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In the past, I have written
various articles discussing the importance of knowing
whether a payment bond has been procured for a particular
construction project. Many times it is the difference
between getting paid and not getting paid.
Every public project in
excess of $200,000.00 requires a payment and performance
bond. No exceptions to the rule are permitted.
Unfortunately, the City of New York has unilaterally decided
to substitute the mandatory requirement for a payment bond
by incorporating its own contractual payment guarantee in
the prime contract. The terms of the payment guarantee are
more stringent then the requirements needed for a payment
bond claim.
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For instance, in a payment
bond claim, a subcontractor is not obligated to serve notice
upon the general contractor or construction manager if it is
in a direct contract with them. Yet, the payment guarantee
requires notice of any claim within four (4) months of
nonpayment. This time frame is a significant change from the
payment bond requirements. If you do not meet the time
frame, you may be barred from bringing a claim against the
City of New York under the payment guarantee. Worse, unless
and until the City of New York denies your claim, you are
barred from filing a Mechanics Lien or instituting legal
action against the City of New York for payment. According
to the contract with the City of New York, the fi ling of a
lien or the institution of a lawsuit will automatically
forfeit any right to making a claim on the payment
guarantee.
Luckily, the courts have
been reluctant to enforce the stringent terms incorporated
in the City of New York's contract which replace the payment
bond requirements. Recently, the Court held that a
subcontractor may pursue a claim against the City of New
York for all sums due, notwithstanding the additional
requirements and restrictions set forth in the City of New
York's contract. It is clear, therefore, that the City of
New York is unilaterally attempting to disregard the law to
the detriment of the subcontractors and suppliers. It is
imperative that you understand the terms and conditions of
every contract and pursue your remedies when they are
available to you. Never let your lien time run out!!
For a free copy of a
pamphlet pertaining to mechanics liens and payment bond
claims, kindly contact me or the association.
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