Cures for Common Contractor
Headaches: 10 ‘Health Tips’
Lawyers are like doctors: You usually don't visit
them unless there is a problem. Below are some of the top construction-related
problems we encounter. Avoid these potentially costly mistakes and you will
improve your legal and financial health!
1. Not issuing a preliminary 20-day notice. It is
your key to payment, and it's required to preserve your lien rights, payment
bond rights, and stop notice rights.
2. Not timely amending or supplementing your
preliminary 20-day notice. You can exceed your estimated prelim amount by
20%; however, you should issue a supplemental prelim when the scope of work
changes or a change order increases the contract amount.
3. Not obtaining a written contract with an
owner/occupant of residential property, or not obtaining written change orders.
A missing residential owner-occupant signature on the contract means no lien
rights, regardless of whether you issued a prelim. Not having written change
orders adds confusion to the work to be performed and the cost of that work.
Always request and obtain written change orders.
4. Contract fails to comply with ROC requirements.
Although there may be additional ROC requirements in specific circumstances, all
construction contracts must contain:
the contractor's name, address, and ROC
the name and address of the owner
job site address
estimated date of completion
description of the work to be performed
the amount of any advance deposit, and
a progress payment schedule (if applicable).
5. Tracking completion of the project. Completion
starts the deadline to record a lien. Completion occurs (a) 30 days after
issuance of a Certificate of Occupancy; or (b) cessation of labor for 60
6. Contracting beyond the scope of your license.
If you operate beyond the scope and classification of your license, you are not
only violating ROC rules - you are also barred from filing suit if you are not
paid for your work.
7. Failing to take ROC complaints seriously. You
may believe that the other side's ROC complaint is frivolous, but if the ROC
hearing officer (administrative law judge) thinks otherwise, it can
significantly interfere with your livelihood. Don't ignore it, and don't fight
8. Signing lien waivers without receiving payment.
Lien waivers are either conditional (the only condition being the payment is in
good funds) or unconditional, meaning that your rights to lien, bond claims,
etc., are waived regardless of whether you are paid.
9. Not complying with Arizona's Prompt Payment Act.
Invoices are deemed certified if not objected to within 14 days. A general
contractor has to pay subs within seven days after receipt of funds from the
owner; subs must pay sub-subs and suppliers within seven days of receipt of
payment from the general contractor.
10. Improper insurance coverage. If a contract
requires specific insurance coverage, have your insurance broker confirm that
your coverage complies with contract requirements.