Subcontractors: Non-Payment and Paid-When-Paid Clauses
What is a subcontractor to do when they have put hours upon hours of their time on a project only to come up empty-handed where payment is concerned? Our Miami construction attorneys advise the subcontractor to take another look at their subcontract.
If you have signed a subcontract with a Paid-When-Paid clause, you may have a problem on your hands. You’ve basically agreed to excuse the contractor that you are in direct privity with from paying you if they have not received payment from the owner they are in direct privity with. All’s not lost, we have some advice that will help you recover payment.
Know Your Lien Rights
Under Florida lien law, like the contractor, subcontractors have mechanic’s lien rights which provide them the opportunity to file a lien against the owner’s property. The only hindrance to a subcontractor filing a lien against the property is language in the contract that impedes them from doing so. Furthermore, making common mistakes such as failing to serve a preliminary notice of lien to the owner of the project within the specified timeframe can cause you to lose your lien rights.
Enforceability is Key
As long as your subcontract is deemed unambiguous and valid in a court of law, the Paid-When-Paid clause is typically enforceable. This is why securing the expertise of a Miami construction attorney prior to signing a contract is essential. An attorney can review your contract to make sure the language is clear and doesn’t leave you penniless or waiting around for years to get paid.
Understand What Reasonable Means
Subcontractors are entitled to payment within a reasonable period of time. This means that the owner cannot permanently withhold payment to the contractor and likewise the contractor, once paid, cannot withhold payment from a subcontractor. Depending on the complexity of the conflict between the contractor and owner, “reasonable time” could drag on.
Other Ways to Prevent Non-Payment Issues
The best thing for subcontractors is to avoid a Paid-When-Paid clause; however, sometimes it may be unavoidable. Another option would be to contract directly with the owner, this way, subcontractors will be entitled to prompt payment. Another option is to have a Miami construction attorney draft a prevailing party clause into your subcontract, this way you can recover attorney fees if you when a lawsuit against the other party.
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.