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).

RESIDENTIAL CONSTRUCTION CLAIMS IN NORTH CAROLINA

Attorney for General Contractor, Wilmington NC

Residential Construction Claims come about within a variety of contexts depending upon who you are in the process:

1. Homeowners:

Common claims that existing or potential Homeowners can have include claims against the General Contractor, a Design Professional (Architects, Engineers, Landscape Architects, Surveyors, etc.), a Subcontractor, a Material Supplier or a Real Estate Agent, among others.

  • Claims against the General Contractor include:  Breach of Contract, Delayed Performance, Breach of Express Warranties, Breach of Implied Warranties, Breach of Warranty of Workmanlike Performance, Breach of Warranty of Habitability, Negligence, Negligent Construction, Negligent Supervision, Negligent Inspection of the Work, Negligent Selection of Materials, Misrepresentation, Fraud, Unfair and Deceptive Trade Practices, and Failure to Be Properly Licensed.
  • Claims against a Subcontractor or Material Supplier include:  Negligence, Breach of Implied Warranty of Merchantability and Negligent Selection of Materials.
  • Claims against a Real Estate Agent include:  Breach of Contract, Breach of Fiduciary Duty, Breach of Duty of Loyalty and Obedience, Breach of Duty of Skill, Care and Diligence, Failure to Disclose Material Facts, Improper Accounting of Funds, Negligence, Fraud, and Unfair and Deceptive Trade Practices.

2. Builders and Contractors:

Common claims that Builders and Contractors can have include claims against the Homeowner, a Design Professional, a Subcontractor, or a Material Supplier, among others.

  • Claims against the Homeowner include:  Breach of Contract, Failure to Pay, and Interference with Performance of Contract.
  • Claims against a Design Professional include:  Breach of Contract, Breach of Warranty of Plans and Specifications, Negligent Preparation of Plans and Specifications, Negligent Supervision, and Negligent Inspection.
  • Claims against a Subcontractor or Material Supplier include:  Breach of Contract, Breach of Implied Warranty of Merchantability, Negligence, and Negligent Selection of Materials.

3. Subcontractors and Material Suppliers:

Common claims that Subcontractors and Material Suppliers can have include claims against the Homeowner, claims against the Builder/Contractor, and claims against each other.

  • Claims against the Homeowner include:  Failure to Pay, Claim of Lien On Funds, Claim of Lien On Real Property, and Signing a False Lien Waiver.
  • Claims against the Builder/Contractor include:  Breach of Contract, Failure to Pay, Claim of Lien On Funds, Claim of Lien On Real Property, and Signing a False Lien Waiver.
  • Claims against each other include:  Breach of Contract, Failure to Pay, Claim of Lien On Funds, Negligent Selection of Materials, and Product Liability.

If you anticipate or are experiencing a Construction Law Dispute with respect to the construction or sale of a Residential Home, call an experienced construction attorney for advice and help.  Call Wesley Jones now at 910-256-5800 for a free telephone consultation.

Wesley Jones is a Construction and Litigation Lawyer serving all of Southeastern North Carolina including New Hanover County (e.g. Wilmington, Kure Beach, Wrightsville Beach, Carolina Beach and the areas of Ogden, Masonboro, Myrtle Grove, Landfall, and Mayfair), all of Pender County (e.g. Burgaw, Surf City, Hampstead and Topsail Beach) and all of Brunswick County (e.g. 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.