COMMERCIAL CONSTRUCTION IN NORTH CAROLINA: Late Payments to Subcontractors – is it legal?

On Commercial Construction Projects, North Carolina law provides Protect Your Small Business with Legal Counselthat a General Contractor cannot withhold payment to its Subcontractors just because the General Contractor has not been paid by the Owner of the project. Specifically,  N.C.G.S. §22C-2. Performance by Subcontractor states:

“Performance by a subcontractor in accordance with the provisions of its contract shall entitle it to payment from the party with whom it contracts. Payment by the owner to a contractor is not a condition precedent for payment to a subcontractor and payment by a contractor to a subcontractor is not a condition precedent for payment to any other subcontractor, and an agreement to the contrary is unenforceable.”

As the statute says, even if the written Contract provides such a “pay when paid” clause, the provision is unenforceable by the General Contractor as a matter of North Carolina public policy.

Moreover, any payment due to a Subcontractor from a General Contractor, or from a Subcontractor to its subcontractor, must be paid withing seven (7) days of receipt of the subcontractor’s invoice for work performed. N.C.G.S. § 22C-3.  Time of Payment to Subcontractors states:

“When a subcontractor has performed in accordance with the provisions of his contract, the contractor shall pay to his subcontractor and each subcontractor shall pay to his subcontractor, within seven days of receipt by the contractor or subcontractor of each periodic or final payment, the full amount received for such subcontractor’s work and materials based on work completed or service provided under the subcontract.”

Additionally, any late payments bear interest at the rate of 1% per month or 12% per year.  N.C.G.S.  § 22C-5.  Late Payments to Bear Interest states:

“Should any periodic or final payment to a subcontractor be delayed by more than seven days after receipt of periodic or final payment by the contractor or subcontractor, the contractor or subcontractor shall pay his subcontractor interest, beginning on the eighth day, at the rate of one percent (1%) per month or a fraction thereof on such unpaid balance as may be due.”

However, these rules do not require a General Contractor or Subcontractor to pay its subcontractors, as set forth above, if the subcontractor’s work is deficient in any way.  N.C.G.S.  § 22C-4.  Conditions of Payment states:.

“Nothing in this Chapter shall prevent the contractor, at the time of application and certification to the owner, from withholding such application and certification to the owner for payment to the subcontractor for: unsatisfactory job progress; defective construction not remedied; disputed work; third party claims filed or reasonable evidence that claim will be filed; failure of subcontractor to make timely payments for labor, equipment, and materials; damage to contractor or another subcontractor; reasonable evidence that subcontract cannot be completed for the unpaid balance of the subcontract sum; or a reasonable amount for retainage not to exceed the initial percentage retained by the owner.”

Finally, be aware that these provisions apply to Commercial Construction Projects only; not to Residential Construction Projects.  N.C.G.S. § 22C-6.  Applicability of this Chapter states:

“The provisions of this Chapter shall not be applicable to residential contractors …, or to improvements to real property intended for residential purposes …., or to improvements to real property intended for residential purposes which consist of 12 or fewer residential units.”

If you are a Subcontractor working on a Commercial Construction Project in North Carolina, and you have trouble getting payment for work you performed on the project, call Wesley S. Jones now for a free phone consultation.

Wesley Jones is a Construction and Business Lawyer in Wilmington, North Carolina serving all of Southeastern North Carolina including New Hanover County (including Wilmington, Kure Beach, Wrightsville Beach, Carolina Beach and the areas of Ogden, Masonboro, Myrtle Grove, Landfall, and Mayfair), all of Pender County (including Burgaw, Surf City, Hampstead and Topsail Beach) and all of Brunswick County (including Bald Head Island, Bolivia, Calabash, Leland, Shallotte, Southport, Saint James, Ocean Isle, and Oak Island).

Construction Laws May Vary by State

Construction Law ServicesWilmington attorney, Wes Jones appreciates that managing a construction project is a tall order. Hiring subcontractors, securing surveyors and inspectors, purchasing materials and acquiring all the necessary permits for a building job are just the beginning. Dealing with weather, illness, and scheduling glitches present their own set of challenges.

When builders agree to work across state lines, which they often do, they may be surprised to learn that construction regulations can vary greatly. In fact, there may be a number of legal issues of which they are completely unaware. Because the legal aspects involved with both commercial and residential construction can differ from state to state, securing the services of an attorney familiar with those laws is strongly advised.

Builders that accept projects in North Carolina are often shocked to discover that individuals with very minimal ties to the job can sue them. For example, if the construction firm caused any delays, loss of profits, or was found negligent, someone outside of the “contractual privity” category is able to sue. Although many states make contractual privity a requirement, which serves to define the relationship and accountability between the parties in a construction contract, North Carolina does not in some cases. Other matters that are not the same among all 50 states are statutes of limitations and statutes of repose. These define how long a builder can be found responsible and be held accountable for damage or injuries suffered on, through, or by the construction site.

Even if you are familiar with the current laws on the books that govern construction practices, having an experienced attorney will help you stay one step ahead, especially when changes are made or new laws are enacted. For example, here along the Cape Fear coast, many were caught off guard with the new flood insurance legislation and how it impacts both new construction and renovation projects.

To avoid any surprises and for optimum piece of mind, it just makes sense to get the facts from an experienced attorney who is familiar with the legal requirements of the state you’ll be working in. Throughout southeastern NC and the greater Wilmington area, Wes Jones has a proven track record in Construction Law and Litigation.

If you want to be confident that you are in full compliance with the law, please schedule a meeting with Wesley Scott Jones. You can also learn more about his practice and the other types of cases he handles by browsing his Practice Areas and Services.

Wes’s office is located in Lumina Station, just before the Wrightsville Beach drawbridge, at 1904 Eastwood Avenue, Suite 30. To make an appointment or get more information on the services Attorney Wes Jones provides, please call 910-256-5800.

Proper File Management in Your Construction Firm

Construction FilingIn today’s world of hi-tech communication, some may think the concepts of establishing a “paper trail” and “getting it in writing” are almost obsolete. Some construction professionals assume it’s enough to have a well-executed contract and rely on text messages and e-mails to communicate with clients, vendors, inspectors, and subcontractors during a building project. Regardless of the job, there should always be a solid documentation process that is well understood and executed to the letter by you and all of your employees.

For the uninitiated, grasping the amount of paperwork involved for a building project, even a simple one-can be mind-boggling. From the job’s initial proposal to the final walk-through, the number of documents and forms is sizeable. Consider a few of these items that must be accounted for, especially if there are ever any legal issues that arise, before, during, or even after the work is complete: proposals, estimates, supply receipts, surveys, inspections, pay stubs, building plans, and all correspondence among all of the parties involved in the endeavor. Communications that rely on digital media and e-mails must also be accounted for.

When a business owner understands what is known in legal terms as the “discovery process,” he or she can then appreciate why thorough documentation of every step is vital. Of course no one ever expects to face legal trouble. However, in the construction industry, there are just too many factors at play to take any chances. To set things up for smooth sailing, there are just a few necessary procedures to follow. The idea of such in-depth record keeping may seem over the top at first, however, if and when a lawsuit rears its ugly head, you’ll be glad the system was in place.

In the act of discovery, information is obtained using all means and methods. This fact-finding is an integral part of prosecuting or defending a lawsuit. Questions are posed by the plaintiff’s legal team, and with the assistance of your attorney, the answers are provided. This will require the production of any or all documents that pertain to any or all phases of the project. It is important to understand that in the discovery period, items may be requested that do not even seem relevant to the case, however, you will be responsible for making them available. A few examples of typical requested articles are:

  • Hand written notes, personal or business calendars, and e-mails
  • Communications in any form sent by one of your employees to anyone involved in the job, from the client to the subcontractors. Even if the individuals had a friendship or causal acquaintanceship, their transmissions may be viewed as admissible in a court of law.
  • Meeting minutes

For the sake of discovery, all documents, including notes jotted down on post-in notes or scrap paper and personal journals can be requested.

To cover all your bases, a system for recording all aspects of the project must be in place.

Creating a system such as this is just as important as developing your contractual documents and is another example of why retaining legal counsel is essential for success. It’s a preventive measure that equates to wearing a seat belt, bike helmet, or installing smoke alarms. Protect yourself with an ironclad document filing system!

Here are the steps to consider:

  • Familiarize each employee with the proper procedures for acquiring and filing all paperwork, including e-mails. Ensure that everyone is using the same system for filing whether it’s for paper records or e-mail folders. Also stress that keeping detailed, chronological information is the only way to do it. Encourage everyone to ask if they are ever unsure about the company’s record-keeping system.
  • Stress the importance of establishing detailed and clear contracts and proposals. The procedure should follow a logical progression and if one step is skipped, such as unclear points that go unanswered or failure to sign a document, then the process stops until the issue is resolved. Consistency and accountability are the keys to success.
  • Know your employees and monitor any inappropriate behavior such as posts on social media sites. Also, insist that they enter all work related items into the company’s computer system rather than keeping it on their personal computer, even if the computer was provided by the firm.
  • Keep a special, separate file marked “Problems” or “Unresolved Issues”. If any one, including a client, supplier, subcontractor, employee or inspector voices concern or displeasure during any phase of the work-document it. Having access to such details could be vital if the issue escalates and winds up in a legal dispute.
  • When matters from the “Problem File” result in further action being taken, move the paperwork regarding those activities to another special folder labeled, “Legal”. This information should also be kept separate from the other files and ideally in a different location to prevent inadvertent disclosure.
  • Finally, explain to all employees that when creating e-mails, letters, faxes, social site posts, or even phone conversations, that the “Grandmother Rules” should be followed. That is, mind your manners, follow the Golden Rule, when in doubt-don’t, and treat everyone with respect.

If you would like to discuss ways to mange your construction firm’s files and important papers, Wilmington attorney Wesley Scott Jones is just a phone call away. Wes has represented numerous construction and home building  professionals in the greater Wilmington area, including architects, developers, contractors, and subcontractors. His office is located in beautiful Lumina Station across from Landfall just before the Wrightsville Beach bridge in Wilmington, NC. Please, call today for a free consultation – 910-256-5800.

New Hanover County Construction Litigation

Construction BlueprintsThis has been a busy year for home builders and subcontractors in New Hanover County and the surrounding area. In fact, compared to this time last year, construction activity is up between 4 and 5 percent.  There are scores of new residential developments going up, both in the single-family and multi-family markets. Current homeowners are also enlisting the help of home improvement professionals to update and upgrade their properties.

In the multi-faceted process of home construction, whether the task at hand is new construction, renovation, or an addition, sometimes things just don’t go according to plan. As a local attorney for contractors in Wilmington, Wesley Scott Jones understands all too well the variety of difficulties that can crop up during construction projects. You may have had excellent communication and an ironclad contract, but unforeseen issues can cause major financial headaches plus major inconveniences.

Here are just a few examples of problems that can arise:

  • faulty construction
  • improper permitting
  • work delays
  • bid protests
  • labor issues
  • failure to meet local codes and/or OSHA requirements
  • construction defects that can lead to safety and health problems such as leaks and mold
  • HOA disputes

Wes has represented numerous building professionals in the greater Wilmington area, including architects, developers, contractors, and subcontractors. If you have concerns that could require an experienced, knowledgeable litigator, please contact our office.

We are located in beautiful Lumina Station across from Landfall just before the Wrightsville Beach bridge in Wilmington, NC. There is easily accessible, free parking. Call us today for a free consultation: 910-256-5800.

Defective Workmanship or Design

Construction BlueprintsAs builders in New Hanover County continue to see increased activity on the construction front, those in the industry can also expect to see more potential lawsuits alleging defective design and workmanship. Local attorney, Wes Jones is skilled in addressing this area of construction claim. Since 1994, Wes has represented Wilmington, NC clients in the construction and real estate business, including architects, developers, designers, general contractors, subcontractors, and material manufacturers.

In considering counsel by Attorney Jones, consider that he has extensive experience in working with insurers, multiple parties, individual homeowners, and community associations. Wes has handled numerous cases involving a variety of complex construction and design issues such as, infrastructure problems, defective building materials, water damage as a result of alleged construction or design defects, and mold concerns.

“If something can go wrong it probably will.”  With all of the steps and complex components required for even the most simple projects, it does seem that the aforementioned “Murphy’s Law” was written especially for those involved in the phases of construction and design. Of course no one in the business ever sets out to become the subject of a defective workmanship controversy. However, piece of mind is knowing that should you find yourself in such a situation, Attorney Wes Jones can help. Should problems arise, Jones urges any parties involved to first try and resolve the situation amicably on their own. If that does not work, dispute resolutions of this type are one of his specialties.

Upon choosing Wes for your dispute, he will evaluate your case and consider any and all viable strategies for resolving the matter to your satisfaction. Wes also works with HVAC installers, brick masons, electricians, and plumbers.  Learn more about his experience with Construction Law in Wilmington, NC.

If you would like to learn more, please contact the office of Wesley Scott Jones910-256-5800