Hurricane Michael was one of the most-damaging hurricanes to hit the mainland United States ever. Being from Louisiana, we at Levelset have seen some big storms. In fact, our very company was created, in large part, as a result of the construction work afterward. Recovering from Hurricane Michael will take a similar effort, and the construction industry plays perhaps the biggest role in that recovery.
Recovering From Hurricane Michael: The Basics
In this article, we’ll set out some of the most important considerations for the construction industry regarding the rebuilding work to come as the affected states begin to recover and rebuild from the damage caused by Hurricane Michael. We’ll start with some big, general concepts, then move to more state-specific considerations.
[Editor’s note: we’ve written another post that might be worth your while before you or your company decides to take on any recovery work — The Playbook for Disaster Recovery Construction Projects.]
Download the 2-page Disaster Recovery Cheat Sheet
Navigating the various contractor license requirements can be tricky after a big storm. Often, licensure requirements are relaxed or even lifted in the wake of a natural disaster. It makes sense – all hands on deck, right?
Even if you just want to help, it’s important to make sure you’ve got the proper licensure to perform the work you’re doing. Often, if an unlicensed contractor or sub performs work where a license is required, that contractor or sub will lose their right to payment. Meaning, the contract isn’t worth the paper it’s (hopefully) written on. It seems awful to think about licenses, lawsuits, or liens in a time like this, but if you’re expecting to be paid for your work, make sure you’ve got the proper license or that licensing rules have been relaxed or lifted.
Working With Insurance
Working with insurance can be a double-edged sword. On one hand, when work involves an insurance claim, typically that means there will definitely be funding available for the job. Contractors and subs can rest a little easier knowing that the insurance company is paying.
At the same time, there are some pitfalls. Insurance payments often come late, and that can put a strain on cash flow. What’s more, construction companies can hardly afford to wait if there’s a payment issue looming on the horizon — lien rights are an ever-present ticking clock. If a contractor or sub waits too long, they’ll lose their strongest right to recover payment.
Another interesting issue we’ve come across lately is when some property owners use a contractor’s quote to obtain insurance money, then ditch the construction contract (and the contractor!) in order to just pocket the insurance proceeds. In order to make a proper claim on insurance, an owner may need a quote for the damage. Often, a property owner will only want the quote and then will bail on the project once the quote and insurance payment are in hand. This can be frustrating, but recall that if the property isn’t improved, a mechanics lien is probably not the right remedy. If worse comes to worse, sending a demand letter or a Notice of Intent to Lien could compel an owner to pay whatever is owed, if anything, for making the quote.
Hire Reputable Subs and Suppliers
This one is big, too — for everyone along the payment chain. After a disaster, there is so much construction work to go around that working with your usual contractor, subs, and suppliers might not be feasible. It’s still important to vet your fellow construction companies as much as possible, and that goes both up and down the payment chain! Before taking on a new customer, make sure that customer has a reputable business. Before hiring an unknown sub or supplier, do a little research.
State by State Considerations
It’s a good idea to send notice on every job. Notices help build relationships by improving communication, and they make the entire payment chain visible. This helps to speed up payment from higher tiers. Plus, notices will preserve the right to lien should worse come to worst.
The following links will provide an in-depth look at each state’s notice requirements:
Am I Entitled to File a Mechanics Lien?
We’ve said it before, and we’ll say it again: Nobody likes liens! What’s more, when you’re performing recovery work, having to threaten or file a lien stings that much more. The owner just wants life to go back to normal, and the construction business just wants to help and to be paid what they’re due.
But disputes happen.
While no one should have to file a lien to get what they’re owed, leveraging the right to file a lien (perhaps with a Notice of Intent to Lien) can be really effective when it comes to getting paid. Plus, if push comes to shove, filing a mechanics lien is a strong last line of defense for recovery. With that being said, it’s important to know whether you have lien rights at all.
Florida provides lien rights pretty broadly. Prime contractors, subs, sub-subcontractors, laborers, material suppliers (if they’re supplying an owner, contractor, sub, or sub-subcontractor), and professionals are entitled to mechanics lien rights. Not to harp on licensure, but note that if a license is required for your work, you could lose your lien rights if you aren’t properly licensed.
Georgia provides lien rights broadly, too. If you’ve provided labor or materials for the construction, repair, or improvement of real property, chances are you’ll have the right to lien. Specifically, contractors, subs, materialmen (who provide materials to contractors and subcontractors), laborers, architects, engineers, surveyors and equipment renters are all protected by lien rights. Just because you don’t fit nearly into one of those roles doesn’t mean you won’t have lien rights, though. Like Florida, unlicensed Georgia contractors may not be able to file a lien for work where licensure is required.
South Carolina provides lien rights to a wide spectrum of project participants, and it has some unique rules too. Parties furnishing labor or materials for the erection, alteration, or repair in the improvement of real property will have the right to lien. That means Contractors, subs, laborers, design professionals, surveyors, and equipment renters are all protected – and some others. South Carolina is unique, though, in that security guards at the site of an improvement are also entitled to lien rights (as a laborer). Plus, landscape services will give rise to lien rights as long as the service exceeds $5,000 and was done under written contract with the owner.
Lien rights are available to prime contractors in North Carolina, but it can get tricky for subs. In some form or fashion, lien rights are also available to 1st, 2nd, and 3rd tier subs. For a thorough breakdown, check out North Carolina Lien and Notice FAQ.
Alabama is home to two types of mechanics liens: an Unpaid Balance Lien and a Full Price Lien. A Full Price Lien is available for parties hired by the owner and for materialmen (as long as the materialman sent a Notice to Owner before furnishing materials). For all other parties who don’t contract directly with the owner, an Unpaid Balance Lien is available.
There are an infinite number of things to consider when performing recovery work. It’d be impossible to cover every base, but we hope this can provide some help on the payment side of things. Of course, if you have other questions – we’re here! Our number’s at the bottom of this page, and we have construction attorneys ready to answer payment questions at our Construction Legal Center.