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COVID-19 and Construction Projects
COVID-19 and Construction Projects
By: Douglas J. Mahr
No doubt the COVID-19 pandemic will be causing problems on construction projects for many months to come.
Below is a quick primer of items to be aware of while your project is in limbo and starts up again:
Know Your Contract Clauses for Payment, Completion Dates & Submitting Claims
- Do you need assurance that the Owner, general contractor or subcontractor can and will make payment to you for work already performed, and work they want you to complete;
- Are you required to complete a project by a specific date? If so, immediately ask for a new substantial completion date that takes into consideration not only the time period you were shut down, but anticipate that you will have manpower and supply chain concerns going forward for months possibly;
- Is there a liquidated damages clause if you do not finish the job on time? If so, immediately pursue a new substantial completion date that takes into consideration the shutdown, manpower and supply chain concerns;
- You have remedies for breach of contract and failing to be paid, and they have remedies against you if you breach the contract or fail to make payment to subcontractors and suppliers;
- Get a Waiver of Lien from your contractor, subcontractor and suppliers. Waivers of Liens are an excellent way to acknowledge payment and are primarily used to cut off delay claims and surprise costs at the end of a job! Very effective and worthwhile in these uncertain times. Be careful about giving a waiver of lien if you have and want to make a claim for delay damages or increased cost on the project you haven’t fully determined yet. If you sign a waiver of lien it may cut your rights off to make and collect that claim;
- Protect your work during the shutdown and immediately evaluate it upon return to determine if the shutdown has caused any damage that will impact your costs or timing to complete your work. Submit claims for this immediately and do not delay or your rights can be lost.
Document and Submit Your Claims Because of the Shutdown and Its Effects Going Forward
Many contracts have time limits for contractors and subcontractors to submit claims for increased costs because of the delay caused by unforeseen events, and in this case the COVID-19 shutdown. Check your contract for these dates and know when you have to notify the owner or contractor in order to make a timely claim. Once you are aware of a claim, submit it immediately so that your rights are not lost.
Questions to ask yourself:
- Will your costs for completion be impacted by the new Federal and State mandates for social distancing and personal protective equipment? Determine this now and submit a claim for it immediately. Do not delay or your rights can be lost;
- Will permits, fees and compliance with new laws impact your costs? Determine this now and submit a claim for this immediately. Do not delay or your rights can be lost;
- Will insurance and bond costs be extended, or increase? Determine this now and submit a claim for this immediately. Do not delay or your rights can be lost;
- Have your material and storage costs increased? Will you experience a disruption in delivery of materials, and especially materials specifically manufactured for this project because of a manufacturer’s delay beyond your control? Seek written confirmation from your suppliers and report this immediately to the contractor and owner;
- Know the time limits to submit a claim and file for a dispute. In more sophisticated contracts (AIA and with larger owners and contractors) time limits are measured in just a few days of when you become aware of the extra costs to you (3 days, 7 days, 10 days, etc.) and you must submit your claim within those time periods or you may lose your rights to payment;
- What if you are suspended or terminated for convenience? Determine the amount you are due immediately and submit a claim within the appropriate timeframe.
File a Mechanic’s Lien and/or Make a Claim Against the Payment Bond
No doubt, payment for work and materials you supplied to a project will also be impacted by the pandemic. These are the general rules if you want or need to file a mechanic’s lien to protect your rights to be paid.
If you are a contractor, subcontractor or supplier and the project is a private improvement in New York, you have 8 months from the date you last provided labor or materials to the project to file a mechanic’s lien for commercial jobs, and 4 months if it is a residential project. Do not delay in contacting an attorney to assist you with preparing and filing a mechanic’s lien if you are worried about payment, especially because your recovery can be limited to the balance due on the contract if you are a subcontractor or supplier.
If your contract is related to a public improvement in New York, a subcontractor and supplier can file a public improvement mechanic’s lien within 30 days of completion and acceptance of the project, but you really do not want to wait that long because your recovery can be limited to the balance due on the contract if you are a subcontractor or supplier.
Labor and Material Payment Bonds for Public Improvement and Federal Projects: Public improvements and Federal projects may also have a labor and material payment bond component. Some private projects have payment bonds, but it is unusual these days. If your job has a payment bond, find out the time limits to make a claim under the bond if you need to. These are strict time limits sometime as short as 30 days, but if you meet the requirements of the bond and file timely, it is another very important source for payment. Be diligent and do not delay in investigating this and making your claim for payment if you are worried.
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If you find yourself in a position where you want to learn more about what rights and options you may have in a particular situation, contact Douglas J. Mahr, Esq. at Scolaro Fetter Grizanti & McGough, P.C. at 315-477-6264.
