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Getting Paid on Construction Projects INTRODUCTION The City of Seattle recognizes the importance of prompt payment of subcontractors and suppliers by contractors on City construction projects. State law protects the rights of businesses and individuals who perform work on the City’s constructions projects. It is also an important value of the City that construction workers employed on City construction contracts receive their appropriate wages. YOUR RIGHTS UNDER THE LAW The information contained herein is not legal advice from the City of Seattle. Subcontractors, suppliers, materialmen, and employees to whom a City construction contractor owes payment should consider contacting an attorney to protect their rights. There are two important resources available to subcontractors, suppliers, materialmen, and workers to help ensure they are paid for work on a construction project. Payment and Performance Bond: On most construction projects, the City of Seattle obtains a Payment and Performance Bond from the contractor for the full contract amount. The Payment and Performance Bond is a guarantee by the contractor’s bonding company that the project is successfully completed, and that all subcontractors, suppliers, materialmen, and workers associated with the project will be paid. State law provides that you may file a claim of lien against this Bond to protect your rights to payment. Retainage: On most construction projects, the City of Seattle is legally required to withhold 5% of each payment made to the prime contractor. This 5% withholding is known as retainage and is held as a trust fund to help ensure that subcontractors, suppliers, materialmen, and workers are paid. State law provides that you may also file a claim of lien against the retainage in order to protect your rights to payment. FILING AND RENEWAL OF CLAIM Filing a claim against the Payment and Performance Bond or retainage does not guarantee that you will be paid, but it is an important first step to help obtain payment. There are a variety of requirements that relate to when a claim must be filed and what you must do to "perfect" the claim. You may file a claim against the Payment and Performance Bond and retainage after you have performed the work and not been paid, subject to the following restrictions: 1. Filing Period:
2. Claim Renewal:
3. Pre-Claim Notice for Delivery of Materials, Supplies, or Equipment: State law requires that anyone furnishing materials, supplies, or equipment on a public works contract must provide a notice to the contractor within specified time limits that they have commenced delivery of the materials. The notice must state the name of the subcontractor who requested the delivery and state that a claim against the bond and/or retainage may be filed. Without such a notice being filed, no foreclosure action against a claim will be considered valid by the courts. The specified time limits for filing such a notice are different for protection from the Payment and Performance Bond (within 10 days after the first delivery of such materials) and retainage (within 60 days of beginning to furnish such materials). (RCW 39.08.065 and RCW 60.28.015). 4. Where to file your claim: A claim and any renewal against the Payment and Performance Bond and retainage on a City of Seattle construction project should be sent to the address below. A copy of the claim should also be sent to the contractor and the contractor’s bonding company. If you need information on the contractor’s Payment and Performance Bond, please call us at (206) 684-0430. We can provide the name and address of the bonding company and the Bond number.
The City of Seattle FAX (206) 684-4511
5. Release of Claim: If the contractor subsequently pays you, you should then send a Release of Claim of Lien form to the same parties to whom the claim form was sent. FORECLOSURE AND PAYMENT 1. Foreclosure: In order to "perfect" your claim and preserve your legal rights, you must commence a lawsuit for foreclosure on the claim. A foreclosure action must be filed in court prior to the claim lapsing. A claim may lapse if you file your claim or renewal of your claim after the deadlines noted above or if you fail to renew your claim within four months of filing the claim. If all attempts to obtain payment from the contractor have failed and it becomes necessary to "perfect" your claim and commence a lawsuit to foreclose on the claim, you may want to consider hiring an attorney to assist you in the legal proceedings. All lawsuits filed in which the City is a defendant must be served formally upon the Mayor. 2. Payment based on a claim. The City of Seattle does not make payments to subcontractors or suppliers who have filed claims on retainage without a court order directing the City to make such payment. The City does not review or pass judgment on a claim to determine if the amount claimed should actually be paid. That role is reserved for the courts. Payment of claims against the retainage is based on the following priority order established by RCW 60.28.040: 1. Claims by workers for payment of prevailing wages. 2. Claims by the State Department of Revenue for unpaid taxes. 3. Claims by subcontractors, suppliers, and materialmen. 4. Claims for other taxes due (no court order required). 5. Claims by the City (no court order required). If an inadequate amount of money remains in the retainage to cover all claims due, the protections provided by the Payment and Performance Bond become applicable and the amounts due to subcontractors, suppliers, materialmen, and workers should be paid by the contractor’s bonding company. RETAINAGE RELEASE In order for the retainage to be released, the City of Seattle must declare the project complete and issue a Certificate of Completion. The following documents must be submitted by the contractor before the Certificate of Completion can be issued: 1. All Intents and Affidavits of Wages Paid for the prime contractor and all subcontractors; and 2. final Subcontractor Payment Report. Once the Certificate of Completion is issued, the City must obtain releases from the following agencies: State Department of Revenue, State Department of Labor & Industries, Employment Security and the City’s Revenue and Consumer Affairs Division. The State Department of Revenue requires a 45 - 60 day waiting period before retainage can be released. If all appropriate releases are received and there are no claims against the retainage at the end of the waiting period, the City releases the retainage. For questions or more information, contact the Contracting Services Division:
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