A friend of mine has not received payment for a job (private) that he performed as a subcontractor in the state of Virginia (completed early June 2019). The contractor he did the job for is contracted by a Virginia state agency (public). Does that alter my friend’s legal standing with respect to collecting payment? Thanks in advance. – Birgitte
Per public records it appears as if the contractor has several lawsuit pending for not paying contractors and employees.
That’s an interesting question, and I’m sorry to hear that your friend’s been having trouble getting paid here. Before determining what options are available, it’s important to discern whether the project is public or private. Typically, when the prime contractor is hired by a public agency, the project will be public. Meaning, contractors are typically hired by public agencies when they’re working on a project that’s owned by that agency. And, because publicly owned property cannot be liened, the recovery options change a bit. We discuss that idea further, here: Is My Project Private, Federal, State…Or Something Different?
Since there’s a little uncertainty here as to whether it’s a public or private project at hand, let’s look at a few different payment options for both scenarios.
On public projects, some of the tools available on private jobs won’t be available – like mechanics liens (more on those in the “Private Projects” section below). Public property cannot be liened, and as a result, payment bonds are required on most Virginia public projects. If there is a payment bond present, that bond would be in place to protect sub-tier claimants from nonpayment. Ultimately, for subcontractors, suppliers, laborers, etc. – when unpaid for work done on a public project, making a bond claim is a great tool for recovering payment. You can learn more about Virginia’s bond claim process here: Virginia Bond Claim Guide and FAQs.
When work is done on privately owned property, mechanics liens will generally be available. Mechanics liens are an extremely powerful tool, and we’ll discuss them more in the paragraph below. But, because mechanics liens are such a strong tool, the mere threat of using a lien claim is often enough to compel payment. By sending a document like a Notice of Intent to Lien, unpaid construction businesses can show their customer and the property owner that they’re serious about getting paid and that they’re not afraid to take whatever action is necessary to obtain payment. More on that here: What Is a Notice of Intent to Lien and Should You Send One?
As mentioned above, when necessary, mechanics lien filings will also serve as a good option for getting paid. However, filing a lien is usually seen as a more “nuclear” option. Still – mechanics liens work because a lien filing puts the property owner’s title in jeopardy, and when a lien is filed, owners and contractors typically can’t afford that risk. This article discusses the mechanics lien option in a little more detail: How Do Mechanics Liens Work? 17 Ways a Lien Gets You Paid. Note, though, that Viriginia mechanics liens have strict notice and deadline requirements, and some parties might not be entitled to lien depending on the circumstances. For more background on who can filed Virginia lien claims and how to file them, here are some great resources: (1) Virginia Mechanics Lien Guide and FAQs; (2) About Virginia Preliminary Notice; and (3) How to File a Virginia Mechanics Lien.
Options that may be available for both
Outside of the lien and bond processes, there are also other options that might help with recovery. For one, threatening to take legal action might help to be taken a little more seriously. That can even be taken up a notch by sending a payment demand letter via an attorney which specifies potential actions that might be taken – like an action under breach of contract.
Another option might be to pursue an action in small claim court, depending on the size of the debt. For legal disputes amounting to $5,000 or less, small claims court might be a good option for payment recovery – in small claims court, much of the time and cost associated with litigation can be minimized. More on VA small claims court here: Small Claims Court Procedures
Finally, note that when a serious debt is owed, litigating the issue is always an option. Of course, there’s plenty of risk, time, and cost associated with bringing a case to suit, so it’s a good idea to put a lot of thought into deciding whether or not to pursue litigation.
I hope this information was helpful! Please feel free to come back to the Expert Center and ask clarifying questions, if that’d help. And, if you’re still unsure of what options might make the most sense, it might be helpful to consult a local construction attorney – they’d be able to review the situation and advise on how best to proceed in your friend’s particular circumstances.