could lead to significant and costly consequences.  Increasingly, general contractors and construction managers are providing subcontractors and suppliers with a new breed of lien waiver.  Unlike traditional lien waivers that sought only to protect the owner from the prospect of unwanted labor and materials (mechanic’s) liens cropping up on their projects, many new “lien waivers” are crafted with the intent for the subcontractor to agree to far more than a simple waiver of its lien.

In New Hampshire, and other jurisdictions, it’s well-settled law that contractors and subcontractors may waive their right to assert or perfect a mechanic’s lien by contract.  Savvy owners, developers and general contractors have long drafted contracts with this in mind.  As more and more subcontractors rejected provisions that limited or restrained their right to assert mechanic’s liens, owners, developers and general contractors have started to shift additional waiver language from subcontracts into lien waivers.  As an illustration, consider the following, taken in part from a lien waiver recently reviewed by the author:

 “In consideration of receipt of payment, the undersigned irrevocably and unconditionally releases and waives any and all mechanic’s liens or other liens or right to claim any and all mechanic’s liens or other liens against [the property].  Additionally, the undersigned waives and releases any and all other claims against the Owner, the property or the Contractor, or any other claims of any kind whatsoever in connection with the Subcontract and the property.  The undersigned shall defend, indemnify and hold harmless the Owner and Contractor against any lien, bond, claims or suits in connection with the materials, labor and everything else in connection with the subcontract.

In this instance, the subcontractor waived not only its right to assert a mechanic’s lien or any other lien upon accepting payment, but the subcontractor also waived its right to assert ANY claim related to the contract or the property.  Furthermore, the subcontractor has affirmatively agreed to indemnify the owner and contractor for any claims connected to the materials, labor or “anything else in connection with the subcontract.”  Among other things, this means that contractor has agreed to pay the general contractor and the owner for any costs they might incur in dissolving a lien on the project arising from the subcontractor’s sub-subcontractors or suppliers or in resolving any other claim or lawsuit connected with the sub-subcontractor or material supplier’s involvement in the project.  This so-called “waiver,” contains substantially more than a waiver of the subcontractor’s right to claim a lien in consideration of its partial payment on the subcontract.  

Some lien waivers go a step further.  Consider the following language, taken in part, from another lien waiver recently reviewed by the author:

 “In consideration of the receipt of the payment above, the receipt and sufficiency of which are hereby acknowledged, [the subcontractor] releases and forever discharges [the contractor and owner] of and from any and all claims, causes of action, liabilities and other obligations respecting payment for, upon or by reason of work, labor and/or materials furnished through the date shown below to the construction project.”

At first blush, this provision appears ordinary enough.  A more thorough consideration of the highlighted language, however, reveals that the provision is carefully calculated to insure that each month the subcontractor waives its right to pursue payment for all work performed before the date the lien waiver is signed. 

So why is this a problem?  To the extent that the subcontractor signing such a lien waiver performed extra work, change order work or has disputed work that occurred prior to signing the lien waiver, and the subcontractor accepts the payment referenced in the lien waiver without carving an exception for the added, changed or disputed work, the subcontractor has agreed to relinquish its right to any further payment, a lien or a claim for payment for that work.  In other words, the subcontractor has agreed not to be paid anything further for work performed through the date the lien waiver is signed, regardless of whether the subcontractor is otherwise entitled to payment.  In tying the subcontractor’s waiver to a particular date in time, rather than to an agreed upon amount to be paid, this waiver extinguishes any claim for payment for any work performed that wasn’t included in the subcontractor’s payment for which the lien waiver was signed.  This subtle, but very important distinction, can prove costly when the subcontractor fails to appreciate its impact on its right to payment.

Other lien waivers seek to make the subcontractor a trustee, converting the funds paid to the subcontractor into trust funds for the benefit of its subcontractors and suppliers, by agreement.  Take the following example:

 “The undersigned [subcontractor] acknowledges and agrees that it is receiving the funds paid in consideration of this payment application as a trustee, and said funds will be held in trust for the benefit of all subcontractors, materialmen, suppliers and laborers who supplied work for which the beneficiaries or their property might be liable, and that the [subcontractor] shall have no interest in such funds until all these obligations have been satisfied in full.”

In this instance, rather than taking payment as the rightful owner of the funds paid, the subcontractor accepts payment as a trustee for its sub-subcontractors and materials suppliers, installing affirmative obligations and fiduciary duties on the subcontractor to its sub-subcontractors and suppliers, which otherwise do not exist.  By virtue of the language in this provision, the subcontractor has agreed to restrict its discretion and ability to use the funds paid to it for its work as it deems necessary, replacing its discretion with the affirmative obligation to hold and distribute the funds paid to its subcontractors and suppliers on behalf of the owner and general contractor.  In a perfect world, every subcontractor would pay each of its sub-subcontractors and suppliers in full out of each payment it received on a project.  In the real world, there are often good business reasons for subcontractors to withhold some or all of the payments claimed due by its sub-subcontractors and suppliers, or to apply certain portions of the payments it receives elsewhere.  This language removes the subcontractor’s discretion to do so.

With increasing frequency, developers, owners and general contractors employ “lien waivers” intended to do much more than insure that mechanic’s liens aren’t perfected against a property after payment has been made.  Instead, this new breed of “lien waivers” is intended to create “knowing” waivers of subcontractors’ affirmative rights after they have signed their subcontract.  These “lien waivers” are intended to rewrite the bargain to which the parties agreed in their subcontract by downshifting the owner’s and general contractor’s desired contractual terms into a lien waiver when it might otherwise have been rejected in the subcontract.  It’s no longer sufficient for subcontractor’s to review only the proposed subcontract and scope of work.  Subcontractors must review proposed lien waivers carefully to insure that the lien waivers aren’t an agreement not to be paid.  If you have any questions or concerns regarding the provisions of your lien waivers, consult your construction attorney for a thorough assessment of the risks and exposures.