When it comes to filing mechanics liens and collecting money owed to your company, there is a world of difference between private and public construction projects. And it’s very important to know the difference between the two.
Why Does The Type of Construction Project Matter?
Before explaining what distinguishes these projects from one another, let me talk a little about why it matters.
If unpaid on a private project, the laws in most states allow you to file a “mechanics lien” against the property. This gives your company an actual interest in the real estate your labor or materials improved. The lien must be filed within a particular period of time, and if the lien is not paid, you’re required to “foreclose” upon the lien to obtain payment, which could result in the property being sold at auction to obtain the funds to payoff your claim.
If unpaid on a public project, there is a much different experience.
Generally, your company is not able to file a “mechanics lien” against a public project because most states (and the federal government) prohibit any party from gaining an interest in public property. As a result, most public construction projects may only proceed if a “payment bond” is issued. In the event of non-payment on a public job, rather than file a lien the unpaid party will file a “claim” against the bond. Instead of foreclosing on the property, the claimant will “foreclose” – so to speak – against the lien, eventually resulting in payment.
What is the Difference Between Public and Private Projects?
99 times out of a 100, a project is private when owned by a private person or entity, and is public when owned by the government.
When the government is the United States or a federal agency, the applicable rules are found within the “Miller Act.” We’ve written a good deal about Miller Act rules and claims here at the Construction Lien Blog. When the government is the state or a state agency, the applicable rules are usually found within a “Little Miller Act” statute. These vary state-by-state, a great resource on little miller acts across the country is linked below (and here).
Be very careful when performing work on a private school (i.e. private university) or for a non-profit agency, and even large public corporations. We sometimes think of these types of organizations as “public” agencies, but that does not necessarily render them a “public construction project.” Usually, such a designation is reserved for land and projects owned by the federal or state government. If you’re unsure, it’s a good idea to ask, or to hire an attorney to research the question.
GREAT Resources for Public Lien Laws and Public Contracting Issues
Here are two great resources for folks looking to learn a little more about public contracting in general, and about bond / lien claims against public projects.
1) Mike Purdy’s Public Contracting Blog: Mike Purdy is a retired public contracting consultant out of Seattle, WA. His frequently updated blog addresses public contracting questions and laws across the country.
2) Law Office of David Bransdorfer Miller Act Summaries: This website, offered by a New York law firm, provides summaries of the Miller Act, and each state’s version of the Miller Act. It’s a great place to start researching the applicable public contracting claim / lien laws in your state.