Las Vegas Construction Payment Attorney
If you are a contractor, subcontractor or material supplier on a construction project getting paid in a timely manner can sometimes be a frustrating experience. This could be due to a variety of things, but is typically due to one or more parties to the contract not following the statutory guidelines enacted to avoid delays in progress payments. Hiring an attorney experienced in construction law could be a great benefit in reducing the amount of frustration you might experience in obtaining payment for work performed. An experienced attorney can review your contracts to ensure that the appropriate payment and retention provisions are included.
Payment on Private Construction Projects
Nevada has adopted laws that are commonly referred to as “Prompt Payment” statutes. These statutes set forth specific requirements for owners, architects, contractors and subcontractors with respect to the submission of payment applications, review and approval, withholding, and the payment of amounts due.
Between Owner and Prime Contractor
Typically the prime contract between the owner and the prime contractor will establish the date when payment applications are to be submitted to the owner, or its representative (typically the architect or other design professional), by the prime contractor. The subcontracts between the prime contractor and its subcontractors will establish the date that the subcontractor’s application for progress payment is due, typically a week before the general contractor’s application to the owner is due.
Under Nevada’s prompt payment statute if the agreement between the owner and the prime contractor provides for schedule for payments to the prime contractor the owner must pay the prime contractor on or before the scheduled payment date. If the contract does not provide a payment schedule, the owner must pay the prime contractor within 21 days of the date the prime contractor submits a request for payment.
Owners may withhold retainage in an amount agreed upon in the written contract. However, the retention cannot exceed 10 percent. In addition, the owner may withhold an amount equal to the sum of the value of any work not furnished for which payment is being sought, or the cost reasonably necessary to repair any work that is subject of a progress or retainage bill, but only to the extent that such costs exceed 50% of the amount being withheld. The owner may also withhold the amount the owner may reasonably be liable for and which the owner has paid or is required to pay on behalf of the prime contractor or its lower-tiered subcontractors or suppliers as a result of a demand for payment from an official state agency or an employee trust fund. The owner may also require that the prime contractor provide lien releases for the amount of the progress payment or final payment.
If the owner intends to withhold any portion of a progress payment the owner must give written notice to the prime contractor, on or before the date the payment is due, of any amount that will be withheld.
The written notice must identify the amount that will be withheld from the prime contractor and must give a reasonable detailed explanation of the condition or the reason the owner will withhold that amount, including a specific reference to the provision or section of the agreement, and any documents relating thereto, and the applicable building code, law or regulation with which the prime contractor has failed to comply. The written notice must be signed by the owner or its authorized agent.
The prime contractor who receives a written notice of withholding from the owner may give the owner a written notice of its good faith dispute of the withholding. The prime contractor may also correct the condition or reason for withholding and provide written notice to the owner of the correction of the condition. The notice of correction must be sufficient to identify the scope and manner of the correction of the conditions or reason for the withholding and be signed by the prime contractor. The prime contractor must provide a copy of any notices given to the owner to each lower-tiered subcontractor.
If the owner receives a written notice of correction from the prime contractor the owner must pay the amount withheld on or before the next payment is due to the prime contractor, or object to the scope and manner of the correction before the date the next payment is due to the prime contractor. The objection must in writing and must state the condition or reason for the objection.
There are very specific notice requirements that must be adhered to according to statute and failure to strictly follow meet the requirements could affect your legal rights. Therefore, it is important that you seek the advice of an attorney with experience in handling construction payment issues.
Between Prime Contractor and Subcontractors
Payments by Prime Contractor to Subcontractors:
If the contract has a payment schedule the general contractor must pay the subcontractors the earlier of either: the date the payment is due according to the contract, or; within 10 days of the date the general contractor receives payment from the owner.
If the contract does not have a payment schedule or there is no written contract the general contractor must pay the subcontractor the earlier of: within 30 days of the date of the subcontractor’s invoice or payment application, or; within 10 days of the date the contractor receives payment from the owner for the subcontractor’s work.
The prime contractor may withhold retainage from the subcontractor in an amount identified in the written agreement between the parties. However, the amount cannot exceed 10 percent of the payment that is due to the subcontractor. Further, the prime contractor is permitted to withhold an amount equal to the sum of the value of any work or labor that has not been performed or any materials or equipment that have not be furnished for which the subcontractor is seeking payment. Simply stated, the subcontractor must perform the work or provide the materials and equipment for which he is requesting payment.
The prime contractor is also permitted to withhold any costs and expenses reasonably necessary to correct or repair any work which is not materially in compliance with the agreement, but only to the extent that the costs and expenses exceed 50% of the total retainage already being held by the prime contractor.
The prime contractor may also withhold the amount the owner or prime contractor has paid or is required to pay to a state agency or employee benefit trust fund on behalf of the subcontractor’s employees or suppliers.
If the prime contractor intends to withhold any amount in addition to the agreed upon retainage, the prime contractor must give written notice to the subcontractor of any amount will be withheld. The notice must be given on or before the date the payment is due and a copy must be provided to any higher tiered contractors and the owner.
The notice must identify the amount that will be withheld from the subcontractor and give a reasonable detailed explanation or the reason the prime contractor is withholding the money, including a specific reference to the provision or section of the subcontract and the applicable building code, law or regulation with which the subcontractor has failed to comply. The notice must be signed by the authorized agent of the prime contractor.
A subcontractor who receives a notice of withholding may give the prime contractor a written notice of dispute in good faith and state the reason the amount should not be withheld. The subcontractor may also correct any condition or reason for the withholding and provide written notice to the prime contractor of the correction. The notice of correction must be sufficient to identify the scope and manner of the correction of the condition or reason for the withholding and be signed by and authorized agent of the subcontractor.
If the prime contractor receives a written notice of correction the prime contractor must either pay the amount withheld before the next progress payment is due or must object to the scope and manner of the correction before the next progress payment is due and provide a written statement which sets forth the condition or reason for the objection. The prime contractor is required to pay the subcontractor for any correction to which the prime contractor no longer objects.
Damages for Improper Witholding
Prime Contractors Right to Stop Work:
If an owner fails to pay the prime contractor in the time and manner required or if the owner fails to give the prime contractor written notice of withholding in the time and manner required by statute, the prime contractor may stop work. However, the prime contractor must give the owner 10 days written notice of its intent to stop work. If the prime contractor stops work the prime contractor may terminate the contract by giving at least 15 days written notice to the owner. If the owner pays the prime contractor before the date for termination of the contract the prime contractor must resume work. Likewise, if the prime contractor gives notice of its intent to stop work, the owner may provide 15 days written notice to the prime contractor of the owner’s intent to terminate the contract.
It is highly recommended that prior to giving any notice to stop work or notice to terminate that you seek the advice of an experienced construction law attorney.
If an agreement is terminated, the contractor is entitled to recover from the owner for the cost of all work, labor materials, equipment and services furnished by the contractor, including overhead and profit. This includes work performed by the prime contractor and lower-tiered subcontractors and suppliers. The prime contractor may also be awarded its reasonable costs and attorney’s fees in any action brought to enforce the rights or obligations set forth in the statutes.
Any money which is payable to a prime contractor, higher-tiered contractor or lower-tiered contractor accrues interest from the time it becomes due at a rate equal to the higher of the rate agreed upon between the parties or the prime rate at the largest bank in Nevada at the time the agreement was entered into between the parties.
If a prime contractor stops work in accordance with the statute, each lower-tiered subcontractor that has not fully performed may also stop work on the project. If the prime contractor terminates the contract in accordance with the statutes all lower-tiered subcontractors may also terminate their respective agreements with the prime contractor.
The prime contractor’s right to terminate the contract pursuant to the statute is in addition to all other rights that the prime contractor may have at law or in equity and does not impair or affect the prime contractor’s right to maintain a civil action or submit the dispute to arbitration.
Subcontractors right to Stop Work:
A subcontractor may stop work if the prime contractor fails to pay a subcontractor or supplier within 45 days after the 25th day of the month that the subcontractor submits and application for payment. A subcontractor may also stop work if the prime contractor has not paid the subcontractor within the time permitted after the subcontractor provided a good faith dispute of any withholding by the prime contractor. If the prime contractor fails to issue a change order, the subcontractor may also stop work. The subcontractor must give the prime contractor at least 10 days written notice before the subcontractor stops work.
If a subcontractor stops work the subcontractor may terminate the subcontract with the prime contractor by giving written notice of the termination to the prime contractor at least 15 days prior to terminating the contract. If the prime contractor pays the subcontractor the amount due before the termination date stated in the written notice the subcontractor shall not terminate that agreement and must resume work.
If a subcontractor stops work or terminates its agreement with the prime contractor, the subcontractor’s subcontractors and suppliers may also stop work or terminate their respective contracts with the subcontractor.
The right of a subcontractor to stop work or terminate its agreement are in addition to any other rights or remedies that subcontractor may have at law or in equity and does not impair the subcontractors right to maintain a civil action or to submit any controversy to arbitration.
Award of Attorney Fees and Costs to Prevailing Party:
In any action brought to enforce the rights or obligations between the parties, the court may award reasonable attorney’s fees to the lower tiered subcontractor, or if the court determines that the subcontractor stopped work or terminated the agreement without a reasonable basis in law, the court may award reasonable attorney’s fees and costs to the prime contractor.
No Liability Delays:
No prime contractor or subcontractor or supplier may be held liable for any delays or damages that an owner may suffer as a result of the prime contractor or lower-tiered subcontractors or suppliers stopping work or terminating a contract for reasonable cause in accordance with the statutes.
Not getting paid for your work can be very frustrating and the failure to strictly follow the provisions of the prompt payment statutes can be fatal to your claim. Therefore it is extremely important that you hire an experienced Las Vegas Attorney to assist you. The Wright Law Group, P.C. has more than 20 years construction law experience and is well equipped to assist you in handling your case. Please call us at 702-405-0001 to schedule a consultation.