A mechanics lien is a payment recovery tool that is available only to construction parties working on private projects. If you are working on a public works project, you can make a payment bond claim to deal with a non-paying client.
In Arizona, making a bond claim requires relatively fewer steps than when recording a mechanics lien. This guide details the process of making an Arizona payment bond claim and gives helpful tips on how to successfully recover your payment when doing work on a public project.
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- Who can make an Arizona payment bond claim?
- Preliminary notice requirement in making an Arizona payment bond claim
- When is the deadline for making a payment bond claim in Arizona?
- How to make a payment bond claim in Arizona
- Best practices when making an Arizona payment bond claim
Who can make an Arizona payment bond claim?
Construction parties who provide services such as labor and material suppliers to the general contractor, as well as the first-tier subcontractor, have the right to make an Arizona payment bond claim. In other words, first-tier and second-tier subcontractors and material suppliers may make a bond claim to ensure that they get fully paid for their services.
Parties below the second tier and suppliers to material suppliers, unfortunately, have no bond claim rights in Arizona.
Preliminary notice requirement in making an Arizona payment bond claim
Parties who have no direct contractual relationship with a project’s general contractor must serve a 20-day Preliminary Notice in Arizona. This preliminary notice informs a general contractor about your participation in a project, and lets them know that you are ready to make a payment bond claim in case you do not receive payment for your work.
Serving an Arizona preliminary notice before making a payment bond claim is required as long as you have no direct contract with the general contractor. Failing to serve this preliminary notice forfeits your bond claim rights in a certain project.
When must you serve an Arizona 20-Day Preliminary Notice?
As the name implies, the Arizona 20-Day Preliminary Notice must be served within the first 20 days of working on a project. It is best practice to serve this preliminary notice right on your first day of work to avoid issues with compliance with Arizona bond claim rules.
Note that you may still serve the 20-Day Preliminary Notice in Arizona after the first 20 days have passed. However, your potential payment bond claim can only cover the period starting from the previous 20 days from the day that you served the Arizona 20-Day Preliminary Notice. You are therefore encouraged to not let the original 20-day deadline elapse before serving this preliminary notice.
What information must be included in your Arizona 20-Day Preliminary Notice?
There are four major details that must be written on your Arizona 20-Day Preliminary Notice:
- A general description of the services furnished or to be furnished to the project, together with an estimate of the total price of those services
- Your name and address
- The name and address of the party who hired you for the project
- A legal description, subdivision plat, or street address of the project location
Note that the description of the project location must be sufficient for identifying the project site. Also keep in mind that the estimated amount of your services must be reasonable; avoid padding the amount just so you can potentially recover a higher payment. It is best practice to stick to the amount that is stipulated in your contract.
Who must receive your Arizona 20-Day Preliminary Notice?
The Arizona 20-Day Preliminary Notice with respect to payment bond claims must be served on the general contractor and the party who hired you, if different from the general contractor. You may also serve the preliminary notice on the surety so they too are informed about your participation in a project.
How must you serve the Arizona 20-Day Preliminary Notice?
As with the preliminary notice for mechanics liens, your Arizona 20-Day Preliminary Notice for a potential payment bond claim must be served via first-class mail or certified mail with return receipt requested. Be sure to keep copies of the return receipt as well as other postage-related documents.
When is the deadline for making a payment bond claim in Arizona?
Make an Arizona bond claim within 90 days of your last day of furnishing labor or materials to a public project. Note that this deadline applies only to parties who have no direct contract with the general contractor.
The 90-day deadline is also strictly enforced; failing to serve a valid Arizona Notice of Bond Claim on or before the 90th day after your last day of work effectively dissolves your bond claim rights in that specific project.
It is also very important to remember that the Arizona Notice of Bond Claim is different from the 20-Day Preliminary Notice. The Notice of Bond Claim is the actual document that you serve if you are making a payment bond claim, while the 20-Day Preliminary Notice is a separate document that simply informs the general contractor about your involvement in their project.
How to make a payment bond claim in Arizona
1. Request for payment bond information
As soon as you secure a contract for an Arizona public works project, request for a copy of the payment bond. This may be done by writing the general contractor or the awarding public entity a formal written request for information.
The request for information is just a simple written document that you deliver to the general contractor or the public entity. These higher-tier parties will usually furnish you with a copy of the executed payment bond for your project after they receive your request.
Having access to the payment bond will let you know the name and address of the surety, as well as the specific terms of the bond. Note that not all payment bonds are the same, and some may require claimants to add more information in their claims. It is, therefore very important that you secure a copy of the payment bond as soon as you can so you are well-prepared in case payment disputes come up.
2. Ensure that you have the right to make a payment bond claim
Before you make a payment bond claim for an Arizona public works project, you have to ensure that you have the right to make such a claim to start with. This means that you must have served the required preliminary notice prior to making a payment bond claim.
Remember that the 20-Day Arizona preliminary notice must be served on or before the 20th day after your first day of work. Even if you miss this deadline, it is still best practice to serve the preliminary notice anyway so you can still potentially recover the payment the period duly covered.
3. Prepare the Arizona Notice of Bond Claim form
While there is no statutorily prescribed template for your Arizona Notice of Bond Claim, it is best practice to include the following information in your payment bond claim form:
- Your name and address
- The name and address of the general contractor
- The name and address of the party who hired you if different from the general contractor
- A description of the services that you furnished to the project
- A description of the nature of the project, including the name of the public entity
- The amount you are claiming
- A statement demanding payment for your services
Make sure that the payment you are claiming is accurate and reasonable. Sureties may require you to provide additional information such as copies of the relevant invoices, so be prepared to hand those over as well.
Also, always verify the accuracy of the details that you write in your Arizona Notice of Bond Claim. Ensure that the names and addresses are correctly spelled and that the description of the project location is sufficient for identification.
4. Serve the Arizona Notice of Bond Claim on the appropriate parties
Once your Arizona Public Works Bond Claim form is ready for service, you have to serve it on the general contractor via first-class mail or certified mail with return receipt requested. While you are required to serve it only on the general contractor, it may be best to also serve a copy of your bond claim on the awarding public entity as well as the surety.
You should have access to the address of the surety if you successfully completed Step 1. Being in contact with the surety may fast-track your payment claim, so it is worth serving them a copy of your Arizona Public Works Bond Claim.
Note that all parties who have no direct contract with the general contractor must make the payment bond claim within 90 days of their last day of work. No specific deadline applies for those who are in direct contract with the prime contractor; however, you must still read the payment bond provisions carefully to make sure that you go through all the project-specific steps.
5. Enforce the bond claim if payment is not released
A payment delay or dispute will most likely be resolved in step 4 after the Arizona Notice of Bond Claim is served. Either the general contractor or the surety will step to release payment, but it is also possible for your payment bond claim to be ignored.
You must, therefore, remember that in Arizona, you only have 1 year within your last day of work to enforce a payment bond claim. This 1-year deadline applies to all payment bond claimants, regardless of whether they have a direct contract with the general contractor or not.
Enforcing a payment bond claim implies initiating a lawsuit against the surety. You are advised to seek the help of a legal counsel when initiating a legal action as this step can be complicated and will require legal expertise.
Best practices when making an Arizona payment bond claim
1. Always ask for a copy of the payment bond
Before you even start working on a project, you should be in touch with the general contractor or the awarding public entity to request a copy of the payment bond. The payment bond will tell you project-specific details about making an Arizona payment bond claim, and it will give you access to information such as the surety’s name and address, which can make serving a payment bond claim much easier.
2. Serve the Arizona 20-Day Preliminary Notice right on your first day of work
If you have no direct contractual relationship with the general contractor, you have to serve a 20-Day Preliminary Notice to preserve your bond claim rights. If possible, you should serve this Arizona preliminary notice right on the very first day of working on a project. It is a good professional practice to always serve the preliminary notice early to avoid potential issues with complying with Arizona public works bond claim requirements.
3. Serve the Arizona Public Works Bond Claim on the surety
The Arizona Public Works Bond Claim is required to be served only on the general contractor, but serving it on the surety and even the awarding public entity can potentially make the payment process easier. This is no guarantee, but it is always better if more relevant stakeholders know about your payment bond claim.