Rarely do you buy real estate that needs no repairs or improvements. Even if you are so lucky, at one point or another, something will break, and you’ll need repairs. Unfortunately, disputes between contractors and property owners can be just as common and stressful as the need for repairs.
If you’re a contractor or you’ve worked on a home, building, or property and have yet to be paid, you may wonder, can a contractor sue for nonpayment? New York law provides remedies for contractors and others who’ve invested time and money on repairs to real property and a property owner does not pay them. In this article, the attorneys at TonaLaw discuss remedies available to those who haven’t been paid for construction work, including a potential lawsuit.
Another common question we get from homeowners is, what to do if a contractor is suing me for nonpayment? Below, we also explain what a property owner should do if sued for unpaid construction work.
Who Can Sue for Unpaid Construction Work?
Construction involves many different trades. Those who most commonly sue property owners for unpaid construction are:
- Landscapers, and
Essentially, anyone who worked on the property with the knowledge or consent of the owner can sue for unpaid construction work. However, the laws that can justify a lawsuit differ depending on their relationship with the property owner.
Potential Legal Reasons for a Contractor’s Unpaid Construction Work Lawsuit
There are several potential legal arguments in a lawsuit for unpaid construction work. We describe some of the most common below. If you’re considering filing a lawsuit, you should speak with an attorney who can assess your situation and advise you on what laws apply to your case.
Breach of Contract
Not all construction contracts are required to be in writing. Nonetheless, many construction contracts between property owners and general contractors are in writing. New York law also requires home improvement contracts to be in writing.
The construction contract typically sets forth a payment schedule that mustr be followed as specific milestones in the work are completed. A contract can also state reasons why a property owner can decline or approve payment for work. Typically, this is where a legal dispute arises; an owner doesn’t like the contractor’s work and withholds part or all of the contractor’s payment.
If the contractor believes they have fulfilled their end of the deal, the contractor can file a lawsuit for breach of contract. Depending on the type of contract, this can be an extremely complicated process. Plus, the owner may fight back and accuse you of substandard work or defective products. A contractor must document their case well and gather evidence to support their position. Likewise, a property owner can pursue a breach of contract case where the contractor performed work that was not in compliance with the contract or did not complete a project which they were contracted to perform.
Speak with an attorney if you’re considering filing a breach of construction contract claim.
Another basis of a lawsuit for a construction dispute is called unjust enrichment. If you’ve improved someone’s property with their knowledge and consent but did not have a formal contract, they’ve benefitted from your work. You can’t just take your work back if they refuse to pay. Thus, the law allows you to sue a property owner for unjust enrichment for work you’ve done on a property that benefitted the property or property owner.
You do not need a written contract to sue for unjust enrichment. A court may award you a reasonable amount for the costs of your supplies and services rendered.
Prompt Pay Act
New York’s Prompt Pay Act (PPA) generally covers construction projects that are worth more than $150,000. There are some exceptions, such as government construction and construction on smaller residential dwellings (e.g., one, two, or three-family dwellings).
The PPA sets forth a billing and payment cycle between the property owner and contractor. When a contractor submits an invoice to the owner, the owner has 12 days to approve the invoice. Then, the owner must pay the contractor’s invoice within 30 days of approval. If the owner doesn’t fully approve of the invoice, they must pay the portion of the invoice which they do approve. If the owner doesn’t approve or disapprove of the invoice or pay the undisputed portion within 30 days, the contractor can stop work.
Disputes between the owner and contractor under the PPA are handled in expedited arbitration proceedings. Although an arbitration may be based on the same issues as a lawsuit, arbitrations are not the same as a lawsuit. In arbitration, a neutral third party, called an arbitrator, will hold a hearing, examine the evidence, and decide on the case. Their decision is binding, meaning you can’t appeal it to a court except for very specific circumstances which would call the arbitrator’s neutrality into question.
Other Laws Addressing Unpaid Construction Work
There are additional remedies under the law for unpaid construction work, such as:
- Mechanic’s Lien. Anyone who has worked to improve real property can file a mechanic’s lien with the county clerk’s office. This attaches to the property. The holder can force a sale of the property to satisfy the lien. This filing requires the proper licensing if the work performed requires a license to perform.
- New York State Department of Labor Complaint. Unpaid workers can file a complaint with the New York State Department of Labor for work they performed. Contractors can be liable for the unpaid wages of a subcontractor’s workers if the contractor was paid.
- Lawsuit for Wages. Unpaid construction workers can file a lawsuit for unpaid wages under the New York Labor Law and the Fair Labor Standards Act.
If you haven’t been paid for construction work, you should speak with an attorney to help determine the best course of action to pursue payment.
What to Do if a Contractor Is Suing You for Nonpayment
Can a contractor sue for nonpayment? Yes, a contractor can sue for nonpayment. You could face a lawsuit or arbitration even if you as a property owner had a good reason not to pay your contractor.
So, what should you do if a contractor is suing for nonpayment? You should talk to an attorney and take the following steps to preserve your rights.
Look at Your Construction Contract
If you wonder, “Can a contractor sue me for nonpayment?” First, examine your contract and any amendments. Be sure that your contract or the PPA supports why you’ve refused to pay your contractor. You should have an attorney look at your contract so you understand all provisions.
Can a contractor sue for nonpayment? They can, but you’ll have the upper hand if you have evidence on your side. Photograph or take videos of the work done and find witnesses, such as other construction experts, to examine the work. Document any problems and specifics of how the problems can be fixed with how much the fixes will cost.
Hire an Attorney
A construction arbitration or lawsuit can be very complex and stressful. You need someone to fight for you and your rights. Contact an attorney who has handled construction litigation and arbitration right away.
A construction lawsuit or arbitration can be grueling. It can impact your livelihood or your quality of life. You don’t have to face it alone. Contact TonaLaw today. We have over 30 years of experience litigating cases on Long Island and can fight to preserve your rights. Call our experienced business litigation attorneys today.