Getting Paid for Underground Utility Work

Consider the following scenario: You are an underground utility subcontractor looking for work. You recently learned that the City of Colby located in the state of Kansas has passed a resolution to approve a contract, known as a Wired Telecommunications Right-of-Way License Agreement. This contract grants a telecommunication company, such as AT&T, the right to build, operate, maintain, and repair a telecommunications network within the village’s rights-of-way. Under this agreement, AT&T is allowed to install conduits, manholes, splicing vaults, and fiber optic cables within the city’s rights-of-way.

To fulfill the terms of the Wired Telecommunications Right-of-Way License Agreement, AT&T must hire a general contractor to supervise the construction of the project. This general contractor will then hire subcontractors specializing in various trades to assist him. One such subcontractor has enlisted your services to carry out specific underground utility work in the City of Colby, Kansas. Upon agreeing to this arrangement, you are required to arrive in Colby, Kansas, within a week.

Before performing work, your customer will typically require you to execute a Master Service Agreement, which outlines the responsibilities and obligations of all parties involved, a Mobilization Agreement (payment to cover the transportation costs for you and your crew to travel to Colby, Kansas, where you will undertake the agreed-upon underground utility work), and possibly additional purchase orders in furtherance of the Master Service Agreement.

The Master Service Agreement or purchase orders should have a pricing sheet that details the agreed-upon rates for the work to be performed. The pricing sheet will have specified codes that will correspond to the description of work, units of measurement, and unit prices. Your scope of work might include directional boring, trenching, plowing, potholing, cable pulling, pedestal/vault installations, ground rod placements, missile boring, setting boxes, and preparation for splicing.

Various factors might lead to non-payment, including: (1) prolonged payment terms; (2) disputes over the quality of your work, leading to back charges, regardless of their validity; (3) bankruptcy filings by the owner, general contractor, subcontractor, or your direct client; and (4) other reasons such as administrative errors, financial difficulties of the paying party, or contractual disputes. These scenarios can complicate the payment process and affect the timeline for receiving compensation.

Under common law rules of contract, if the contractor or subcontractor fails to pay you, you cannot seek compensation from the owner (who benefits from your work) due to a lack of a direct contractual relationship, known as privity of contract. The mechanics’ lien statutes were established to address this issue. Another challenge arises from the absence of payment bonds specifically for underground utility projects. If filing a mechanic’s lien or filing a claim against a payment bond is not an option, what alternatives do you have to recover the outstanding balance on your contract?

Advanced planning Is the Key

With any construction project, including those involving underground utility work, the key to securing your future payments is to plan ahead. It’s important to understand:

  • Safeguarding your documents – If your customer initially accepted and approved the work you completed but is now claiming back charges months later, you will need to prove your case. In the event of non-payment, it is crucial to have all project documents securely stored. Your attorney will require access to your Master Service Agreement, any related contracts, scope of work, invoices, pictures of where the work was performed, permits, etc. These documents are crucial in assisting your attorney with helping you file a lien and verifying project data.
  • Notice to Owner, Notice to Contractor, and Preliminary Notice –  In some cases, you may be required to notify the property owner or contractor before you begin work of your role in the project if you want to preserve your right to assert a mechanics lien later. Knowing what you need to file and when you need to file it – whether it’s a notice that you’re working on the project or a notice that you’re about to file a mechanics lien – is vital to protecting your rights to get paid. Each state has its own mechanic’s lien laws, which can differ significantly from one state to another. Some states, like Arizona, California, Florida, New Mexico, etc., require a notice to the owner or preliminary notice to preserve your right to file a mechanic’s lien. Failure to send these notices within the required periods from the first work date could limit the amount you are owed or possibly be fatal to your lien rights.
  • Who the owner is – When work is performed within an easement, the right to file a mechanic’s lien can be complex due to the shared or limited nature of property rights involved. Typically, a mechanic’s lien can be filed against the property title for unpaid work; however, when the work is within an easement, it may affect multiple properties or involve different types of ownership. This requires clear identification of the benefited property and an understanding of the legal relationship between the property owner and the easement holder.
  • Can you file a mechanic’s lien against the property – unfortunately, there is no simple answer in this scenario. The problem is the uncertainty caused by the conflict between the state’s mechanics’ lien statutes and whether the project is deemed to be public property. Filing a lien against land owned by the public is prohibited. This is where you need experienced attorneys, such as Emalfarb Law LLC, who can guide you through these complex situations.

Asking these questions first lets you move forward as needed when you haven’t been paid on time.

Emalfarb Law LLC and National Lien and Bond Can Help

At Emalfarb Law LLC, we are devoted to helping clients in the construction industry get paid on time, making it easier to protect themselves when they don’t, and collecting past-due funds. In fact, over the years, we’ve helped our clients recover more than $9 billion in past-due claims for contract work. We have a strong network of dedicated and experienced attorneys in all 50 states who understand how to prepare and file a mechanic’s lien. Working with us means working with professionals focusing on getting you paid.

We can help you in several different and complementary ways:

  • We work with clients to develop in-house best practices to keep tabs on projects so they know when payments are late and what to do next.
  • We help clients understand what steps they need to take to protect their receivables, steps that can vary depending on the project location, the owner, the type of project, and the client’s role in the project.
  • We help prepare, serve, and file mechanics liens, payment bond claims, and non-payment lawsuits.
  • We negotiate with owners and contractors on behalf of our clients from a position of knowledge and strength.

Contact Emalfarb Law LLC at (847) 208-6513 or by using our contact form to schedule a consultation. Tell us about your company, and let us share how we can help you get paid.