A number of separate articles in past issues of Construction Law Comments have provided details of the various means available to contractors, subcontractors and suppliers to secure their payments. The purpose of this article is to summarize in one place the payment security available on public and private projects in Massachusetts.
Massachusetts Public Projects
General Contractors are assured payment by contracting with government entities whose continued solvency is supported by the power to tax or to issue publicly supported bonds. A general contractor, however, must make certain that the public awarding authority has made a sufficient appropriation to cover its contract and extra work. The absence of such appropriation leaves the general contractor without a source for recovery. (See Construction Law Comments - Spring 1997)
Subcontractors' and Suppliers' payments are secured by a statutory payment bond that the general contractor is obligated to provide on every public project by c. 149, §29. Those having a direct contract with the general contractor can get the benefit of the bond by suing the bond surety within one year after last performance. Those having contracts with subcontractors, of any tier, must first provide the general contractor written notice of their claim by certified mail within 65 days of last performance, and then sue the surety within one year of last performance. (For details see Construction Law Comments - Winter 1995)
Additionally, filed subcontractors, and other subcontractors approved by the awarding authority, have a right to receive direct payment from the awarding authority under c. 30, §39F by making written demand in conformance with that statute. If the general contractor certifies a valid and timely objection to direct payment, c. 30, §39F requires the Awarding Authority to place the disputed amount in a joint escrow account for the benefit of both the general contractor and the subcontractor. (For details see Construction Law Comments - Winter 1995)
Federal Government Projects
General Contractors' payments are secured by the credit of the United States.
Subcontractors' and Suppliers' payments are secured by a payment bond which the federal Miller Act requires the general contractor to provide on every federal project. Miller Act payment bonds are similar to payment bonds required by c. 149, §29 on Massachusetts public projects, except Miller Act bonds cover only two tiers of subcontractors and suppliers. Those having a direct contract with the general contractor can get the benefit of the bond by suing the bond surety within one year of last performing contract work. Those contracting with a subcontractor must first send written notice of their claim by certified mail to the general contractor within 90 days of completion, and then by suing on the bond within one year of completion. (For details see Construction Law Comments - Winter 1996)
Private Projects
General Contractors can secure their payments by filing a mechanic's lien against the Project. To establish a mechanic's lien, a Contractor must file a notice of its contract in the Registry of Deeds. To enforce a mechanic's lien, a Contractor must file a timely statement of claim in the Registry and then file a timely court action. If the Owner fails to pay, the Project may be sold to provide funds to pay the Contractor (and eligible subcontractors and suppliers). (For details see Construction Law Comments - Fall 1996)
Subcontractors and Suppliers having written contracts with the general contractor or another subcontractor also may secure their payment by filing mechanic's liens. The Massachusetts mechanic's lien statute invalidates any contract provision interfering with that right. Subcontractors and suppliers must file timely notices of identification, notices of contract, statements of claim and court actions to enforce their mechanic's lien rights. (See Construction Law Comments - Fall 1996)
In addition to lien rights, subcontractors and suppliers may have the security of a payment bond. On private projects, such bonds are available only where the Owner requires the general contractor to provide a payment bond or a lien bond. [A lien bond is a payment bond filed in the Registry of Deeds as a substitute for the security provided by a mechanic's lien.] Some private projects provide payment security by payment or lien bond. Many do not. Subcontractors and suppliers must determine on each private project if such bonds are available and, if so, they must obtain a copy to determine what steps must be taken to recover on the bond. (For details of lien bond coverage see Construction Law Comments - Winter 1995)
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