By: Joseph P. Asselta, Esq.,
Partner, Agovino & Asselta, LLP
A recent amendment to the New York State Finance Law extends the time in which to bring an action on a labor and material payment bond required to be issued in connection with public improvement projects. The amendment now permits suits to be filed within one year from the date on which the public improvement was completed and accepted by the public owner. The statute previously measured the one year time period from the date when final payment became due under the claimant's subcontract.
This amendment is intended to avoid inconsistent court rulings as to when final payment actually became due under a particular subcontract by expanding the time within which claims for nonpayment may be brought. By doing so, it also eliminates the need for early construction trades to file suit before a project is even finished.
It must be pointed out, however, that the amendment does not change the statutory requirement that those without a direct contract with the prime contractor that issues the payment bond (i.e., sub-subcontractors and suppliers to subcontractors) must still provide written notice of their claim within 120 days from the date on which they last provided their labor or material. Therefore, while everyone's time to sue on the bond is now extended beyond project completion and acceptance, there are those that will still need to take affirmative action to protect and preserve their bond rights prior to project completion. Failure to timely take such action will bar the claim against the bond.
Similar expansive rights were also recently given to those seeking payment on private improvement projects, extending the time within which a mechanic's lien may be filed. While a notice of lien must still be filed within eight months of the date when the last item of work was performed or materials were furnished by the lienor (or within four months, if the project involves a single-family dwelling), an amendment to the Lien Law now permits liens for retainage to be filed within ninety (90) days after the date the retainage was due to be released.
Since retainage is often not due until well after a contractor last provided labor or materials to a project, this amendment is clearly intended to resolve the unenviable choice a contractor previously faced of having to file a lien for its not yet due retainage or waiting until its retainage later becomes due, only to discover that the retainage is not going to be paid and that its lien rights have expired.
With this change, however, it is certain that there will be much disagreement as to when retainage is due to be released under a particular contract. Additionally, there is sure to be some confusion where a contractor is owed both contract/change order money and retainage and mistakenly assumes that it has additional time to file a lien for all of its money. The extension of time in the amendment specifically applies to retainage only.
