what to do when customers won't pay
DESCRIPTION
What do you do when your customers won't pay? In this economy, more and more business owners and construction professionals are facing this question. Stites & Harbison attorney Anne Gorham shows you what you can do to get the money that's owed to you. Anne has more than twenty years of construction legal experience, representing contractors, design-builders, owners, developer and design professionals. She has also been involved with projects that range from industrial and commercial distribution centers, pipeline construction and chemical manufacturing facilities to highway construction and energy production facilities including coal gasification and biomass. For more information on construction law issues, please go to our website, www.Stites.com, or visit our constrution page at http://www.stites.com/services/126/constructionTRANSCRIPT
What to do when a customer doesn’t pay?
Thirsty ThursdayMay 26, 2011
Lexington, KY
Anne E. Gorham
Payment Remedies
Retainage laws Public and Private Mechanics
Liens Federal and State Prompt
Payment Statutes Payment Bond Claims Theft by Unlawful taking
Retainage
Kentucky’s Fairness in Construction Act
KRS 371.410
Owner’s Release of Retainage
Not for materials provided by owner
30 days after Substantial Completion
Contractors & Subcontractors Release
of Retainage
15 days after release from owner–Business days
Failure to Release Retainage
12% per year Send Notice
Mechanics Liens
Private Projects
Preliminary Notice
ID Yourself
ID the Owner
Preliminary Notice
Sign, Notarize, Send Copy
ID labor, mtls
providing
Price
ID who contracted with
ID Property
Notice of Intent to LienIf no contract with owner
ID Your Relationship to Project Owner of Construction Project v. Real Estate
Owner
Anne Gorham859-226-2308859-425-7884 [email protected] [Insert name and address of [real estate owner]
Notice of Intent to Lien
Time Limitations– $1000 or more – 120 – < $1000 – 75 – Residential – 75
Days after last day of work (LDOW) Owner of Project = Owner of Real
Estate
Statement of Lien
File with County Clerk – 6 months of LDOW
Copy to owner within 7 days of filing
ID yourself
ID Owner of Real Estate
ID LDOW
ID $
Statement of Lien
ID who contracted with
ID Property
Statement of Lien
The name and address of CONTRACTOR’s agent for service of process is
_______________; however, service of process may be accomplished by serving
Anne E. Gorham, Stites & Harbison, PLLC, 250 West Main Street, Suite 2300,
Lexington, KY 40507.
The Affiant states that the foregoing statements are true:
______________________________
COMMONWEALTH OF KENTUCKY )
) ss.
COUNTY OF FAYETTE )
The foregoing instrument was acknowledged, subscribed and sworn to
this ___ day of _________, 2011.
ID Process Agent
Perfect the Lien
12 months
Other lien holders or mortgage holders
COMMONWEALTH OF KENTUCKYROWAN CIRCUIT COURT
CIVIL BRANCH_____ DIVISION
CIVIL ACTION NO. ________________
PLAINTIFF
v.
DEFENDANTS
COMPLAINT
* * * * * For its cause of action, the Plaintiff states:
Design Professional’s Lien Statute
KRS 376.075
Who Can File – Professional Engineer– Licensed Architect– Licensed Landscape Architect– Real Estate Broker (under certain
circumstances) Only if they contracted directly with
owner or owner’s agent
Design Professional’s Lien
What does the lien attach to?
What does the lien secure?
Design Professional’s Lien Statement
6 months Lien Requirements
Public Construction
Kentucky Public Mechanics Lien Statute– KRS 376.210
Statement of Lien
File with County Clerk Later of
– 60 days– or the date of S.C.
Time not extended by trivial or warranty work
ID Project
LDOW $ owed
Agent
Perfecting the Lien
Perfecting public Liens Attested by County Clerk Send letter and lien by certified
mail– to owner – and person contracted with (if not
the owner)
Protests
GC has 30 days to file protest
Owner to hold funds
If no protest –owner pays
If protest – file suit & serve owner within 30 days
Suit to Enforce Lien
KRS 376.110 Filed in Circuit Court in County where project
is located Parties -- Party with whom you contracted -- Any party who has an interest in the
property Cause of Action -- Breach of contract -- Enforcement of lien – must be carefully
drafted -- Unjust Enrichment
Bonding Off
Surety bond for twice the amount of the lien
Filed with the County Clerk Bond substitutes for property
as security for lien Property is free and clear of
Lien
Overstating Lien
Don’t overstate lien Public Projects
– KRS 376.220(3)
– Damages
Slander to Title – Malice
– 1 year SOL
Failure to Release Lien
Release lien within 30 days of satisfaction
$100 penalty per day Penalty increases to $500 per day
after 45 days
- KRS 382.365(1)&(3)
Prompt Payment Act
Kentucky’s Fairness in Construction Act
KRS 371.410
Payment of Invoices– Owner to pay within 30 days- Notice within 25 days
–15 day rule for subcontractors
Kentucky Prompt Payment
Act Public Projects
KRS 45.451 - .453 Application - state
purchaser Paid within 30 days 1% penalty per month
Federal Prompt Payment Act (31usc § 3902)
Interest on unpaid amounts Rates change Use the calculator
– http://www.fms.treas.gov/prompt/ppinterest.html
Payment Bond Claims Private Projects
Before you start work Get a copy Deadlines are
different – Typical Notice - 30-90
days– Suit – 1 year of date
that notice was provided or last day of work
Payment Bond Claims Public Projects
Bonds required for public projects in excess of $40,000
Covers– Subcontractors– 1st tier subcontractors and materials
suppliers No coverage for 2nd tier
Federal Miller Act Payment Bond Claims
Federal Miller Act Payment Bond Claims
Application - contract > $100,000 – public building of the United States
Covered parties:– The general contractor– 1st tier – 2nd tier
Federal Miller Act Payment Bond Claims
Notice of Claim on Bond– 90-days LDOW
Notice must state: – $ – Name of party Claimant contracted
with Send to general contractor by
registered mail
Federal Miller Act Payment Bond Claims
Enforcement of Claim Against Bond
– File suit within 1 year of the last date labor or materials were supplied
– 40 U.S.C. §3133(b)(4)
Theft by Unlawful Taking & Making Required
Disposition KRS 514.030 &
KRS 514.070 KRS 446.070
– injured by the violation of any statute may recover damages
Things to Remember
Develop a checklist of deadlines– Liens (every state different)– Notice requirements (bonds, claims,
etc) Don’t wait to call Document, Document, Document Lien Releases Final Payment
What to do when a customer doesn’t pay?
Thirsty ThursdayMay 26, 2011
Lexington, KY
Anne E. Gorham