What to Do When Subcontractors and Suppliers Ask the Owner for Payment
In Massachusetts, homeowners are not held responsible for complying with safety regulations in construction. They can sandblast paint that may contain lead, walk on their roofs without protection and operate in blissful ignorance of the laws regarding safety. If homeowners hire contractors who do not follow safety rules, they are not responsible for that either. The risk of noncompliance falls on the contractor. If a homeowner creates an unsafe condition, of course he/she may be liable if someone gets hurt, but the homeowner does not have to police the contractor. In fact, since many safety regulations make the cost of doing a job more expensive, there is an incentive for homeowners to hire contractors who do not follow the rules! Today my friend and colleague, Mark Paskell posted a story about a roofer in Connecticut who died after falling off a roof http://www.thecontractorcoachingpartnership.com/Blog-Contractor-Coaching--Construction-Business-Coach-EPA-RRP-Lead-Rule/bid/65475/roofer-killed-in-fall-from-roof-in-westport-ct-osha-investigates?source=Blog_Email_[Roofer%20killed%20in%20fal]. You do not want to have that occur during your job.
I was just thinking about two recent clients who were owed money by owners. One had a contract that was not in compliance with the Massachusetts Home Improvement Contractor Statute and had waited a long time to pursue his money. The other had a contract that fully protected him and contacted me once communication had broken down with the customer. In the first case, my client ended up writing the homeowner a check because he couldn't face the risk of the multiple damages, attorney's fees, interest and costs that are available to the homeowner under the Consumer Protection Statute (c. 93A). In the case of the second, I had no qualms about filing a mechanic's lien and pursuing payment aggressively because my client was in full compliance with state law.
I recently had the occasion to file my first lawsuit under the (relatively) new Prompt Pay Statute in Massachusetts. The Prompt Pay Statute applies to construction projects of three million dollars or more. There is a clause in the law that covers change orders. It states that in order for a change order to be rejected, the owner or higher level contractor must state the contractual or factual basis for the rejection, and must certify that it is made in good faith. The rejection also has to be made within a certain amount of time after submission of the change order depending on the level of the contractor (30 days for the owner plus 7 days for each level of subcontractor on down). As part of this lawsuit, I alleged that back charges were issued late in violation of the contract, but I also stated that back charges are simply change orders after the fact, and for that reason, the owner should have to state the contractual or factual basis for the back charges and certify that they are made in good faith.
Although I have written about mechanic's liens in the past, the power of a lien cannot be underestimated and bears repeating. The right to file a lien is a huge advantage for contractors and construction companies, and is a unique tool that helps contractors get paid. As long as the construction company has a written contract with the owner, it can file a lien on a property within ninety days of the date the it last worked at the project. If the contractor is a subcontractor, the time for filing is extended to within ninety days of the last date that someone working by and through the general contractor worked at the project. These deadlines are strict, and if they are missed, then the company can no longer file a valid mechanic's lien.
I've seen a new trend in contractor disputes lately, and it isn't pretty. Some homeowners are making unreasonable demands on contractors, and bullying them into doing work without getting paid. They unreasonably withhold payments, or impose penalties for delays that they cause. They expect contractors to do all kinds of extra work without being paid or changing the completion date.