By: Mark A. Cobb
Making a payment bond claim (i.e., a claim against the surety bond) in Georgia may be difficult unless you realize that there are four different types of payment bonds and that each type of payment bond has its own requirements and its own statutes of limitations.
Payment Bonds Help You Get Paid on Georgia Projects: The construction industry is very unique and offers its material suppliers and subcontractors tremendous advantages to make sure that they receive payment for their services, labor and supplies. But, in order to avail yourself of these advantages, you must strictly comply with each of the requirements and deadlines necessary to enforce your claim.
The Advantage to Being a Georgia Subcontractor or Supplier: In typical business situations, two parties contact with each other and, in the event of a breach of the contract, the offended party can only seek restitution from the breaching party. As an example, let’s assume that ABC Construction, Inc. contracts with XYZ Roofing Corp. for the delivery of roofing tiles. If the roofing tiles are delivered, but they are not paid for, Georgia contract law clearly allows XYZ Roofing Corp. to seek payment from ABC Construction, Inc. And, in most business law situations (i.e., in non-construction claims), ABC Construction, Inc. would be XYZ Roofing Corp.’s sole avenue for recovery.
However, Georgia’s materialmen lien law and Federal and state payment bond statutes allow Georgia contractors and materialmen to also seek recovery from additional parties: In the case of a lien claim, XYZ Roofing Corp can also seek recovery from the owner of the construction project, and in the case of a payment bond claim, XYZ Roofing Corp. can also seek recovery from the surety or insurance company backing the payment bond.
Four Different Types of Payment Bonds in Georgia: The advantage of seeking payment from parties other than those with whom you have a direct contractual relationship come with obligations from the potential payment bond claimant. Because there are four significant types of payment bonds covering Georgia construction projects, each type of bond has its own distinct differences with differing requirements.
1. Federal Public Works Bonds Under the Miller Act: Most Federal projects in Georgia are required to provide payment bonds to protect suppliers and subcontractors. The Federal statute governing these bonds is commonly referred to as the Miller Act. Currently, the Federal Miller Act does not require a preliminary notice (e.g., an NTO or a Notice of Furnishing).
2. Georgia Public Works Bonds Under the Little Miller Act: Most construction projects owned by the State of Georgia require the general contractor to post a payment bond for the benefit of the project’s materialmen and subcontractors. The Georgia State Statute governing these bonds and their claims is commonly referred to as Georgia’s Little Miller Act. It is called this as many of the provisions in the Georgia Little Miller Act mirror the provisions of the Federal Miller Act. However, there are significant differences which can abridge a subcontractor or supplier’s rights. Unlike the Federal Miller Act, for example, Georgia’s Little Miller Act requires that those not in privity of contract with the prime contractor or the owner send a Notice to Owner and a Notice to Contractor within 30 days of the first day that the subcontractor or supplier begins working on the job.
3. Georgia Municipality Public Works Bonds: Although there are many similarities between them, local municipalities in Georgia are governed by a different set of statutes that the State of Georgia’s Little Miller Act. Nonetheless, most local government projects (e.g., school construction or renovation) are required to maintain a payment bond to protect the project’s contractors and material suppliers.
4. Private Project Payment Bonds: The three preceding bond statutes require payment bonds on governmental projects. Although not required by law, many private projects–particularly large projects–are also covered by bonds. In these situations, potential bond claimants must meet the individual requirements of each bond in order to qualify as a claimant. In these situations, it is vital to obtain a copy of the payment bond at the project’s beginning and then read and comply with each of its terms and deadlines.
The Payment Bond Terms May Expand Subcontractors Rights: Each of the first three categories of payment bonds in Georgia (Miller Act Bonds, Little Miller Act Bonds, and Municipal Construction Bonds) have minimum requirements established by their respective statutes. However, the payment bond is also a contract between the governmental entity undertaking the work and its insurer; thus, the contract between them may be more expansive than the minimum requirements of the law. It is possible, therefore, for a particular payment bond to grant more rights to a claimant, extend the deadlines, or include a class of potential bond claimants which might otherwise be excluded. Therefore, every contractor and every supplier should review the terms of every payment bond under which they are working.
In the future, we intend to write a series of blog posts highlighting more details of each of the different types of payment bonds in Georgia. In the meantime, if you are working on or providing materials to any Federal, state or municipal project in Georgia (or a private project with a payment bond) you need to consult with an experienced payment bond attorney who can help you understand your rights, protect and preserve your rights, and, if necessary, enforce your rights.
by: Mark Cobb
An Atlanta payment bond claim, a Marietta payment bond claim, a Coweta County payment bond claim, an Athens, Clarke County payment bond claim, a Fort Benning, Georgia payment bond claim, and a Savannah payment bond claim. This is my week so far!
Since the Cobb Law Group’s construction law practice has been so busy with filing and perfecting claims against payment bonds this week, we thought our readers might appreciate hearing some of our ideas on the payment (and nonpayment) trends that we are seeing!
So far this week, we have initiated six payment bond claims. Although the mechanics lien attorneys at the Cobb Law Group also typically file numerous mechanics and materialmen lien claims in Atlanta and throughout Georgia each week, so far, we haven’t filed any new Claims of Liens. We monitor our clients’ files very carefully, and since almost all of our clients are construction professionals (in particular, they are specialty subcontractors and material suppliers), we have the advantage of noticing trends affecting the industry before others. Also, since we have been focused on Georgia subcontractor law for over 20 years, we recognize the cyclical nature of the trends and can see the big-picture.
Unfortunately, the U.S. economy is not recovering as quickly as we need; our little feelers indicate certain geographic pockets experiencing slight increases in construction, but other areas continue to be stagnant. Although they are not as plentiful as we would like to see, there are government public works projects providing construction contracts to subcontractors and purchasing construction materials from suppliers. Without spending too much time on this (we’ll save it for another blog article), government projects are subject to difficult bidding procedures and, increasingly, bid preferences for local contractors which greatly limit the playing field for legitimate, regional contractors. Nonetheless, there are some government construction projects out there which are providing necessary work.
PAYMENT BOND DEADLINES:
Government projects are notoriously slow-paying which means that subcontractors and suppliers have to vigilantly monitor their (i) 60-day deadline from the date a Georgia lien or bond waiver was signed to file an Affidavit of Nonpayment if they haven’t received payment, and (ii) 90-day deadline from the last day they were on the job to make their claim against the surety backing the payment bond.
MILLER ACT AND BABY MILLER ACT:
Furthermore, federal construction projects are governed by the Miller Act; State of Georgia construction projects are governed by Georgia’s version of the Miller Act which is referred to as the Little Miller Act. It is essential that everyone understand that these two Acts–although parallel in many respects–differ substantially!
Because the government projects are slow-paying, our clients are asking us to timely file their claims against the projects’ payment bonds. As mentioned, above, our Georgia payment bond lawyers have initiated six new claims so far this week. All six of these claims were approaching the deadlines in which a valid claim could be made.
It is interesting to note, however, that of the six claims we have begun in the last day or so, we have settled (or almost resolved) four of them! Here’s the break-down:
- payment of two of the payment bond claims have been paid in full via joint-check;
- payment of two of the payment bond claims have been promised by the general contractor within the next 30 to 45 days; and
- two of the payment bond claims have not yet received a response (but we are hopeful they will get paid quickly!).
ENFORCE YOUR BOND RIGHTS TO GET PAID:
So, what exactly does this little study show? Slow-pay is not “no-pay”, but you will probably have to exercise your legal rights to make a claim against the payment bond in order to get paid; in four out of our six examples, 2 have been paid and 2 are promised to be paid. Thus, our clients have already released two payment bond claims, and two others have been suspended pending payment by the surety or the general contractor. That’s recovery of 2/3 of the cases in a matter of hours after bringing a payment bond construction lawyer on board. Prime contractors understand the government’s slow-pay mechanism; however, as the entity posting the bonds, it is the prime contractors’ credit rating which is affected by a subcontractor’s or materialmen’s claim; thus, it is in the best interest of the general contractor to pay the third-tier supplier or subcontractor rather than face increased premiums in the future.
We firmly believe that if our clients had not made their payment bond claims before the statute of limitation ran, they would not have received payment. Making these claims is a wonderful tool in the arsenal of Georgia subcontractors and suppliers to make sure that payment is made. If you need to discuss nonpayment issues on a public works project with our Georgia payment bond attorneys, please contact us today.