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Filing a Bond Claim: Public vs. Privately-Owned Property Rules

Filing a claim against a bond may offer a subcontractor protection against both privately and publicly incurred debts. However, there are different rules for filing a bond claim on public property versus privately-owned property.

PUBLIC BONDS

Liens are not allowed on publicly owned lands. To protect contractors, the law provides for claimants to file against a bond under the following conditions:

The prime contractor must have a contract directly with the governmental body that owns the property that is to be improved. The prime contractor will then furnish a payment bond for the benefit of subcontractors and suppliers, and a performance bond that protects the governmental owner from the prime contractor's default.

There are two different kinds of public bonds: state and federal.

Federal Bonds - The Miller Act

The Miller Act provides protection to construction professionals, like architects and engineers, and to first and second tier subcontractors and suppliers only.

Notice

If a claimant has a contract directly with the general contractor, the claimant does not have to meet any special notice requirements to file suit. If, however, the claimant has a contract with a subcontractor, it must provide notice of its claim to the general contractor within 90 days of the last furnishing labor or material to the project.

The notice must be:

· In writing

· State with substantial accuracy the monetary amount claimed

· Name the party to or for whom the labor or material was furnished

· Be delivered by any means that provides written verification of delivery or by    any means by which the U.S. marshal of the district in which the project is located may serve the summonses

Filing Suit

For a federal bond, claimants must wait 90 days after they last furnished labor or materials to the project before they can file suit. A claimant may not be able to recover attorney fees under the Miller Act unless there is a clause in the contract between the parties that allows for interest and fees.

State Bonds

Public works jobs in Texas valued at over $25,000.00 are required to have a bond. There are exceptions to this rule that this article does not cover. It is also important to note that a general contractor does not have a claim to a state bond and is limited to statutory or contractual remedies.

Notice

In order to send notice, the claimant must first obtain a copy of the bond. However, this can sometimes prove challenging and timely, so asking for this information as early as possible in the project is best. A subcontractor can request the bond information from the general contractor in writing and the general contractor is required to respond within 10 days. Or, a public information request may be made for a small fee, but this can take up to 30 days.

A claimant must send notice to the prime contractor and surety by the 15th day of the third month after each month in which the labor was performed or the materials were supplied. If you are a sub of a sub-contractor, you must provide notice by the 15th day of the second month after each month in which the labor was performed or the material was delivered.

It is important that the claimant include with the notice a sworn statement of account which states that "the amount claimed is just and correct" and that all lawful offsets, payments and credits have been allowed. Substantial compliance is all that is necessary for notice.

Filing Suit

A claimant may file suit on a bond before the end of the first year after the date of mailing the claim. A sub of a sub must wait to file suit 61 days after the claim has been made.

PRIVATE BONDS

Only a contractor with a written contract with the owner may acquire a bond, which is then recorded in the county of the owner's property where construction is performed.

The bond protects the owner by relieving them from having to withhold funds and retainage as required under the Texas Property Code, and also benefits potential claimants.

Notice

The same notice requirements that grant a Mechanic's or Materialman's Lien apply to a lien claim on a private bond. To perfect a bond claim, a claimant must provide notice to the general contractor by the 15th day of the second month after the debt has incurred, and the owner by the 15th day of the third month after the debt has incurred.

Filing an Affidavit

The same rules for filing an affidavit for a Mechanic's or Materialman's Lien apply to a private bond, also. A claimant must file an affidavit not later than the 15th day of the 4th calendar month after the day on which the indebtedness occurs, and for residential projects, by the 15th day of the 3rd calendar month.

Filing Suit

To file suit against a private bond claim, a claimant must wait 60 days after perfecting their claim (abiding by all the rules for notice and filing) before they can file suit. If the bond was recorded, the claimant has one year from the date of perfection to file suit.

If the bond was not recorded, the claimant has two years to file suit in the county in which the property being improved was located.

There are many more factors and rules to consider when making a claim against a bond, whether private or public. If you have questions about a potential bond claim or need assistance, we are here to help. Contact us today for a free consultation.

This article is intended as a general educational overview of the subject matter and is not intended to be a comprehensive survey of recent jurisprudence, nor a substitute for legal advice for a specific legal matter. If you have a legal issue, please consult an attorney.

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