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 FAXagorham@stites.com [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