How Do I Get Paid After I Send a Notice of Nonpayment/Bond Claim? - Webinar

Learn about the payment bond claim, how to get paid after sending a Notice of Nonpayment, when to send a Notice to Owner/Notice to Contractor, and when the lienor has a claim against the surety bond.

Ariela Wagner
Ariela Wagner
Oct 26, 2022
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Oct 26, 2022
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Florida

What is a payment bond claim? Understand when a lienor has a claim against a surety bond, when reference to the payment bond should be made in the Notice of Commencement, and what the bond claim deadlines are. Learn when no Notice to Owner/Notice to Contractor is required, when to send a Notice of Nonpayment, and how to check for subcontractor bonds. Also gain an insight into contractor’s bonds, how to get paid after making a bond claim, and when you will get paid.

This article is taken from a webinar that was presented by SunRay Construction Solutions and Alex Barthet. Alex is a board-certified construction attorney, who serves clients in the state of Florida. In this article we will discuss how to send that Notice of Nonpayment or bond claim on bonded jobs. The following points will also be discussed:

  1. What is a payment bond claim?
  1. What are the bond claim deadlines?
  1. How to get paid after making a bond claim
  1. When will I get paid?

What Is a Payment Bond Claim?

First, let us start with what exactly a payment bond claim is.

a. A payment bond secures a lienor’s right to payment

A payment bond secures a lienor’s right to payment.

b. Instead of claim on property, lienor has claim against surety bond

As you know, when you do work on a private job where there is no bond, your right is a claim against the property. There are ways for that property to be exempt from liens and the main way to do that is to have a bond. The bond is not posted by the owner, the bond is posted by the general contractor.

Almost every public project has a bond, and many large private projects have bonds. Typically, a bond may be required by a lender on a private job, and certain laws exist that require public jobs to have bonds.

c. Reference to the payment bond should be made in the Notice of Commencement

Do you know if a job is bonded? Well, the easiest way is if you use SunRay to do your notices to the extent that we find in our research that the job has a bond, we will make sure to put that bond on notice. But if you want to do the work yourself, what you need to do is look for the Notice of Commencement.

construction bond

That is the document that is recorded at the beginning of a project. Reference to that bond should be made in the Notice of Commencement – this is on private projects. On public jobs, there is typically no Notice of Commencement. So the way you find out if the job is bonded is to look for a copy of the bond that has been recorded.

So the contractor is supposed to record a copy of the payment bond when they start the project for a public job. That is the way you can find out if a job has a bond or not.  

What Are the Bond Deadlines?

Now we will talk about what the bond deadlines are. This will be broken down into a few major categories.  

a. Private bonded projects with direct contract

First, let us start with private bonded projects. So this would be a condominium building, an apartment complex, or an industrial facility. These are private jobs, not public jobs.

So what are the deadlines? Let us go through the general rules.

i. If in contract with bonded prime contractor, no Notice to Owner/Notice to Contractor needed

If you have a contract with the bonded prime contractor, which means you are a direct subcontractor, then you do not need to send a Notice to Owner or what is called with respect to bonded jobs, a Notice to Contractor. It is strongly recommended that you set up a process in your office so that for any job over a certain amount of money, you send a Notice to Owner.

You do not start to dissect the rules to determine whether you need a notice on the job. You do not need it on that one. Usually, you will find that that is when people make mistakes – when they try to save a few bucks and they make a mistake. Ideally, they should send a notice, but they do not.

There is never any harm in sending a notice when you do not need one. There is a lot of harm if you should have sent one and you never did. So whether that threshold is $500, $2,500, or $5,000 in your office, it is advised that any job over that threshold should automatically be noticed early on.

If you have a contract with the bonded prime contractor, you do not need to send this first notice – the Notice to Owner – but you should.

notice to owner

ii. Notice of Nonpayment within 90 days of last work/delivery of materials

The next deadline that you need to keep track of is the Notice of Nonpayment. This document needs to be served no later than 90 days from your last work on the project or last delivery of materials to the project.

Just recognize that the last work does not include punch list work, warranty work, or repair work to fix your defective work. It has to be real work. It can only be change order work that is approved.

This has to be done within 90 days of your last work. Remember also that 90 days is 90 calendar days, not work days. The only exception to the 90-day rule is if the last day falls on a weekend or legal holiday. Then you get to roll it to the next day.

So, for example, if the 90th day is a Saturday, it would go to Sunday, and then it would go to Monday. If Monday is a national holiday and the post office and courts are closed, it would go to Tuesday but otherwise, you are going to count every holiday and weekend throughout those 90 days until you get to the end.

iii. File suit on the bond within 1 year from last work/delivery of materials

The last deadline that you need to keep track of is you need to file a lawsuit on this bond no later than one year from your last work or delivery or delivery of materials to the project. If you do not file that lawsuit within the one year, you automatically lose any rights to make a claim on that bond.

One of the things you have to keep track of is that you may submit a bond claim or Notice of Nonpayment. You may be corresponding back and forth with the surety who is asking for information, you may provide certain backup, and you are thinking that everything is running according to plan.

If you find out that it has been more than a year, you will have lost your rights. Typically, the surety at that point will send you a letter denying the claim because it is time barred and you have waited too long.

So do not fall into the trap of thinking that the surety is there to help you if in a perfect world they would love not to pay you. So the way that you keep them on point is to make sure that you do not let this one year from last work date slip to file a lawsuit in court to preserve your rights.

b. Private bonded projects without direct contract

So what are some of the other rules with respect to private bonded work? Above, we talked about what the rules are if you have a direct contract with the bonded contractor.  

i. If not in contract with bonded prime contractor (sub-subcontractor), no Notice to Owner/Notice to Contractor needed

Maybe it is the owner or general contractor, and you are the plumber. What if you are the sub-subcontractor or the material supplier to a subcontractor? The first thing you need to do is to serve a Notice to Owner or Notice to Contractor within 45 days of your first work or delivery of materials to the project.

The 45 days are counted just like the 90 days, so you count every weekend and legal holiday except when the 45th day may happen to fall on a weekend or legal holiday. You get a little extra time.

One of the things you should absolutely be cautious about is that the 45thday, just as with the 90day, is the day it has to be received. So if you are starting the Notice to Owner process on Day 43, you are going to have real problems because you are not going to get it into the owner’s hands and all of the other people that need to get it, by Day 45.

There is an interesting rule in the Florida statute which says that if it gets sent a certain way by certified mail with what is called a ‘mail log’ or a ‘manifest,’ that verifies that by the 40th day, it has been taken to the post office, then whether it is actually delivered or not, it is deemed served.

SunRay uses this mail log system, and if you get the order to us early enough, we will meet those 40 days. Then, if the mail truck catches on fire, if the mail actually never gets delivered it does not matter because it is still deemed served so long as you have that manifest showing that it was taken to the post office.

construction documentation service

That is another really important reason why you want to send your Notices to Owner early and not wait until the last minute. So that is Step 1 if you are a subcontractor or a material supplier to a subcontractor.

ii. Notice of Nonpayment within 90 days of last work/delivery of materials

The next step is like above. You need to serve your Notice of Nonpayment within 90 days of your last work or delivery of materials.

iii. File suit on the bond within 1 year from last work/delivery of materials

You also need to file your lawsuit on the bond no later than one year from your last work or delivery of materials.  

iv. Check for subcontractor bonds

Next, keep in mind that there may be other payment bonds on the project that are in addition to the contractor’s bond. So above, it was discussed that the owner may require the general contractor to get a bond.

But the general contractor could require that you, for example, if you consider the example of the plumber, get a bond. If you are supplying material to the plumber, or you are a subcontractor to the plumber, you could make a claim on that subcontractor bond just like you could make a claim on the general contractor’s bond.

The problem is that the sub-bond is not recorded in the public record. Only the general contractor’s bond is recorded and is in the public records. So how do you get a copy of this subcontractor bond?  

Well, you could ask the subcontractor, but they would like you not to make a claim on their bond, so they may be less willing to provide it to you. But the one person that would love for you to make a claim on their bond ideally, instead of theirs, is the general contractor.  

So making a request of the general contractor to see if the subcontractor has a payment bond is one surefire way to find out if the subcontractor is bonded. Also know that even if there is no bond by the general contractor, sometimes the subcontractor may in fact have a bond.

So do not think that the contractor has to have a bond f for the subcontractor to have a bond. It is possible that the subcontractor has a bond, and the general contractor does not. In that case, you may have lien rights on the project, and also have a bond claim against the subcontractor. So where do we see subcontractor bonds?

Typically, it is on larger jobs where the subcontractor’s scope of work is either complex or expensive. It is pretty common to think for example, on a large $80 million condominium where the mechanical contractor’s contract is $10 million, that the general contractor is going to require that the mechanical contractor get a bond.  

If you are the supplier to the mechanical contractor, or the subcontractor to the mechanical contractor, they may have a bond. So make sure you are aware of that and that you are looking for it.

c. State public bonded projects with direct contract

Let us talk about the deadlines for state public bonded projects.

i. If not in contract with bonded prime contractor (subcontractor), no Notice to Owner/Notice to Contractor needed

If you have a direct contract with the bonded contractor, as above, when you have a direct contract with a bonded contractor on a private job, just like on a public job, you do not need to send a Notice to Owner again. It is strongly recommended that you do, but it is not required.

This next tidbit usually causes people to second-guess themselves, but interestingly, on a state public bonded project, if you have a contract with the bonded contractor, you do not need the Notice to Owner.  

ii. No Notice of Nonpayment (but you should)

You also do not even need to send a Notice of Nonpayment. It is recommended that you do, but it is not required under Section 255, which is the statute that governs public bonded projects.

iii. File suit on the bond within 1 year from your last work/delivery of materials

So the only requirement that you have is to file a lawsuit on that bond no later than one year from your last work or delivery of materials on the project. The reason that it is important to know what the rules are (even though it is recommended to send a Notice to Owner), is because you should still serve a Notice of Nonpayment.

People go to attorneys, and they make the mistake of not serving the notice. But they believe that they are required to, and therefore, because they did not, they just assumed they had no rights. They have to be told that actually, in this unique situation, you do have rights and it is still within a year so you can file a lawsuit on the payment bond for the public job.

Remember, this is only if you have a direct contract with the bonded contractor on a state public bonded project.

c. State public bonded projects without direct contract

Now, what if you are a sub-subcontractor or a supplier to the subcontractor? What are the rules? It now becomes more consistent.

i. If not in contract with bonded prime contractor (sub-subcontractor), no Notice to Owner/Notice to Contractor needed

You need to serve your Notice to Owner/Notice to Contractor within 45 days of your first work or delivery of materials.

ii. Notice of Nonpayment within 90 days of last work/delivery of materials

You also need to serve a Notice of Nonpayment within 90 days of your last work or delivery of materials.

iii. File suit on the bond within 1 year from your last work/delivery of materials

You also have to file that lawsuit in court no later than one year from your last delivery of materials.

iv. Check for subcontractor bonds

As mentioned before on private jobs, and also on public projects, the general contractor may require their subcontractors to post payment and performance bonds and if so, you may have a right as a sub-subcontractor to that bonded subcontractor or as a supplier to the subcontractor if they have a bond. So you need to look for a copy of that subcontractor bond.

How to Get Paid after Making a Bond Claim

Now we will discuss how to get paid.

construction bond requirements

a. Notice of Nonpayment only starts the process

The Notice of Nonpayment only starts the process.

b. Claimants typically receive a letter asking for information and Proof of Claim

That document needs to be received by the surety and the contractor no later than 90 days after last work or delivery of materials. The other side to going to get that document and the surety is going to send two letters – they are going to send a letter to the bonded contractor and say that they received this claim from your plumber and to tell them what is going on. That letter goes to the bonded contractor.

The second letter that is sent is a letter saying that your claim was received and that you need to fill out this Proof of Claim form and return it to them.  

c. No obligation in Florida to provide Proof of Claim

Under Florida law, there is no obligation to provide that Proof of Claim. It is typically found that the Proof of Claim form is used to stall payments, and to find reasons why that payment may be due.

So when you fill out the form, it will ask you when your last work on the job is. The last work on the job may have been 100 days ago, and you submit that claim. You need to timely serve a Notice of Nonpayment within 90 days and but let us say it turns out you did it in 100 days.

They are going to reject your claim. Now obviously, if you did it late and you needed to serve it, then you have no rights anyway. But be aware that there is no obligation in Florida to complete this Proof of Claim form when you are dealing with the bonded general contractor.

The exception to this rule is that if you are a sub-subcontractor for example, making a claim on the sub-bond, the process that you need to follow is what is listed in the bond. So, you have to get a copy of the bond that was issued by the subcontractor, read it, and see what the claim process is in that bond.

Maybe it is to provide certain backup, maybe it is to provide certain notices, maybe it is not to provide anything, but that is the process you need to follow.  

d. In most instances, do not provide the Proof of Claim

Generally speaking, you can ignore the Proof of Claim. You can fill it out though because there is no harm in doing so if all the information is accurate and timely. But just know that you do not have to.

e. Most sureties will not pay you voluntarily unless principal agrees to pay you first

Most sureties will not pay you voluntarily unless their principal agrees to pay you first. The principal is the bonded contractor. The reason is simple. The bonded contractor owes an obligation of indemnity to the surety. So if the surety were to write you a check, the surety is going to look right to the general contractor and say they paid the plumber $100,000.

They will ask you to pay $100,000. It is not like Geico or Progressive on your auto insurance where you submit a claim, and the claim gets pai. Maybe your car is totaled, you are written a check for $50,000, your premiums may go up, but you do not have to pay back the $50,000.

The surety is not like that. Suretyship is an indemnity product, so when the surety writes a check, they look to be reimbursed 100%. So the surety does not want to pay you if the contractor does not want to pay you.  

So the fact that the contractor has not paid you already is a strong indication that the surety is not likely to pay you. One of the ways you see this happen is that if you bring a claim on the payment bond, sometimes the person that writes you the check to pay you is the principal on the bond or the general contractor.

f. Watch out for a shortening of your claim period

You have to watch out for the shortening of your claim period. There are means for contractors or owners to submit paperwork to you that will shorten the time that you have to make the claim. So be aware of any documents you receive after you serve your Notice of Nonpayment, because you may have to file that lawsuit.

There are ways for it to be shortened down to 60 days or even 20 days. So the way you will know is you will get something in the mail, or you will be served with certain legal paperwork. Do not ignore that paperwork. You need to make sure that you are on top of it.

g. Watch out for the surety waiting you out

Watch out for the surety waiting you out. You have one year from your last work to file a lawsuit on the payment bond. If you just wait for the surety to do the right thing and they wait you out more than a year, they will then deny the claim.

So as you get closer to the year, and you have decided to keep waiting, you just know that if you do not get a satisfactory answer, (which typically means a check in the mail) then you need to hire a lawyer, and file that lawsuit right away. Do not keep waiting.

When Will I Get Paid?

So when will you get paid and what is the fastest way to get paid?

a. Practice the 60/60 rule

It is recommended that you practice what is called the 60/60 rule. This is explained below.

b. Sixty days from last work to submit the Notice of Nonpayment

Sixty days from your last work on the project, you should already be thinking about submitting your Notice of Nonpayment. The deadline is 90 days. You should not wait until the 85th day to do this. You should start no later than the 60day. You need to prepare all the paperwork.

SunRay can do the Notice of Nonpayment for you, and it will be submitted in a timely manner. It is timely served well before the 90 days expire.

notice of nonpayment deadline

c. For the next 60 days after, hassle customer and surety for payment

Then for the next 60 days after you submit your Notice of Nonpayment, you hassle the customer and the surety for payment. This could be through frequent phone calls, emails, and letters, and by showing up in people’s offices.

Be a thorn in their side to get them to pay you. The more of a hassle you are, the higher the likelihood is that you will get paid. The most successful individuals at collections have a tenacious attitude when it comes to getting paid. They make phone calls and send emails on a weekly or sometimes daily basis to their customers and the sureties when there are delinquent payments.

So it is recommended you do that for the next 60 days. It is possible that between the pressure that you bring to bear on the customer and the surety that you get paid, you never have to hire a lawyer.

d. Submit the claim to a construction lawyer for collection

But if that does not work, at that point, you should not wait much past the 60 days to decide to hire a construction lawyer to start the collection process which is typically a letter on your letterhead. So now they know you hired a lawyer so that you have escalated the situation.

If that does not work within a week or so, you typically file a lawsuit right away. You should not wait until the one-year deadline, do it right away.

e. Except for business reasons, do not delay

Now there are reasons that you may decide to wait, like for business reasons. For example, maybe you have five jobs with a contractor, and he owes you $10,000 on the job. You know you would like to get paid, and you submit your bond claim. You timely perfect your rights, but you have four other jobs, they are much bigger, and you are just going to let it all roll.

That is a perfectly legitimate business reason to decide to wait. But if you do not have a really good reason to wait, waiting by itself in the hopes that you get paid is a very poor strategy. It is not likely to get you paid.

payment bond or performance bond
Disclaimer
THE INFORMATION ON THIS WEBPAGE IS NOT THE SAME AS LEGAL ADVICE. SUNRAY CONSTRUCTION SOLUTIONS, LLC IS NOT AN ATTORNEY OR A LAW FIRM. WE RECOMMEND THAT YOU CONSULT WITH AN ATTORNEY.
Ariela Wagner
Ariela Wagner
Ariela is the president and founder of SunRay Construction Solutions. She has over 13 years of construction industry experience.
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