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 license number
   • 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 consecutive days.
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 it alone.
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.

Be well!