3 Mistakes That Can Wreck Your Construction Business
Construction professionals face significant business challenges, but there are legal challenges and traps for the unwary that can wreck your successful construction business. These 3 tips can help you avoid some common traps, and land mines, that could wreck your construction business.
Don't Let the Clock Run Out at 60 Days!Most experienced professionals in the construction business have an internal date clock set at 90 days. Contractors know that they must file a Claim of Lien (against the subject property) to protect their right to payment within 90 days after services were last performed at the jobsite. However, many contractors don't know that this critical date is advanced to 60 days if the contractor signed and submitted an Interim Lien Waiver or Final Lien Waiver with a Payment Application. The contractor must file an Affidavit of Nonpayment, or Claim of Lien, within 60 days after the date of any Interim Lien Waiver, or Final Lien Waiver, submitted with a Payment Application if the payment amount is not received within those 60 days. Failure to file the Affidavit of Nonpayment within 60 days can be devastating to the remedies available to the contractor, because Georgia law "conclusively" deems the contractor to be paid, regardless of whether payment was actually received by the contractor. So think "60 days" rather than "90 days".
Don't Fall Prey to the Crushing Workers' Compensation Audit Bill - After the Fact!Contractors, landscapers and other construction professionals engaging subcontractors in their daily business are familiar with the need to collect certificates of insurance from subcontractors. The contractor often goes to the trouble to obtain the subcontractor's certificate of insurance, and then confirms that the subcontractor has valid worker's compensation coverage for the subcontractor's employees at the beginning of the job. The contractor, in its agreement, requires the subcontractor to maintain certain insurance coverage, and the contractor drops the certificate and the agreement in a job file, never to be considered again. That is, until the workers' compensation audit is performed by the contractor's insurer (after the policy period), and the contractor is handed a huge bill that it cannot pay (perhaps because the subcontractor failed to pay its premiums and maintain its workers' compensation coverage, that has lapsed during the job). The contractor may have a valid contract claim of indemnity against the subcontractor, but the subcontractor rarely is able to pay the balance. Instead, consider an endorsement to the subcontractor's policy (at the beginning of the job) requiring the sub's insurer to notify you (the contractor) at least 10 days prior to the cancellation by the sub's insurer of any valid coverage. This notice would offer you an opportunity to address the issue with the sub before all payments have been made, or pursue alternative services by a properly insured service provider. CAUTION: Note that the language of the standard ACORD certificate expressly disclaims any "obligation or liability" of the insurer if they fail to send notice to you (the contractor) if you rely solely upon the Certificate without taking the additional step to obtain an endorsement to the policy (the Certificate states that it confers no rights to the holder and does not amend the policy). It can be a crushing blow to the business if you are surprised by the workers' compensation audit and adjustment bill after the policy period.
Don't Forget to Review the Filing Deadlines in the BondMany jobs require a payment bond, which will be filed of record with the commencement documents. Don't forget to obtain a copy of the bond before you commence working on the job, and carefully review the terms for any specific notice and filing deadlines. The surety steps in to the shoes of the contract party to provide a solvent payor (usually an insurance company) to settle payment claims if the owner/contractor fails to make timely payments. However, there are specific terms and documentation requirements set forth in the terms of the bond, and you must comply fully with the requirements to protect your right to recovery. Get a copy of the bond, and know your deadlines.