Even though two states may share a border, their approaches to construction law may be drastically different. One state may favor contractors while another may favor owners and government agencies. For this reason, contractors have to be familiar with the laws of their neighboring states in addition to the laws of their home state.
We are picking up where we left off in part one by continuing our discussion on what contractors should consider when working out-of-state. At Cotney Construction Law, we are dedicated to helping contractors navigate through the legal hoops that come with operating a construction business. To ensure that your business continues to run smoothly and lawfully, consult with a Nashville contractor attorney at our Tennessee law office.
The Mechanic’s Lien
Sooner or later, every contractor has to turn to the mechanic’s lien to retrieve owed payments. Every state has its own set of mechanic’s lien laws, and contractors are often left in the lurch when trying to file a lien that is compliant with state laws they are unfamiliar with. If you are operating out-of-state, be sure to brush up on the local lien laws before you are faced with filing. Depending on the state, taking a wait-and-see approach could leave you with deadlines that you can’t meet and your back against the wall.
The State of Tennessee has strict rules regarding mechanic’s liens. Among other requirements, subcontractors have only 90 days from the last day of the particular month the project was completed to furnish pre-lien notices. For example, if labor was provided on April 3rd, then the notice deadline is 90 days from April 30th. Subcontractors that fail to meet these pre-lien notice requirements are in violation of a misdemeanor offense.
Review Your Contracts
Contractors working out-of-state are often caught off guard when contract provisions that are commonplace in their home state turn out to be illegal in a neighboring state. This is especially true when it comes to how payments are distributed, and contractors can greatly benefit from hiring a Nashville contractor lawyer to review their contracts.
Retainage caps — up to 10 percent of the contract price in many neighboring states — are no more than 5 percent in Tennessee. Retainage must be kept in a separate escrow account and distributed in accordance with Tennessee law. If these regulations seem unfamiliar, you may be in violation of state law and could receive a Class A misdemeanor and fine of $3,000. To ensure that you are not unknowingly violating state law, consult with our team of Nashville contractor attorneys at Cotney Construction Law.
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.