In the construction industry, payment bonds are essential. In a previous article we talked about unconditional payment bonds, and in this article we will be discussing conditional payment bonds. Payment bonds are posted by the contractor to guarantee that all employees involved with the project will be paid for their work. As Jacksonville construction lawyers, we know the importance of these bonds, and why everyone in the construction industry should be aware of them.
What are Conditional Payment Bonds?
Conditional payment bonds are commonly known as the “pay when paid” clause, which means that the lienor will place a claim against the payment bond, only if payments have already been made to the contractor. Otherwise, the only way non-payment can be recovered is by placing a construction lien on the property.
What Steps Need to be Followed to Recover Payments With a Conditional Bond?
A conditional lien can be a little more difficult to obtain, because the lienor is not always entitled to information about the payments between the contractor and the owner. There is a process with conditional bonds (outlined by Florida Statutes 713.245) that needs to be followed by lienors to recover the necessary payments for labor, services, or materials.
- The owner is required to attach the conditional payment bond to the notice of commencement when it is first documented, with “Conditional Payment Bond” on the front page.
- The lienor should follow the same steps they would take when filing a construction lien. The notice to owner must be provided within 45 days of the first day of labor and materials, and the claim of lien is required to be documented within 90 days of the final day of labor and supplies.
- After the claim of lien has been filed, it’s up to the owner to transfer the lien to the bond, within 90 days. After which the lienor has one year to file their claim against the conditional bond to recoup payment.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.