Glossary of terms used on this site

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Acceptance (Final) -

The owner's acceptance of the project from the contractor upon the architect or engineer's certification that it is complete and in accordance with the contact requirements. Final payment usually is what confirms final acceptance unless otherwise stipulated in the contract

Action -

Another term for a lawsuit.

Allowance(s) -

A sum of money set aside in the construction contract for items which have not been selected and specified in the construction contract. For example, selection of tile as a flooring may require an allowance for an underlayment material, or an electrical allowance which sets aside an amount of money to be spent on electrical fixtures.

American Samoa -

Requires contractors to post bonds for security for territorial public works contracts. Section 10.0250 of the American Samoa Administrative Code states the conditions under which bonds are required: Performance and payment bonds are required for all territorial construction works contracts that exceed $100,000. American Samoa has not adopted a Mechanic's Lien statute due, in part, to the difficulty in reconciling a lien remedy with the Samoan Constitution's stated policy against the alienation of land.

APN Number or Assessor's parcel number -

An assessor's parcel number, or APN, is a number assigned to parcels of real property by the tax assessor of a particular jurisdiction for purposes of identification and record-keeping. The assigned number is unique within the particular jurisdiction, and may conform to certain formatting standards that convey basic identifying information such as the property type or location within the plat map. In the United States, APNs are typically assigned by the local taxing authority, such as the city or county within which the property is located. Many taxing authorities will provide property tax information to the public, indexed by APN.
Source: Dictionary30

Arbitration -

A non-court procedure for resolving dispute using one or more neutral third parties -- called the arbitrator or arbitration panel.

Assignee -

A person to whom a property right is transferred.

Assignment -

A transfer of property rights from one person to another, called the assignee.

Assignments For The Benefit Of Creditors -
Attorney Fees -

The payment made to a lawyer for legal services. These fees may take several forms:

  • Hourly
  • Per job or service - for example, $160 to serve a notice
  • Contingency - the attorney collects a percentage of any money won for the client and nothing if there is no recovery, or
  • Retainer - usually a down payment as part of an hourly or per job fee agreement

Back Charges -

Generally arising from a dispute, an off set charged back to a creditor for non-performance.

Bankruptcy -

A legal preceding that relieves the responsibility of paying debts or provides protection while attempting to repay debts. There are two types of bankruptcies liquidation, in which the debts are wiped out (discharged) and reorganization, in which you provide the court with a plan for how you intend to repay your debts. For both consumers and business, liquidation bankruptcy is called Chapter 7. For consumers, reorganization bankruptcy is called Chapter 13. Reorganization bankruptcy for consumers with an extraordinary amount of debt and for businesses is called Chapter 11. Reorganization bankruptcy for family farmers is called Chapter 12.
Source: Nolo

Bid Bond -

A form of security where the contractor i.e. the principal guarantees the obligee i.e. the owner, that the principal will honor the bid and the sign the contract, if bid is awarded. In default of the bid the owner may sue both the obligator i.e. the principal and the surety. This bond guarantees that the bidder will carry on the contact at the bid price if bid is awarded.

A form of security offered by a bidder to the party soliciting the bid which guarantees that the bidder will enter into a contract within a specified period of time and will furnish any required performance and labor and material bonds.

Bond -

A contract or a guarantee agreement which contains the promise of a third party to pay a fixed sum if certain acts are not performed. See Payment Bond and Performance Bond.

Bond Claim -

The state specific statutory process of "making a claim" against a payment bond. A two or three step process depending on the state:

  • Step 1 is often a certified bond claim notice of the potential claim to the principal (usually the prime contactor).
  • Step 2 is often the bond claim which generally requires additional notification to the bonding company and primesuit against the payment bond.

Each step will have specific time frames and requirements. "Make a claim" does not mean "simply sending a letter to the bond company advising you are owed money." It ultimately means, get an attorney and file suit.

Bond Off / Bond Around -

The need for this type of bond arises when a construction lien is asserted against a piece of property and the person contracting for the work wishes to have it removed while its validity, or the validity of the claim underlying it, is contested. The law permits the owner of the real property to "bond off" the lien by providing a mechanic's lien bond for the benefit of the lien clamant in an amount equal to some multiple of the sum claimed due to the lien. In addition the courts frequently require the bonding company to be Treasury Listed. The lien claimant can look to the bond for payment.

Bonding Capacity -

Refers to the ability of a contractor to obtain surety bonds. It can refer to the maximum aggregate dollar amount of bonds that a contractor can obtain from a surety at any given time or to the highest individual dollar amount of a bond that a contractor can obtain for its surety during that same period.

Change Orders -

In project management, a change order is a component of the change management process, whereby changes from the agreed upon scope (limitations) of the project's work require a mutual agreement. A project manager then typically generates a change order that describes the new work to be done (or not done in some cases), and the price to be paid for this new work. Once this change order is submitted and approved it generally serves to alter the original contract such that the change order now becomes part of the contract.

Collateral -

Property that guarantees payment of a secured debt.

Complaint -

Papers filed with a court clerk by the plaintiff to initiate a lawsuit by setting out facts and legal claims (usually called causes of action). In some states and in some types of legal actions, complaints are called petitions and the person filing is called the petitioner. To complete the initial stage of a lawsuit, the plaintiff's complaint must be served on the defendant, who then has the opportunity to respond by filing an answer.

Conditional Waiver and Release Upon Final Payment -

Use this type of form when the claimant is required to execute a waiver and release in exchange for or in order to induce the payment of a final payment and the claimant has not been paid. This release is only binding if there is evidence of payment to the claimant.

(See Waiver)

Conditional, Partial Waiver and Release -

Use this type of form when the claimant is required to execute a waiver and release in exchange for or in order to induce the payment of a progress payment and the claimant has not been paid.

A release of lien rights may be conditioned upon:

  1. Receiving a check for a specific amount
  2. Receiving a check within a specific time period
  3. The check clearing the bank
  4. Debtor not filing for bankruptcy within 90 days of receipt of payment.
  5. A conditional waiver is not effective until and unless the conditions are met.

(See Waiver)

Construction Contract -

An agreement entered into by two parties under the terms of which one party agrees to perform a specific job for which the other party agrees to pay. Contract documents attached to and/or stated (as per plans and specs) in the agreement form integral parts of the contract.

Construction Contract Addendum -

A form returned to the customer in conjunction with accepting a purchase order or sub contract; designed to reinstate varies critical terms and conditions. It's a good policy to have the Addendum signed before signing the Purchase Order. (Download PDF)

Contractor's License Requirements -

Many states require contractors of various types to be licensed to provide various trades and services. The following link details state by state requirements.

Contractor's License Reference Site

Court Costs -

The fees charged for the use of a court, including the initial filing fee, fees for serving the summons, complaint and other court papers, fees to pay a court reporter to transcribe deposition and in-court testimony and, if a jury is involved, to pay the daily compensation of jurors. Often costs to photocopy court papers and exhibits are also included. Court costs must be paid by both parties as the case progresses, but ultimately, the losing party will be responsible for both parties' costs.

Construction Trust Fund -

Although varying state to state generally any moneys paid under a contract by an owner to a contractor, or by the owner or contractor to a subcontractor for work done or materials furnished, or both, for or about a building by any subcontractor, shall be held in trust by the contractor or subcontractor, as trustee, for those subcontractors who did work or furnished materials, or both, for or about the building, for the purposes of paying those subcontractors. Generally payment must be made to the contractor or subcontractor to establish a "trust". Through these statutes a supplier's recourse to payment may extended to the personal liability of the owner, contractor or subcontractor.

Debtor -

A person or entity (such as a corporation) who owes money.

Default Judgment -

At trial, a decision awarded to the plaintiff when a defendant fails to contest the case. To appeal a default judgment, a defendant must first file a motion in the court that issued it to have the default vacated (set aside).

Deposition -

An important tool used in pretrial discovery where one party questions the other party or a witness in the case. Often conducted in an attorney's office, a deposition requires that all questions be answered under oath and be recorded by a court reporter, who creates a deposition transcript. Increasingly, depositions are being videotaped. Any deponent may be represented by an attorney. At trial, deposition testimony can be used to cast doubt on a witness's contradictory testimony or to refresh the memory of a suddenly forgetful witness. If a deposed witness is unavailable when the trial takes place -- for example, if he or she has died -- the deposition may be read to the jury in place of live testimony.
Source: Legalglossary.org

Discovery -

A formal investigation -- governed by court rules -- that is conducted before trial. Discovery allows one party to question other parties, and sometimes witnesses. It also allows one party to force the others to produce requested documents or other physical evidence. The most common types of discovery are interrogatories, consisting of written questions the other party must answer under penalty of perjury, and depositions, which involve an in-person session at which one party to a lawsuit has the opportunity to ask oral questions of the other party or her witnesses under oath while a written transcript is made by a court reporter. Other types of pretrial discovery consist of written requests to produce documents and requests for admissions, by which one party asks the other to admit or deny key facts in the case. One major purpose of discovery is to assess the strength or weakness of an opponent's case, with the idea of opening settlement talks. Another is to gather information to use at trial. Discovery is also present in criminal cases, in which by law the prosecutor must turn over to the defense any witness statements and any evidence that might tend to exonerate the defendant. Depending on the rules of the court, the defendant may also be obliged to share evidence with the prosecutor.

Easement -

A formal contract which allows a party to use another party's property for a specific purpose. e.g. A sewer easement might allow one party to run a sewer line through a neighbors property.

Execute -

To finish, complete or perform as required, as in fulfilling one's obligations under a contract or a court order.
The Free Dictionary

Extension -

Some states provide for the extension of lien deadlines through the recording of a Notice Extending Time to File Lien Statement. Colorado and New York are two examples of "extension" states.

Extra or Extra Work -

An additional construction item that is not included in the original scope of the contract. Extras usually entail an item of work involving additional cost.

Federal Projects -

Federal projects are protected through The Miller Act. The Miller Act requires a contractor on a federal project to post two bonds: A Performance Bond and a Labor and Material Payment Bond. The surety company issuing these bonds must be listed as a qualified surety on the Treasury List, which the U.S. Department of the Treasury issues each year. This list is also known as the Circular 570. List of approved sureties

Field Order -

A written order issued by an architect during contact performance effecting a minor change in the work not involving an adjustment to the contract sum or contract time.

First Furnishing -

The first day labor or material arrives at the job site.

Fixed price contract -

A contract with a set price for the work. See Time and Materials Contract.

Foreclosure -

Mechanic's liens are enforced exclusively through judicial foreclosure sales, i.e., through court proceedings similar to mortgage foreclosures. The court must determine whether the requirements of the statute have been met and, if so, the priority of the mechanic's lien being foreclosed relative to the other liens or encumbrances on the title. Once that is determined, the court will order the property sold and the proceeds of the sale applied to the liens in the order of their priority. A foreclosure is a process, not an event can take several months to a year to complete.

Full Price Lien States -

Lien rights are not limited to unpaid funds between the owner and prime contractor. By timely and accurately serving a notice to owner and timely and accurately filing a mechanic's lien the owner is subject to double jeopardy (paying twice).

Guarantor -

An entity which makes a legally binding promise to either pay another entity's debt or perform another entity's duty if that entity defaults or fails to perform. The guarantor gives a 'guaranty,' which is an assurance that the debt or other obligation will be fulfilled.

General Conditions -

The part of the contract document which sets forth many of the rights, responsibilities and relationships of the parties involved or of the contract.

General Contractor -

Also know as a prime contractor or original contractor: Any contractor on a project having a contract directly with the owner. Generally having a direct contract for an entire project; the contractor may in turn assign portions of the work to subcontractors.

Hearing -

Any proceeding before a judge or other magistrate (such as a hearing officer or court commissioner) without a jury in which evidence and/or argument is presented to determine some issue of fact or both issues of fact and law.

Homestead -

The house and lot of a homeowner which the head of the household (usually either spouse) can declare in writing to be the principal dwelling of the family, record that declaration of homestead with the County Recorder or Recorder of Deeds and thereby exempt part of its value (based on state statutes) from judgment creditors. A similar exemption is available in bankruptcy without filing a declaration of homestead.

Hypothec -

A general mortgage on the land and the building in construction or in renovation.

Inchoate Lien -

A lien that has not yet been perfected. For example, in construction, an inchoate lien, may arise as soon as a contractor begins work or supplies materials to the project. In a state without an inchoate lien, a sale of the property or a bankruptcy may cut off lien rights.

Interlocutory Mechanic's Lien -

A provisional lien, not intended to be final until future action is taken.

Job Information Sheet -

"The credit application for a project". Project detail that should be collected up front in order to maintain lien rights.

Click here to view the Job Info sheet

Joint Check -

An agreement whereby the owner will issue checks payable jointly to the prime contractor and to the subcontractor. This process can work to the subcontractor's advantage, because it prevents the prime contractor from using funds in trust for the subcontractor to satisfy other obligations.

Joint Check – Selling Contractor
Joint Check – Selling Subcontractor
Joint Check – Selling Minority contractor

K -

The shorthand symbol for 'contract' used almost universally by lawyers and law students.

Ladder Of Supply -

A term used to describe the "chain linked" entitles included in a construction project. The ladder of supply includes the lender, project owner, prime contractor, subcontractor and supplier/laborer. Architects are often considered a peripheral member of the ladder of supply.

Landlord -

The owner of any real estate, such as a house, apartment building or land, that is leased or rented to another person, called the tenant.

Last Furnishing -

The last day labor or material arrives at the job site. Many states define last furnishing as "substantial completion". Do not rely on small shipments, "extras" or warranty work to extend notice and lien deadlines.

Leasehold Interests -

If you do work for a tenant, a resultant mechanic's lien is likely to attach only to the interest of the person for whom the improvement is contracted to be made; or restated, your lien attaches to the tenant's interest in the property and not to the property itself. With that in mind, your lien must state that you are filing against the tenant's interest in the property because you have no lien right against the owner's interest.

Improvements conducted with the owner's knowledge are deemed to be at the owner's instance, unless the owner records and posts a noticed of non-responsibility. Where property is subject to a lease, and the work is done at the tenant's request and without the landlord's knowledge, the leasehold interest alone is subject to a lien claim. In some instances the claimant may seek an order from the court for removal of any improvement. Upon establishing that the property will be in the same or similar condition as prior to the performance of the work for which the lien is claimed, the court may authorize the removal. The party foreclosing the lien may be entitled to reasonable costs for removing any improvements or for restoring the property to its previous condition.

If the work is deemed performed at the owner's instance, the lien attaches to the landlord's interest, the real property, as well as the leasehold interest of the tenant. A notice of non-responsibility will not protect an owner who caused the work or improvement or significantly gained from the improvement.

TIPS FOR CONTRACTING WITH TENANTS

  1. Collection of accurate job information is critical; know for whom you are working. Are you contracting with a tenant, an owner, or a sub of a tenant?
  2. Carefully consider the tenant and your customer's ability to pay, knowing that you will likely not have a mechanic's lien of value to secure payment.
  3. Ensure that your lien names the proper party. If you contracted with the tenant, then your lien should be against the tenant's interest in the property.
  4. Remember that a properly filed lien against a tenant may cause the landlord to pressure the tenant to pay you.
  5. Whenever possible, include the owner in the contract. Making the owner a party will allow you to attach the owners land instead of just the tenant's interest.
Lien Waiver -

A document signed by a contractor, subcontractor, or other supplier of goods or services stating that the supplier has been paid for the work performed or goods supplied and waiving the supplier's right to file a claim against the property.

(See Waiver)

Liquidated Damages -

Contracts often include completion dates to which the contractor agrees. In the event there is a delay in the contractual completion date, the liquated damage clause obligates the contractor to pay the owner a daily rate that compensates the owner for damages, assuming the contractor and the not the owner caused the delay.

Lis pendens -

Pronounced 'Lay penden', is Latin for 'suit pending.' This may refer to any pending lawsuit or to a specific situation with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded. This notice secures a lien plaintiff's claim on the property so that the sale, mortgage, or encumbrance of the property will not diminish lien plaintiff's rights to the property, should the lien plaintiff prevail in its case. In some jurisdictions, when the notice is properly recorded, lis pendens is considered constructive notice to the other litigants or other unrecorded or subordinate lienholders.
Source: Wikipedia

Low Bidder -

A contractor who is wondering what he left out.

Managing Agent -

Any employee of a contractor or subcontractor who has direction over or control of money held in trust.

Material Supplier -

Any person who furnishes materials or supplies to be used or consumed in any work of improvement.

Mechanic's Lien -

A legal claim placed on real estate by someone who is owed money for labor, services or supplies contributed to the property for the purpose of improving it. Typical lien claimants are general contractors, subcontractors and suppliers of building materials. A mechanics' lien claimant can foreclose to have the real estate sold at auction and recover the debt from the proceeds. Because property with a lien on it cannot be easily sold until the lien is satisfied (paid off), owners have a great incentive to pay their bills.
Source: Nolo

Mechanic's Lien Process -

The basic aim of the lien process is straightforward. To provide a form of security for the payment of money owed to persons such as contractors, subcontractors, workers and material suppliers who add value to a building that is under construction. Full Text

Miller Act -

Federal bond statute requiring a payment and performance bond on all projects over $100,000. 'Before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government the following bonds, which become binding when the contract is awarded: (1) Performance bond. (2) Payment bond.' -Miller Act 40 U.S.C. § 3131 The bond must be with an approved surety company. Listing of Approved Sureties: (This list is also known as the Circular 570.)

Who Is a Subcontractor Under the Miller Act?

Public-private partnerships (P3s) raise concerns for subcontractors and suppliers regarding payment assurances. The "blending" of private and public financing and ownership of construction and real estate poses unique risks for subcontractors and suppliers, who cannot file mechanic's liens on projects where the federal government owns the land. At the same time, subcontractors and suppliers don't have the assurances of payment bonds when P3s are privately owned or financed. On such projects, no Miller Act bond is required.

MLBS -

NACM's Mechanics Liens & Bond Services brings best-in-class service options to today's construction credit professional. References.

Mortgage -

A loan in which the borrower puts up the title to real estate as security (collateral) for a loan. If the borrower doesn't pay back the debt on time, the lender can foreclose on the real estate and have it sold to pay off the loan.

Motion For Summary Judgment -

A final decision by a judge that resolves a lawsuit in favor of one of the parties. A motion for summary judgment is made after discovery is completed but before the case goes to trial. The party making the motion marshals all the evidence in its favor, compares it to the other side's evidence, and argues that a reasonable jury looking at the same evidence could only decide the case one way--for the moving party. If the judge agrees, then a trial would be unnecessary and the judge enters judgment for the moving party.

Non-Statutory Notice -

A preliminary notice to owner served, but not required by statute in one of the 15 direct-to-lien states. Non-statutory notices are used to leverage payment and avoid the need to file a lien.

Notice To Owner -

Also known as a Preliminary Notice - Notice given to various parties of the construction chain (lenders, owners, contractors and subcontractors) as a prerequisite to filing a lien claim. The notice was created as an identification process for the proactive protection of property owners. To reduce the impact of a notice to owner some credit mangers prefer to include a Pre-Lien Softening Letter.

Notice Of Commencement -

Applicable in Ohio, Michigan, Utah, Georgia, South Carolina, North Carolina and Florida the owner must do the following with the prepared notice of commencement:

  1. file the notice of commencement with the county recorder's office in the county where the project is located;
  2. provide a copy of the notice of commencement to the original contractor(s);
  3. post the notice of commencement at the project site;
  4. amend the notice of commencement to add any additional original contractors during the project;
  5. provide copies of the notice of commencement to any potential lien claimant requesting a copy.

The information is used by contractors and suppliers to prepare and service preliminary notices and mechanic's liens.
Source: Fortney & Klings

Notice Of Completion -

The Notice of completion can trigger an expedited mechanic's lien or suit deadline. Available in several states, a written notice, signed and verified by the owner or his agent, frequently contains all of the following:

  1. The date of completion (other than a cessation of labor).
  2. The name and address of the owner.
  3. The nature of the interest or estate of the owner.
  4. A description of the site sufficient for identification, containing the street address of the site, if any. If a sufficient legal description of the site is given, the validity of the notice shall not, however, be affected by the fact that the street address recited is erroneous or that such street address is omitted.
  5. The name of the original contractor, if any.

Notice Of Completion - need to link to article

Obligee -

The person that requires a bond. A real estate owner who requires a bond from the prime contractor is an obligee.

Or Equal -

A product, material or piece of equipment offered in place of a specified produce, material or piece of equipment.

Owner's Agent -

Anyone who was authorized or knowingly permitted by the owner to contract with someone else to improve the land.

P3s -

Private-public partnerships.  P3 projects historically used for transportation projects  but increasingly used for redevelopment and commercial projects such as Base Realignment and Closure and urban renewal projects, "blend" the private and public financing and ownership of construction and real estate. Under existing law payment assurances (liens and payment bonds) often don't apply. State P3 Legislation.

Pass-Through Claims -

Claims a subcontractor has that the general contractor should properly assess against the owner. They are called pass-through claims because the general contractor must pass the subcontractor's claim through to the owner, as there is no privity of contract between the subcontractor and the owner. Typically, there has been no conduct on the part of the generally contractor that contributed to the subcontractor's claim.

Pay-if-Paid Clause -

Clause contained in some subcontract conditioning the general contractor's payment to the subcontractor upon receipt of payment from the owner. In some states, these clauses are an absolute defense for the generally contractor against subcontractor claims if the clause clearly and unequivocally shifts the risk of owner non-payment to the subcontractor.  In some states enforcing such clauses the words "payment by the owner to the general contractor is a condition precedent to payment from the general contractor to the subcontractor".  Some states have determined that it is against public policy for a generally contractor to shift the risk of the owner non-payment to the subcontractor and view all such contract provisions as timing mechanisms and refuse to enforce them (see Pay When- Paid Clause).

Pay When Pay Clause -

Commonly included in subcontracts by many general contractors. The stated effect of these clauses is to permit the general contractor to withhold payment from its subcontractor for work performed until such time as the general contractor is paid by the owner.

Payment Bond -

Guarantees the owner that subcontractors and suppliers will be paid the monies that they are due from the principal. The owner is the obligee; the "beneficiaries" of the bond are the subcontractors and suppliers. Both the obligee and the beneficiaries may sue on the bond. An owner benefits indirectly from a payment bond in that the subcontractors and suppliers are assured of payment and will continue performance. On a private project, the owner may also benefit by providing subcontractors and suppliers a bond as a substitute to mechanics' liens or in most states has the option to bond-off a lien if later filed. If the principal fails to pay the subcontractors or suppliers, they may collect from the principal or surety under the payment bond, up to the penal sum of the bond. Recognize the penal sum in a payment bond can be less than the total amount of the prime contract. The required sum is usually spelled out in the local, state or federal statute. If the penal sum is less then the prime contract it's usually first in first paid. When the money runs out so does the protection for down stream contractors and suppliers, a particular concern on federal projects, often combined with a Performance Bond.

Payment schedule -

A pre-agreed upon schedule of payments to a contractor usually based upon the amount of work completed. Such a schedule may include a deposit prior to the start of work. There may also be a temporary 'retainer' (5-10% of the total cost of the job) at the end of the contract for correcting any small items which have not been completed or repaired.

Privity Of Contract -

Exists between parties in a contract. In the case of a mechanics' lien, the supplier of goods or services is not required to be in privity with the owner in order to have lien rights. With the exceptions of Alaska (Private Projects), Arizona (Private & Public), Idaho (residential), Hawaii (residential), Minnesota (Private), Missouri (Private), Oregon (residential), Tennessee (Private) , Washington (Private) and Wisconsin (Private), notice to owner requirements are waived when one is in privity with the owner.

Performance Bond -

Guarantees the owner that the principal will complete the contract according to its terms including price and time. The owner is the obligee of a performance bond, and may sue the principal and the surety on the bond. If the principal defaults, or is terminated for default by the owner, the owner may call upon the surety to complete the contract. Many performance bonds give the surety three choices: completing the contract itself through a completion contractor; selecting a new contractor to contract directly with the owner; or allowing the owner to complete the work with the surety paying the costs. The penal sum of the performance bond usually is the amount of the prime construction contract, and often is increased when change orders are issued.often combined with a Payment Bond.

Prefabrication -

To manufacture building materials for construction projects offsite that will be transported and erected at the jobsite. Lien rights for prefabrication can vary by state. Tests of lien rights in court concerning prefabrication are relatively new and a guiding body of case law regarding this approach to the construction industry has yet to be established.

Preference -

A payment made by a debtor to a creditor within a defined period prior to filing for bankruptcy "" 90 days (regular commercial creditors) and within 1 year for insider creditors (friends, family members, and business associates). Because a preference gives the creditor who received the payment an edge over other creditors in the bankruptcy case, the trustee can recover the preference (the amount of the payment) and distribute it among all of the creditors.

Preliminary Notice -

Also know as a "Notice to Owner" - Notice given to various parties of the construction chain (lenders, owners, contractors and subcontractors) as a prerequisite to filing a lien claim. The notice was created as an identification process for the proactive protection of property owners.

Principal -

The 'principal' who is to perform the construction contract, usually the prime contractor. The surety has no obligation unless the principal fails to fulfill the contract obligations.

Prime Contractor -

Also know as a general contractor or original contractor: Any contractor on a project having a contract directly with the owner. Generally having a direct contract for an entire project; the contractor may in turn assign portions of the work to subcontractors.

Private Construction -

Projects owned by an individual, partnership or corporation. Mechanic's lien rights are pursued in private construction.

Project Manager -

A project manager has the responsibility of the planning and execution of any project, typically relating to architecture and the construction project.

Public Construction -

Projects owned by a city, county, state or federal entity. Bond claim and public improvement rights are pursued in public construction.

Public Improvement Lien -

A lien on unpaid funds between the owner and prime contractor available in: California (stop notice), Colorado, Illinois, Kentucky, New Jersey (municipal mechanic's lien), New York, Ohio, South Dakota, Washington and Wisconsin.

Punch list -

Is generally a list of tasks, or a 'to-do' items. In the construction industry, a 'punchlist' is the name of a contract document used in architecture and the building trades to organize the completion of a construction project. In the U.S. construction industry, contract agreements are usually written to allow the owner to withhold (retain) the final payment to the general contractor as 'retainage'. The contractor is bound by the contract to complete a 'punch' list of uncompleted contract items stipulated in the contract agreement by the owner who often is represented by his designer. The designer (typically a licensed Professional Architect or Engineer), is usually also incorporated into the contract as the owner's design representative and agent, to verify that contract work has complied with the design. The typical construction contract agreement calls for the contractor, when he believes it to be so, to declare the construction project to have reached 'substantial completion' and request a 'pre-final' inspection. The architect then observes the project in a 'walk around' inspection and makes a 'punch' list of uncompleted or unsatisfactory work items owed to the project by the contract agreement (which also incorporates the design documents). Final contractor payment is made when the punchlist of items are addressed to meet the project design required by the owner('s) contract. Examples of punchlist items include damaged building components or problems with the final installation of building materials.

Purchase Order Addedum -

Quasi-Community Property -

A form of property owned by a married couple. If a couple moves to a community property state from a non-community property state, property they acquired together in the non-community property state may be considered quasi-community property. Quasi-community property is treated just like community property when one spouse dies or if the couple divorces.

Real Estate -

Land and the property permanently attached to it, such as buildings, houses, stationary mobile homes, fences and trees. In legalese, real estate is also called real property.
Source: Total Loan Services

Real Property -

Another term for real estate. It includes land and things permanently attached to the land, such as trees, buildings, and stationary mobile homes. Anything that is not real property is termed personal property.
Source: Total Loan Services

Remote Contractor -

Only three classes of persons are typically entitled to a mechanic's lien rights: general contractors, subcontractors, and those with a direct contract with subcontractors.  It doesn't matter whether the third tier claimant considers itself a supplier or a labor and materials subcontractor. Forth tier and lower entities are typically "Tiered Out" of lien rights.   Please see "Quick Links" "" Remote Contactor States for the 17 states which allow lien rights for remote contractors.

Residential Construction -

The definition varies by state but generally means any contract for the construction or improvement to a one or two family dwelling, or portion thereof, including any residential unit in a condominium, cooperative, townhouse development, horizontal property regime or planned unit development. Owner occupied is also frequent used to determine residential verses commercial construction.

Retainage -

Percentage of a payment withheld until a contract is adequately completed, generally 5% to 10% of contract.

Secretary of State Corporation and Business Entity Search Page -

You can find information on any corporation or business entity in the United States by performing a search on the Secretary of State website of the state or territory where that corporation is registered. Click here.

Schedule Of Values -

A detailed statement furnished by a construction contractor, builder or others outlining the portions of the contract sum. It allocates values for the various parts of the work and is also used as the basis for submitting and reviewing progress payments.

Secured Debt -

A debt on which a creditor has a lien. The creditor can institute a foreclosure or repossession to take the property identified by the lien, called the collateral, to satisfy the debt if you default. Source: Aledo Consulting Group, Inc.

Stop Notice -
Stored Materials -

Materials intended for use in the completion of a construction contract, but not yet utilized. These materials may be stored on the construction site or at another location.

Supplier To A Supplier -

Whereby neither the material supplier nor its customer install materials at the job site. This situation frequently eliminates lien rights for material suppliers.

Surety -

A surety is a person or company (usually a bonding company) who agrees to be responsible for the debt or obligation of another.

Subcontractor -

A subcontractor is an individual or in many cases a business that signs a contract to perform part or all of the obligations of another's contract. A subcontractor is hired by a general or prime contractor to perform a specific task as part of the overall project.

Subcontractor Payment Bond -

Guaranty furnished by a subcontractor guarantees the prime contractor that suppliers will be paid the monies that they are due from the principal (subcontractor). The prime contractor is the obligee; the "beneficiaries" of the bond are the suppliers. If the principal fails to pay the suppliers, they may collect from the principal or surety under the payment bond, up to the penal sum of the bond. Payments under the bond will deplete the penal sum. The penal sum in a payment bond is often less than the total amount of the sub contract, and is intended to cover anticipated supplier costs and disputes. A subcontractor bond is typically non-statutory meaning the state bond claim or "little Miller Act" statute will not apply. A copy of the bond must be requested and read to determine if a specific supplier is protected.

Subcontractor Performance Bond -

Guaranty furnished by a subcontractor to the prime contractor to ensure performance of a subcontract, and payment of all associated equipment, labor, material, and service bills.

Subdivision -

A work of improvement consisting of two or more separate residential units or two or more buildings owned or reputed to be owned by the same person or on which the claimant has been employed by the same person.

Tiered Out -

A term describing loss of lien rights due to a distanced position on the ladder of supply. Generally liens rights are available within 3 tiers, prime contractors, subcontractors and suppliers/laborers to subcontractors. 4th tier suppliers are often "tiered out" of lien rights. Texas is an example of an exception to the rule.

Title Search -

Examination of court decisions, deeds, public land records, and other relevant documents to verify that

  1. The seller or mortgagor of a property is its legal owner
  2. There are no pending legal encumbrances such as liens, restrictive covenants, taxes, or other claims that may affect the value of the property and/or the marketability of the title.

Source: Business Dictionary

Treasury listed bonding company -

The list of sureties approved by the federal government for federal construction projects (see Miller Act). These companies have complied with the law and the regulations of the U.S. Department of the Treasury. Those listed are acceptable as sureties and reinsurers on Federal bonds under Title 31 of the United States Code. The list of approved sureties can be found on the U.S. Treasury website.

Trust Fund States -

Some state legislatures have established construction trust statutes that provide additional protection to subcontractors and materialmen (Colorado, Delaware, Illinois, Maryland, Michigan, New Jersey, New York, Oklahoma, Texas and Wisconsin). Any money paid under a contract by an owner to a contractor, or by the owner or contractor to a subcontractor for work done or materials furnished, or both shall be held in trust by the contractor or subcontractor, as trustee, for those subcontractors who did work or furnished materials. If the trust funds are used for any other purpose, the contractor or subcontractor may become personally liable to any lower tiered subcontractors or materialmen who remain unpaid as a result.
Source: Blakeley & Blakely

Unconditional Waiver and Release Upon Final Payment -

Use this type of form when the claimant is required to execute a waiver and release in exchange for, or in order to induce payment of, a final payment and the claimant asserts in the waiver he or she has in fact been paid the final payment.

(See Waiver)

Unconditional Waiver and Release Upon Progress Payment -

Use this type of form when the claimant is required to execute a waiver and release in exchange for or in order to induce payment of a progress payment and the claimant asserts in the waiver that he or she has in fact been paid the progress payment.

(See Waiver)

Uniform Real Property Electronic Recording Act -

[URPERA] is one of the Uniform Acts drafted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) with the intention of harmonizing state laws in force in the states...The purpose of the URPERA is to allow county clerks and recorders to electronically record information on real property and land records.

Unpaid Balance Lien State -

Lien rights are limited to unpaid funds between the owner and prime contractor. Once funds are paid to the prime contractor subsequent liens would be ineffective. The serving of a notice to owner or the filing of a lien (in a direct to lien state) generally traps unpaid funds between the owner and prime contractor.

Venue -

The proper or most convenient location for trial of a case. Normally, the venue in a criminal case is the judicial district or county where the crime was committed. For civil cases, venue is usually the district or county which is the residence of a principal defendant, where a contract was executed or is to be performed, or where an accident took place. However, the parties may agree to a different venue for convenience (such as where most witnesses are located).

Waiver -

The intentional and voluntary giving up of something, such as a right, either by an express statement or by conduct (such as not enforcing a right). See Conditional Waiver and Unconditional Waiver.

See:

Source:Forms Max

Writ Of Attachment -

A court order directing a sheriff (or other law enforcement officer) to seize property of a defendant which would satisfy a judgment against that defendant.
Source: Tedford & Associates

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