A Contractors, Subcontractor’s & Supplier's Step By Step Guide to Getting Paid - Wyoming - Webinar

In this blog, presented by SunRay Construction Solutions and Jason Robinson, Founding Shareholder & Director Babcock Scott & Babcock, P.C., we'll look at the various avenues you can explore in Wyoming Construction, from contract claims to mechanic's liens and payment bond claims, shedding light on the intricacies of Wyoming's legal landscape in construction disputes.

First and foremost, it's crucial to recognize that you possess a range of tools at your disposal, each serving a specific purpose in addressing payment disputes. Whether it's a contract claim, a mechanic's lien, or a payment bond claim, these tools can be wielded strategically to safeguard your rights and pursue rightful compensation.

Understanding Contract Claims

In Wyoming, contractual agreements form the foundation of construction projects. Identifying crucial contract provisions, such as payment due dates and clauses pertaining to contingent payments, is paramount. While Wyoming lacks definitive laws regarding contingent payment clauses, it's essential to negotiate terms upfront to avoid complications later on.

What are the Key Contract Provisions?

When engaging in a construction project, the contractual agreement serves as the cornerstone of the relationship between parties involved. Within this agreement, several key provisions warrant attention to ensure clarity and fairness, particularly in the event of payment disputes.

1. Payment Due Dates and Terms

One of the most critical provisions within a construction contract is the specification of payment due dates and terms. Establishing clear deadlines for payment helps avoid ambiguity and ensures that all parties are aware of their financial obligations. Typically, a Net 30 i.e. a 30-day payment period is common practice, but variations may occur based on project specifics.

2. Contingent Payment Clauses

Contingent payment clauses, such as "pay-if-paid" or "pay-when-paid," represent another crucial aspect of contract provisions. These clauses dictate when a contractor is obligated to pay subcontractors or suppliers, often contingent upon receiving payment from the project owner. It's essential to approach these clauses with caution, as their enforceability can vary by state. In Wyoming, while there may not be definitive laws against such clauses, careful consideration is advised, especially given the absence of statutory limitations on interest rates.

3. Interest and Attorney Fees

In Wyoming, contractual agreements have implications for interest rates and attorney fees. Unlike some states with usury laws limiting interest rates, Wyoming lacks such restrictions, allowing materials suppliers to charge interest rates as high as 18% or even 24%. However, in the absence of specified rates, the statutory contract rate defaults to 7% per annum. Therefore, it's crucial for parties to clearly define interest rates within the contract to avoid any misunderstandings or disputes later on.

Similarly, including provisions for attorney fees and costs within the contract is essential for protecting parties in the event of legal recourse. Wyoming courts typically uphold contractual agreements that include provisions for attorney fees and costs. However, such provisions must be agreed upon upfront and included in the contract to be enforceable. Attempting to introduce these provisions after the fact, such as through billing statements or invoices, may prove ineffective and jeopardize the ability to recover legal expenses.

What are the Statutes of Limitations?

Understanding the statutes of limitations governing contract claims is paramount for protecting one's rights and interests. In Wyoming, the timeframe for filing claims varies based on the nature of the contract:

Written Contracts: A generous window of 10 years is allotted for pursuing claims arising from written contracts.

Oral Contracts: Claims stemming from oral contracts must be initiated within eight years. These limitations underscore the importance of prompt action in addressing contractual disputes. Failing to adhere to these deadlines can result in the forfeiture of legal remedies, highlighting the need for vigilant adherence to statutory requirements.

Understanding Mechanics Liens

A mechanics lien, also known as a construction lien or a contractor's lien, is a legal claim against a property that secures payment for services rendered or materials supplied in the improvement or construction of that property. Essentially, it serves as a tool to protect the rights of those who contribute to the enhancement of a property's value through construction or renovation work.

How Does a Mechanics Lien Work?

When a contractor, subcontractor, or supplier performs work or provides materials for a construction project, they have a legal right to seek payment for their services. If payment is not received as agreed upon, they can file a mechanics lien against the property. Filing a mechanics lien puts a legal encumbrance on the property, which can affect its sale or refinancing until the debt is settled.

The process typically involves several steps:

Step 1 - Furnishing Work or Materials: The party must have provided labor, services, or materials for the construction project as per the terms of their contract.

Step 2 - Filing Preliminary Notices: In Wyoming, parties are often required to send preliminary notices to the property owner, general contractor, or other relevant parties within a specified timeframe after commencing work.

Step 3 - Filing the Lien: If payment is not received, the party can file a mechanics lien with the county recorder's office. The lien must be filed within a certain timeframe from the last date of work or substantial completion of the project.

Step 4 - Enforcing the Lien: If payment is still not forthcoming, the party can pursue legal action to enforce the lien, potentially leading to the foreclosure of the property to satisfy the debt.

Who is Entitled to Lien in Wyoming?

In Wyoming, various parties involved in a construction project may be entitled to file mechanics liens, including:

• Every contractor (including architects, professional engineers, and surveyors contracting with the owner), subcontractor, or materialman has a lien.
• The lien applies to work done or materials furnished for any building or improvement upon real property.
• Contractors, subcontractors, and materialmen have a lien on the building or improvements.
• They also have a lien on the real property of the owner where the building or improvements are situated.

Preliminary Notices in Wyoming

In the intricate web of construction projects in Wyoming, preliminary notices play a pivotal role in securing the rights of contractors and subcontractors. Let's explore how these notices function for each party, shedding light on their significance and requirements under Wyoming law.

For Contractors

Contractors, as the primary entities overseeing construction projects, must adhere to specific guidelines when issuing preliminary notices in Wyoming. Here's a breakdown of the key aspects:

Timeliness: Contractors are required to send preliminary notices to the property owner before receiving any payment for their services, including advances. This notice serves as a proactive step to establish transparency and communication regarding payment expectations.

Content: The preliminary notice should clearly outline essential details, such as the contractor's name, contact information, and the scope of work provided. Including this information upfront helps establish a clear record of the contractor's involvement in the project.

Inclusion in Contracts: To streamline the process, contractors are advised to include the preliminary notice requirement in their contracts with the property owner. By incorporating this provision upfront, contractors can ensure compliance and avoid potential disputes down the line.

Documentation: Contractors should maintain thorough documentation of all preliminary notices sent, including proof of delivery or receipt. This documentation serves as valuable evidence in the event of payment disputes or legal proceedings.

For Subcontractors

Subcontractors, as essential contributors to construction projects, also have specific obligations and considerations regarding preliminary notices in Wyoming. Here's what subcontractors need to know:

Timely Notification: Subcontractors must send preliminary notices to the property owner and provide a copy to the general contractor within 30 days after first providing services or materials to the project. Adhering to this deadline is crucial to preserving lien rights and facilitating transparent communication.

Information Requirements: Similar to contractors, subcontractors must ensure that their preliminary notices contain accurate and comprehensive information, including their contact details, the nature of their services, and the parties involved in the project. Clarity and specificity are key to establishing a solid foundation for future payment claims.

Proactive Communication: Subcontractors should proactively seek the necessary information from the general contractor to facilitate the timely issuance of preliminary notices. Establishing open lines of communication and clarifying expectations upfront can mitigate potential misunderstandings and delays in the payment process.

Compliance with Statutory Forms: While Wyoming does not provide a statutory form for preliminary notices, subcontractors should ensure that their notices adhere to the required content and format specified by state law. Seeking legal guidance or utilizing standardized templates can help ensure compliance and effectiveness.

What is the Notice of Intention to File Lien Requirement?

Contractors, subcontractors, and material suppliers (referred to collectively as "lien claimants") are required to send a formal document known as a "Notice of Intention to File Lien" to the owner of the property where they provided services or materials. This notice must be sent at least twenty (20) days before the lien claimant files their official Lien Statement.

What are the Consequences of Failure to Send Notice?

If a lien claimant fails to send this Notice of Intention to File Lien within the specified timeframe, their subsequent lien filing may be deemed invalid. In other words, they may lose their right to claim a lien on the property.

What are the Exceptions to the Requirement?

However, there are certain situations where the failure to send this notice may not automatically invalidate the lien claimant's rights. These exceptions likely depend on specific circumstances or legal provisions, and they can vary from case to case. Further discussion would be needed to understand these exceptions fully.

What are the Information Requirements?

When preparing the Notice of Intention to File Lien, lien claimants must ensure that it adheres to certain standards outlined in statutory law. This includes using a format and providing information that meets the legal requirements

Lien Statement for Contractors

Contractors must ensure that they file their Lien Statement within 150 days from either the last day of work or material provision under their contract or the date of substantial completion of the project, whichever comes earlier. Compliance with this timeline is essential to preserve their lien rights.

Lien Statement for Subcontractors

Subcontractors and material suppliers are also required to submit their Lien Statement within a specific timeframe. This timeframe is defined as one hundred twenty (120) days from the earlier of three possible events:

a. Last Day of Work or Material Provision: Similar to contractors, subcontractors and material suppliers must file their Lien Statement within 120 days from the last day they provided services or delivered materials under their contract.

b. Date of Substantial Completion: They must file the Lien Statement within 120 days from the date when the project achieves "substantial completion," which indicates that the project is essentially finished for its intended use.

c. Last Day of Work Directed by Contractor or Authorized Person: Additionally, subcontractors must file the Lien Statement within 120 days from the last day they performed work at the direction of the contractor, or another person authorized to provide direction on the project.

What is considered as "Substantial Completion" concerning the filing of a Lien Statement?

Substantial completion refers to the point in a construction project where the work is deemed essentially finished for its intended use. It signifies that the project has reached a stage where it can be occupied or utilized, even if minor tasks or finish work may remain.

Presumption of Substantial Completion Date: The statement establishes that the date of substantial completion is presumed to be the same as the date the property owner officially records a Notice of Substantial Completion for the project. This notice serves as an official declaration of the project's substantial completion.

Notice of Substantial Completion Requirement: The Notice of Substantial Completion is a formal document that the property owner must record and distribute to relevant parties involved in the construction project. Specifically, the notice must be sent to contractors, subcontractors, and material suppliers within five (5) days of its recording.

Applicability of Notice: Importantly, the Notice of Substantial Completion only affects those contractors, subcontractors, and material suppliers who receive a copy of the notice from the property owner within the specified timeframe. For these parties, the date of substantial completion, as indicated in the notice, governs certain aspects of the project, such as the timeline for filing a Lien Statement.

What is the Content Requirement in a Lien Statement?

Here is the essential information that must be included in a Lien Statement:

• Name and Address of the Lien Claimant: This refers to the individual or entity asserting the lien and their contact details.
• Amount Claimed to be Due and Owing: The total sum of money that the lien claimant asserts is owed to them for the services or materials provided.
• Name and Address of the Record Owner: The legal owner of the property against which the lien is being filed.
• Itemized List of Materials and Work Performed: A detailed breakdown of the materials supplied, or the work performed by the lien claimant on the property.
• Name of the Party Contractually Responsible for Payment: The individual or entity the lien claimant believes is obligated by contract to pay the debt secured by the lien.
• Date of Last Labor or Services Rendered: The date when the last labor or services were performed by the lien claimant or when the project reached substantial completion, whichever is applicable.
• Legal Description of the Property: A precise description of the property subject to the lien, typically including information such as lot numbers, block numbers, and any other relevant legal identifiers.
• Copy of the Contract or Contract Summary: If available, a copy of the contract between the lien claimant and the party responsible for payment, or a summary of the contract along with information on where to access the full contract if it is in written form.

Ensuring that the Lien Statement contains all required information is crucial for the validity and enforceability of the lien claim.

Notice of Filing Lien

• In Wyoming, after filing your Lien Statement, you're required to send a Notice of Filing Lien to the property owner within thirty (30) days. This notice serves as formal notification to the owner that a lien has been placed on their property. While failing to send this notice doesn't invalidate your lien, it's still strongly recommended to send one, as it can significantly impact your chances of getting paid.
• Even though the validity of your lien isn't affected by failing to send the notice, sending it can serve as a proactive measure to assert your rights and communicate your claim clearly to the property owner. This notice is a crucial step in the lien process and can help initiate discussions or negotiations for payment.
• When preparing your Notice of Filing Lien, it's essential to ensure it complies with statutory requirements. It should be in substantially the same format and contain the same information as prescribed by Wyoming law. Adhering to these requirements helps maintain the legality and enforceability of your lien.
• Sending the Notice of Filing Lien within the specified timeframe and in the correct format is vital for protecting your interests as a creditor and asserting your claim on the property. It helps to establish transparency and communication between you and the property owner regarding the outstanding debt or obligation.

Enforcement of Lien

• In Wyoming, the enforcement of a lien involves strict timelines and legal procedures. After filing your Lien Statement, you have one hundred eighty (180) days to commence a foreclosure action, which essentially means initiating a lawsuit to enforce the lien. It's crucial to adhere to this deadline diligently.
• Failure to initiate the foreclosure action within the specified timeframe can have severe consequences. Your Lien Statement would be deemed invalid and unenforceable, essentially nullifying your claim on the property. This underscores the importance of timely action in enforcing your lien rights.
• In cases where legal action becomes necessary, attorney fees may be awarded to the prevailing party. This means that if you're successful in enforcing your lien through a foreclosure action, you may be entitled to recover your attorney fees from the property owner. Given the complexity of construction law and lien enforcement, it's highly advisable to work with an experienced construction lawyer who can navigate the legal intricacies and maximize your chances of success.

Lien Waivers

• In Wyoming, lien waivers are governed by statutory provisions, making it one of the few states with specific regulations regarding these documents. It's crucial to understand the implications of executing a lien waiver, especially when it comes to unconditional waivers.
• With an unconditional lien waiver, you're essentially relinquishing your right to place a lien on the property in exchange for payment. However, it's essential to ensure that you've received payment in full before executing such a waiver. Once you've signed an unconditional lien waiver, it becomes legally binding, and you may lose your ability to pursue further payment through a lien.
• To protect yourself, it's prudent to include language in the waiver document indicating that it only becomes effective upon receipt of payment. This ensures that you're not waiving your lien rights until you've actually been paid. This language can be prominently displayed, such as on a stamp or in bold text within the document, to emphasize its significance.
• By including such conditional language, you can safeguard your interests and ensure that you're not inadvertently waiving your lien rights before receiving payment. This approach provides a layer of protection for contractors, subcontractors, and other parties involved in construction projects, allowing them to secure payment while also complying with statutory requirements regarding lien waivers in Wyoming.

Notice of Satisfaction of Lien

• In Wyoming, once you've received payment for the debt or obligation secured by your lien, you're required to release the lien promptly.

This involves two key steps:

Step 1 - Filing a Notice of Satisfaction of Lien: Within thirty (30) days of receiving payment, you must file a Notice of Satisfaction of Lien with the appropriate authority. This notice officially releases the lien and clears the encumbrance on the property.

Step 2 - Sending a Copy to the Property Owner: Additionally, you must send a copy of the Notice of Satisfaction of Lien to the property owner. This ensures that the property owner is aware that the lien has been satisfied and that their property is no longer encumbered by the lien.

What is the extent of your lien, what property does it cover?

• Your lien is limited to on acre, unless your improvements cover more than one acre in which case your lien extends to the additional property covered thereby.
• If the real property subject to your lien is located in any city, town or subdivision your lien extends to the entire lot upon which the building or improvement is located.

Can you remove your improvement from the project property?

A court may allow you, as a lien claimant, to remove (repossess) your improvement to the project property if you can establish that the project property will be in the same or similar condition as prior to the performance of your work. (You may also be entitled to reasonable costs for removing your improvement or for restoring the project property to its previous condition.)

What does your lien attach to if the project owner is a tenant, and is it possible to get to the landlord’s interest in the project property?

If the project owner is a tenant, your lien will be limited to the tenant’s leasehold interest in the project property unless you can show that (1) the landlord agreed to pay the costs of the improvement; or (2) the improvements were specifically authorized by the landlord, in which case your lien would attach to landlord’s and the tenant’s interest in the project property.

How do you extend the deadline for filing your Lien Statement?

Any party to a contract for which a lien may be filed may agree to an extension of the time within which the lien may be filed. The time agreed upon may not exceed twice the time within which the lien would have to be filed. The agreement must be acknowledged before a notarial officer, and signed by the owner, the contractor and any other parties to the contract before it is valid. The agreement must be filed with and recorded by the county clerk. (The lien rights of persons not signing the agreement are not affected by it.)

How do you determine the priority of your lien in relation to other liens and encumbrances?

• Mechanics’ liens are on equal footing.
• If the proceeds from a foreclosure sale are insufficient cover all the mechanics’ liens, the proceeds are prorated among the lien claimants according to the amounts of their respective claims.
• As to other liens and encumbrances, mechanics’ liens relate back to commencement of any construction work or repair of the premises or property.

How do you bond off a lien?

The owner of the property, contractor, or subcontractor deposits with the court having jurisdiction over the lien claim a corporate surety bond, letter of credit, cash or cash equivalent of established value approved by the court having jurisdiction over the lien claim in the county where the lien was filed in an amount equal to one and one-half (1 ½ ) times the amount of the lien.

Payment Bond Claims

In situations where mechanic's liens are not applicable, such as public projects, payment bond claims serve as a viable alternative. These claims provide subcontractors and suppliers with a means of securing payment, even without direct lien rights. However, similar to mechanic's liens, compliance with notice requirements is essential to protect payment bond claims.

When is a payment bond required?

• A state or local public entity that enters into a contract for a public work where the contract price exceeds $150,000 must require the contractor before beginning work under the contract to furnish the public entity a payment bond.
• If the contract price is $150,000 or less, the public entity may require the contractor to furnish any other form of guarantee approved by the public entity.
• Before relying on the existence of a payment bond or other form of guarantee for payment, you should make certain they are available.

Who is entitled to make a claim?

• Any person performing any work or labor or furnishing any material or goods of any kind which were used in the execution of the prime contract, conditioned for the performance and completion of the prime contract according to its terms, compliance with all the requirements of law and payment as due of all just claims for work or labor performed and materials furnished in the execution of the prime contract may make a claim against the payment bond or other form of guarantee.  
• Unlike under the Miller Act, there is no “remoteness” limitation for Wyoming state and local payment bond claims.

Preliminary Notice for Public Projects

Subcontractors and materialmen must send a Preliminary Notice to the general contractor no later than sixty (60) days after the date on which they first furnished services or materials if:

• the general contractor’s contract (i.e., the prime contract) for the project exceeds $150,000, and
• the general contractor posts on the construction site a prominent sign citing the pertinent statute and stating that any subcontractor or materialman shall give notice to the general contractor of a right to protection under the bond or guarantee and that failure to provide the notice shall waive the subcontractor or materialman’s protection under the bond or guarantee.

What should the Preliminary Notice include?

The Preliminary Notice must state that it is a notice of a right to protection under the bond or guarantee. It must be signed by the subcontractor or materialman and must include the following information:

• The subcontractor or materialman’s name, address and phone number and the name of a contact person;
• The name and address of the subcontractor’s or materialman’s vendor; and
• The type or description of the materials or services provided.

Key Considerations for sending the Preliminary Notice

• Sending a Preliminary Notice is crucial for subcontractors and material suppliers seeking protection under payment bonds or guarantees.
• Failure to send the notice could waive these protections.
• It's advisable to send the notice whenever there's uncertainty about its requirement to safeguard rights and increase payment likelihood.
• Sending the notice carries no negative consequences and can potentially facilitate payment.
• Proactively sending the notice demonstrates commitment to compliance and protects interests in case of non-payment.
• This approach can streamline payment processes and mitigate disputes, benefiting various parties in Wyoming construction projects.

Enforcement of a Payment Bond

The timeline and process for enforcing a payment bond or other guarantee related to a construction project:

• Time Limit for Commencing Action: Any legal action, such as a lawsuit, against a payment bond or another form of guarantee, must be initiated within one (1) year following the "final completion" of the project. This time limit sets the deadline for pursuing legal remedies related to non-payment or other issues covered by the bond or guarantee.
• Definition of Final Completion: The term "final completion" refers to the point in the project's lifecycle where all work is finished, and the project is ready for its intended use or occupancy. This includes completion of construction work, any necessary inspections, certifications, and administrative tasks.
• Requirement for Public Entity Owners: Public entity owners, such as government agencies, are mandated to post the date of final completion for the project on either the state procurement website or the official website of their entity. This posting provides transparency and clarity regarding the project's completion date, ensuring that all stakeholders are informed.

Parties seeking to enforce a payment bond or similar guarantee have one year from the date of final completion to initiate legal action. The final completion date is typically made publicly available by the public entity owner on designated websites, allowing stakeholders to adhere to the prescribed timeline for enforcement actions.

Key Takeaway

In Wyoming, contractors, subcontractors, and suppliers can secure their payments by understanding and following the above step-by-step guide tailored to state regulations, for ensuring smooth financial transactions and project completion. Mastering the above steps empowers construction professionals to navigate payment processes with confidence and protect their interests in the dynamic landscape of Wyoming's construction industry.

If you find yourself in a situation where you need assistance to get paid in Wyoming, then ensure that you get in touch with SunRay’s experts well in advance, so that they can take all the required steps promptly. Call 800-403-7660 today and get paid what you deserve!