Wisconsin Contractors Facing Nonpayment

What traffic is to major metropolitan areas during rush hour disputes are to the construction industry. They're more than likely always there, whether or not they're wanted. While cars and other vehicles are at a standstill, it's payments in construction that are logjammed. Traffic congestion happens for all sorts of reasons, such as accidents or slowing down to let a pedestrian cross. The same can be said for the construction industry. Disputes may arise for a number of reasons: wrong product delivered, shoddy work, etc. When this happens, the downflow of payments dries up and causes a stressful situation between the contractor, subcontractors, material suppliers and others involved on the construction project.

A project in Prairie du Chien, Wisconsin, is one of the latest construction sites to face difficulties of nonpayment. According to the Courier Press, at least 10 contractors are missing money, and mechanic's liens were filed by at least four contractors late in 2018 and earlier this year. "There are different reasons why others have not been paid, but the short answer is that payment is not due," said the general counsel for Commonwealth Development of Fond du Lac, part of Lawler School Lofts LLC, in the article. Lawler School Lofts is the nearly $9 million project facing the liens.

As with many states, where an entity sits within the construction supply chain determines what needs to be accomplished in order to have full lien protection under a state's law. In the case of Wisconsin, prime contractors on private projects have 10 days after first furnishing to give the owner a copy of the written contract, but if no contract is entered into, prime contractors have 10 days to provide a separate notice to owner. A perfect notice example is laid out in Section 779.02(2)(a) of the Wisconsin statutes.

Nonprime contractors have 60 days from first furnishing to provide the notice, with some exceptions. One occurs when the lien claimant, who is not a prime contractor, has contracted directly with the owner. If lien claimants fail to give the required notice, they lose their lien rights. However, if the notice to owner is served late, rights are still available but for only labor, services, materials, etc. furnished after the late notice is received by the owner.

Another tricky portion of the statute for lien claimants to remember is that liens are valid unless waived by the claimant or if a payment bond is furnished by the prime contractor in accordance with the statute. Not all lien rights are eliminated, however. Prime contractors still have valid liens if the bond is furnished.

-Michael Miller, managing editor

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Monday, 27 January 2020

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