Masonry Magazine November 2007 Page. 51
Contractors who are in a weakening position may feel particularly threatened by bond claims.
Mechanics' lien claims are particularly powerful as they allow you to claim remedies directly against the underlying project rather than a general contractor who may have financial issues. In particular, the timing of lien claims may permit you to take advantage of an owner's upstream requirements to refinance or face huge balloon payments. This is particularly true in a residential context in which temporary construction financing may be in place that needs to be replaced with permanent financing. I have had several cases from which clients recovered all of their owed funds, plus costs and attorney's fees, due to the timing of liens compared to financing requirements.
Similarly, timing and tone of assertion of bond claims can create a great deal of leverage. Contractors who are in a weakening position may feel particularly threatened by bond claims. Serial claims against bonding companies may result in the bonding company dramatically reducing or even eliminating bonding capacity. Depending on the market involved, a reduced bonding capacity may impact a contractor's ability to bid on and obtain profitable work. Understanding the context of bonding capacity can assist in evaluating if and when to raise a bond claim against a general contractor as opposed to the more traditional route of claiming a breach of contract. Naturally, the leverage of bond claims can work in both directions if you are bonded.
Inherent balancing act
THE ULTIMATE question is how to maximize the leverage created by your potential remedies. You need to ensure that you take the steps necessary to perfect your claims to keep them alive. You also need to ensure as a masonry subcontractor that you are able, if possible, to maintain solid and positive relations with the general contractors with whom you subcontract. This means that you will always be engaged in a balancing act of timing between communication and conciliation on the one hand and self-preservation and maintenance of remedies on the other. A healthy understanding of both the current business climate and the timing and leverage created by assertion of your remedies will help you walk this balance beam more effectively.
Timothy R. Hughes, Esq., is the principal of the northern Virginia law firm of Hughes & Associates PLLC, specializing in construction litigation, corporate and business-related representation, and complex civil litigation. Contact Hughes at tim@hughesnassociates.com or 703-671-8200.
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