Court Restricts Payment Rights of Subs
Kegler Brown Construction Newsletter August 1, 1999
Subcontractors and suppliers on public works projects in Ohio have traditionally been able to collect from the prime contractor's payment bond so long as they properly asserted a claim within 90 days of the date of final acceptance of the project. However, a new Court of Appeals decision from Cuyahoga County has now ruled otherwise and held that the final acceptance date is tied to when the subcontractor claimant finishes his work, not the entire project. Thomas Steel, Inc. v. Wilson Bennett, Inc. (1998), 127 Ohio App. 3d 96. This means that subcontractors and suppliers now have a much shorter period for asserting payment bond claims. It also means that there will be a "sliding scale" of payment bond claim deadlines on every project depending on the particular trade.
Lower tier subcontractors have also traditionally asserted unjust enrichment claims against contractors who they believe have not paid in full for the unpaid work. The Court of Appeals ruled that these types of claims could not be asserted on public projects where a payment bond was provided.
This decision means that unpaid subcontractors and suppliers on public projects will be limited to pursuing recovery on lien and bond claims (when their customers fail to pay) and must pay particular attention to the relevant filing deadlines.