How to File a Payment Bond Claim in 3 Simple Steps; Notice to Contractor, Nonpayment and Lawsuit [VIDEO]
A payment bond secures your right to be paid on a construction project. Instead of a lien on the property, if the job i…
A payment bond secures your right to be paid on a construction project. Instead of a lien on the property, if the job is bonded, your claim exists against that payment bond. How do you know if a job is bonded? Two ways:
1. A copy of the bond should be posted at the job site;
2. A copy of the bond is likely recorded with the Notice of Commencement, so if you have access to the public records of the county where you’re doing work, you can pull up the Notice of Commencement and see if the job is bonded.
Let’s talk about the very specific steps with which you need to comply in order to have a valid and enforceable bond claim.
1. Within 45 days of your first work on the job, you need to send what is called a Preliminary Notice or Notice to Contractor. A Preliminary Notice is a document very similar to a Notice to Owner. This document should be sent by you to the bonded contractor and his or her surety, advising them that you intend to look to that bond in order to be paid. Only those who do not have a direct contract with the bonded contractor need to send this Preliminary Notice. This means that if you are a subcontractor, to a bonded general contractor, you do not need to send this preliminary notice; however, I strongly encourage that you do so.
Sometimes, you don’t know a job is bonded and the 45 days to send that Preliminary Notice may have expired. But fear not, if that bond was not recorded with the Notice of Commencement, and you had no reason to know the job was bonded, your 45 days won’t start to run until you have actual notice that the job was bonded.
2. Next, within 90 days of your last work on the job, you need to send what’s called a Notice of Nonpayment. A Notice of Nonpayment, similar to a lien, is a document that’s sent to the bonded contractor and his or her surety, advising them that you’re owed money on a job and you intend to look to the bond to be paid.
3. Finally, in order to assert your claim against the payment bond, you need to file suit against that payment bond surety within 1 year of your last work on the job. This differs from a situation where you may be foreclosing a lien. In that case, you have one year from the recording date of the Claim of Lien. With a bond, you have only one year from the last date of work – that could be a spread of as much as 90 days. Don’t mix up the two rules.
You surely don’t want to squander your claim against a surety bond; that bond is there to guarantee that you can get paid for the work that you do on a particular job. Don’t lose that opportunity.