Subcontractor claims: Federal and state differences

The unfortunate reality of construction projects is that problems do occur, and often people are not paid in a timely manner. When the project involves private property, the remedy available to subcontractors is typically a mechanics lien, allowing them to secure an interest in the property until the debt is satisfied. But when the property subject to construction is government owned, a mechanics lien is not an option. Instead, a bond claim is the subcontractor’s recourse.

Federal bond claims

The Miller Act, 40 U.S. Code Section 3131, controls bond claims when federal property is at issue. The Act requires general contractors to post a bond for projects worth more than $100,000. This bond acts as the remedy to subcontractors who seek collection of an unpaid debt. The amount of the surety bond is typically equal to the amount of the contract but can be less, depending on the circumstances.

Subcontractors choosing to file a bond claim under the Miller Act cannot do so until 90 days after the last work is completed or the last materials are provided. And any such claim must be filed no later than one year after the labor or materials are provided. Any later and the subcontractor loses all rights to the claim. First tier subcontractors do not have to give notice when filing a claim – second tier subcontractors are required to give notice.

State bond claims

Tennessee Code Section 12-4-206 controls bond claims when the property in question is owned by the state. Its requirements are similar to federal law, but with some key distinctions. Where the Miller Act generally requires the amount of the surety bond to equal the amount of the contract, Tennessee law only requires the bond to be 25% of the contract amount.

As for notice, Tennessee has the same 90 day minimum as the Miller Act. However, state claims must be brought within six months of the work being completed, rather than one year for federal claims. Additionally, unlike the federal law, both first and second tier subcontractors are required to give notice when a claim is filed.