Subcontractor Tips for Construction Collections

Subcontractors are often plagued with cash flow issues from slow paying general contractors. It’s par for the course. However, subcontractors and suppliers have rights, and understanding the numerous laws, codes, procedures, and tools can and will help a subcontractor collect money in a more timely fashion. While serious matters of trouble collected should be consulted with an attorney, a subcontractor or supplier should know its rights.  Here are some of the tools a subcontractor has to help collect:

For Private Work (per California Law, check each states rules)

• Send a Preliminary Notice. Within 20 days of starting work on a project, send a Preliminary Notice to owner. This is a must and the first thing any contractor should do, whether a private or public works project.
• File a Stop Notice. A subcontractor has 30 days after a Notice of Completion has been filed. This will stop the flow of funds on the project.
• Record a Mechanic’s Lien. This gives the subcontractor a stake in the property in the amount of lien. A subcontractor has 30 days after a Notice of Completion has been filed to record a mechanic’s lien.
• Make claim on Payment Bond (If project was bonded).  It’s not often a private job is bonded, but if it is a subcontractor can make a claim against the payment bond.

For Public Work

• File a Stop Notice. Just like a private project, a subcontractor can file a stop notice to disrupt the release of funds.
• Make a claim against the Payment Bond.  In California, if the project is above $25,000 there is a payment bond in place.  And it’s in place to protect the subcontractors and suppliers on the job.

As a subcontractor you have these tools at your disposal. It’s always best to try and resolve payment issues without making claims against bonds, or filing stop notices or mechanic’s liens.  But a subcontractor should always file a preliminary notice so it has the recourse of the other items should he not be paid.