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What does a Notice of Default mean?

Hi, we are a sub-contractor pursuing payment from a general contractor. We have just received a letter from the GC stating that they have issued a Notice of Default and Termination on the project that they were working on (which is the same project we were on also). What does this mean for us in terms of payment? I'm concerned as our lien time is drawing to a close very soon, I think we have another two days to file, so if you could get back to me as soon as possible with regards to whether we should file a lien or not? The letter does go on to say that the GC intends to pursue its claims for nonpayment according to the provisions of their contract with the owner, including amounts claimed by its subconstractors - not sure if that helps. Look forward to your reply. Thank you.

1 reply

Mar 18, 2020

Receiving a Notice of Default and Termination from a customer will serve as notice that the contract is being terminated, but it doesn't mean that a subcontractor isn't entitled to be paid what they're currently owed for the job. And, it's important to recall that a sub can still file their lien even if there's a dispute over what they're owed and even if there's a dispute over the quality of the work. Though, the validity of that claim could certainly be the subject of dispute later on if there's issues with the work or if there's some reason the sub isn't owed payment. It's common for a customer to claim that they can't make payment because the owner hasn't paid them yet. But, even if it's true that the owner hasn't paid the GC, that won't necessarily block the viability of a subcontractor's mechanics lien claim. However, if there's a pay if paid clause in the contract between a sub and their customer, that might limit the ability to pursue a mechanics lien claim to some degree. Levelset discusses that in detail here: Enforceability of Pay-if-Paid Clauses in Massachusetts. Finally, keep in mind that the deadline for filing a Massachusetts Statement of Account will be the earliest of (1) 90 days after a Notice of Substantial Completion is recorded; (2) 120 days after a Notice of Termination is recorded; or (3) 120 days after the claimant last furnished labor or materials to the job. So, make sure you've got the right deadline in mind when making calculations.

Additional Massachusetts mechanics lien resources

I hope this was helpful! For more information on Massachusetts mechanics lien claims, the resources below should be valuable. - Massachusetts Mechanics Lien Guide and FAQs - How to File a Massachusetts Mechanics Lien – A Practical Guide

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