In Colorado there is a major difference between remedies available to contractors, subcontractors, suppliers and others in the construction industry depending upon whether the project is privately or publicly owned.
Subcontractors and suppliers (and rental companies) on Colorado public projects have three ways to get paid:
• Sue and get a judgment against the contractors they worked for or supplied to
• Sue on the general contractor’s bond posted at the project if the general contract is over $50,000, or
• Apply through the verified claim/withholding process.
Here are each of these remedies considered separately.
From the contractor. If a contractor on a Colorado public project fails to pay its subs or suppliers, they may sue (or, if applicable, arbitrate) to get their money. That remedy cannot be successful if the contractor is broke, so the subcontractor or supplier must look to one or both of the other remedies. Since monies paid to contractors are designated as trust funds, people in control of those funds may be personally liable for three times amounts owed, plus attorneys' fees if they use those funds for something else.
From the bonding company. Colorado law requires that on public contracts of more than $50,000, the contractors must provide bonds to assure payments to subcontractors and suppliers. If not paid, subcontractors or suppliers may sue the contractor’s bonding company. A suit must be commenced within six months from substantial completion of the project. “Substantial completion” means when the work is sufficiently complete that it may be used for its intended purpose. Some bonds allow for a longer time within which suit may be commenced.
Against the public owner (withholding). Colorado law allows unpaid subcontractors and suppliers an opportunity to file verified claims for amounts due them with the public owner. If a claim is filed in a timely fashion, that requires the owner to withhold payment in the amount of their claims from the contractors. However, verified claims must be filed before the date fixed in “notice of final settlement” to be published by the owner in a local newspaper. Unpaid subcontractors and suppliers must file a lawsuit to recover upon their claims within 90 days after the final settlement date and notify the owner of the existence of their lawsuit in writing.
Those filing either verified or bond claims must be aware that if the dollar amounts they claim are excessive, they may forfeit their rights and have to pay costs and attorneys’ fees incurred in defending their claims.
The lesson here is that alert subcontractors and suppliers have remedies to assure that they get paid on Colorado public projects. All they have to do is know what their remedies are and take timely actions.
Albert B. Wolf is a principal in the Denver law firm of Wolf Slatkin & Madison PC.