Bond Law Changes in the New Year!
2013 Bond Law Changes
By: Victor A. “Andy” Anderson, Attorney and Daniel Knight, Law Clerk
Anderson Jones, PLLC Phone Number: 919-277-2541
AAnderson@andersonandjones.com
In July of 2012, Governor Purdue signed into law two bills which make significant changes to North Carolina’s lien and bond laws. Of the various amendments were several changes which affect state public construction projects in which a payment bond is required. The new statutes will not affect federal bonded public projects. These changes will take effect on January 1, 2013. If the project requires a permit to be issued, then the bond law changes will apply to those projects in which the first permit required is obtained on or after January 1, 2013. If the permit is obtained before January 1, 2013, then the bond law changes will not apply. If not permit is required, then the bond law changes will apply to those projects on which work is commenced on or after January 1, 2013. Please note that under the new statutes, suppliers are considered subcontractors and therefore subject to the new provisions. With January 1, 2013 rapidly approaching, the following is a review of those changes
Project Statements
Contractors: Beginning January 1, 2013, contractors for public construction projects which require a payment bond must provide the first-tier subcontractors with a “project statement.” In creating the project statement, contractors must include:
(1) The project name;
(2) The physical address of the project;
(3) The name of the contracting body;
(4) The contractor’s name;
(5) The name, phone number, and mailing address of an agent authorized by the contractor to accept service of the requests for payment bond, the notice of public subcontract, and the notice of claim on payment bond; and
(6) The name and address of the principal place of business of the surety issuing the bond.
**Please contact Anderson Jones, PLLC for a sample “Project Statement”.
It is important for contractors to remember to create and provide the project statement because if the contractor does not provide the project statement, then the contractor’s agreements with its subcontractors will be unenforceable.
Subcontractors: Once a subcontractor has received the project statement from the contractor or a higher-tier subcontractor, the subcontractor must then provide each of its subcontractors with a copy of the contractor’s project statement as well. If a subcontractor does not provide its subcontractors with a copy of the project statement, then the subcontractor’s agreements with its subcontractors will be unenforceable.
Notice of Public Subcontract
Beginning January 1, 2013, subcontractors of the second- and lower-tier, performing labor or furnishing materials on a bonded public construction project, must issue a Notice of Public Subcontract in order to preserve their lien rights. If a Notice of Public Subcontract is not issued, then the second- or lower-tier subcontractor cannot later make a claim of lien for labor or materials provided on the project. The “Notice” must contain the following information
(1) The name and address of the subcontractor giving the notice;
(2) A general description of the real property on which the labor was or is to be performed or the material was or is to be furnished;
(3) A general description of the subcontractor’s contract, including the names and address of the parties to the contract; and
(4) A general description of the labor and material performed and furnished.
**Please contact Anderson Jones, PLLC for a sample “Notice of Public Subcontract”.
For the most protection, the “Notice” should, at the least, be given to the contractor within 75 days of the date on which the subcontractor first performed labor or furnished supplies on the public project. However, subcontractors should consider sending the “Notice” as soon as possible. The “Notice” must be in writing and served on the contractor by Certified Mail, confirmation signature as provided by the United States Postal Service, or any other method provided for by law in serving a summons.
Subcontractors should keep in mind the exception to the Notice of Public Subcontract. Under the exception, the obligation to provide the Notice does not apply to claims for $20,000 or less. If the claim is for more than $20,000, then the obligation only applies to the portion in excess of $20,000. Despite the exception, subcontractors should consider a threshold of $15,000 for providing a Notice of Public Subcontract because a change order may push a claim that was previously within the exception over the $20,000 threshold.
Copies of Payment Bonds
Contractors: Beginning January 1, 2013, upon request by a subcontractor, a contractor must provide a copy of the payment bond in a bonded public construction project. The subcontractor’s request must be in writing and sent to the contractor by Certified Mail, signature confirmation as provided by the United States Postal Service, or any other method provided for by law in serving a summons. Contractors have seven (7) days from receiving the request to send the copy to the requesting subcontractor. If a contractor does not provide the copy within the time period proscribed, then, upon a future claim on the payment bond by the requesting subcontractor, the subcontractor may include labor and materials provided on the project more than 75 days after the subcontractor provided it’s Notice of Public Subcontract. If the contractor does provide the copy within the seven (7) days, then the subcontractor, upon a later claim on the payment bond, cannot include any labor or material provided on the project more than 75 days after the subcontractor provided its Notice of Public Subcontract.
Subcontractors: Beginning January 1, 2013, in requesting a copy of the payment bond in a bonded public construction project, the request must be in writing and must sent to the contractor by Certified Mail, signature confirmation as provided by the United States Postal Service, or any other method provided for by law in serving a summons. Upon receiving confirmation by one of the designated methods that the request has been received by the contractor, the subcontractor should mark seven (7) calendar days from the day on which the request was received.
If the subcontractor has not received the copy of the payment bond within the seven days, then, upon a future claim on the payment by the subcontractor, the subcontractor may include labor or materials provided more than 75 days after the subcontractor’s Notice of Public Subcontract. If the subcontractor does receive the copy within the seven days, then, upon a future claim on the payment bond, the subcontractor can only include labor or materials provided up to 75 days after the Notice of Public Subcontract was served.
Miscellaneous Changes
Contractors and subcontractors should be aware that beginning January 1, 2013, any false statement about the amount currently owed to the contractor or subcontractor can result in revocation, suspension, or restriction of the contractor or subcontractor’s license in addition to a criminal misdemeanor.
This synopsis is in no way comprehensive, and you should consult with this office, or your attorney, should you have questions.
This summary is for informational purposes only
and does not constitute legal advice or opinion.