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Sub-Tier Payments: Sworn Statement vs. Joint Checks

ArizonaJoint ChecksLien WaiversPay Applications

Hello, We've historically cut joint checks for any conditional waivers that a subcontractor provides for its sub-tier subcontractors/suppliers in a given billing period. We currently collect a list of sub-tier subs/suppliers at the beginning of a project and add to the list as they become known to us (typically via preliminary notices or notification by our field personnel). Through the rise of waiver/payment services such as Levelset, I've been introduced to the concept of a sworn statement document being provided by the subcontractor each billing period to capture the amounts owed to sub-tier subs/suppliers. Joint checks have always been a point of contention with subcontractors and they also create difficulties with the move towards utilizing electronic payment methods. Add in the reduced security in recent years with the increase in ATM and mobile deposit use (we've had subcontractors mobile deposit a joint check directly into their own account with no issue) and it just seems like there needs to be a better way. How well does collecting sworn statements each period, backed up by waivers from each listed sub-tier sub/supplier, protect us? Compared to the use of joint checks? We primarily operate in Arizona. Thank you.

1 reply

Apr 27, 2021
Any time payment is made without a joint check, there is no way for the GC/contractor cutting the check to know if the funds will make it to the supplier. A conditional waiver from the sub/supplier confirms if the funds are received, the supplier is paid through the end of the month - but that is a big if. A sword statement would, theoretically, subject someone to a perjury charge if it was false, but (1) that kind of perjury charge is unheard of (i.e., perjury in a civil context); and (2) getting someone charged with perjury does not help fix your exposure to a sub/supplier who has not been paid. If paying a sub without paying by joint checks, the GC/subcontractor should be firm about following up and obtaining unconditional waivers from all suppliers who provided a conditional waiver for the prior month, or withhold payment until all unconditionals are received from the prior month. The GC/subcontractor will have a one-month lag, but will at least know if payment is not flowing to the suppliers. Also, by being firm about this requirement, the sub is unlikely to rob Peter to pay Paul because the sub will know that would be the last time he could get away with it. This is not a perfect substitute for a joint check because there is no perfect substitute. But at least it would keep a firm grasp on the flow of money and limit your potential exposure.

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