Protecting Your Right to Get Paid

Thanks to two Maine statutes, contractors in Maine can greatly increase their ability to get paid for their work by adhering to rather simple procedures.

With limited exceptions, Maine’s Prompt Payment Act gives contractors, subcontractors, and suppliers the ability to recover not only sums owed to them, but also statutory interest, penalties, and attorney’s fees. Triggering the availability of these remedies is as easy as issuing an invoice for work performed. Once an invoice is issued, the invoiced party is required to make payment within certain deadlines, which may be determined by the invoice or the statute. If deadlines are not met, the invoicing party can seek recovery under the statute.

The statute does provide owners or upstream contractors with a safe harbor: a party receiving an invoice can withhold any amount that is reasonably related to a good faith claim that party has against the contractor, subcontractor, or supplier that issued the invoice. In such an event, the statutory remedies will not be available. Moreover, the statute contains a bit of a double-edged sword in that attorney’s fees are to be awarded to whichever party prevails in a claim brought under the statute. In other words, if a contractor pursues a claim against an owner and the owner prevails, the owner will be entitled to recover his or her attorney’s fees. Nonetheless, the Prompt Payment Act provides a powerful tool for getting paid that is made available simply by issuing an invoice.

Another statute that provides a powerful tool for collecting payment is Maine’s Mechanic’s Lien statute. That statute provides a lien to any contractor, subcontractor, or supplier whose materials or labor are incorporated into a project. The lien acts as an involuntary mortgage imposed on the property on which work is performed or for which materials are supplied. When payment is not received, the contractor, subcontractor, or supplier can ask a court to order the sale of the property.

Although many in the construction industry are aware that they have lien rights, many do not realize that their rights are subject to strict deadlines and procedural requirements. In certain instances, the Mechanic’s Lien statute sets deadlines for recording a lien certificate at the Registry of Deeds in the county where the property is located. In all instances, the statute sets a deadline for filing a lawsuit to enforce the lien. Failure to meet a deadline, or follow other statutory procedures, extinguishes the lien. In such an event, the contractor, subcontractor, or supplier may still have other remedies available, but will no longer have a lien against the property.

Each of these statutes comes with complications that legal advice can best help navigate. However, implementing some basic procedures to ensure (i) that work is timely invoiced, and (ii) lien deadlines are tracked to alert you when action must be taken will greatly enhance your ability to get paid.

We are sending this bulletin to bring useful and timely information to our clients and colleagues.  It is only information we hope you will find interesting or useful and not legal advice.  You should not rely on any information or views in this bulletin as legal advice on any specific legal issue you may have.  Please contact your Skelton Taintor & Abbott attorney for specific legal advice. U.S. Treasury rules require us to tell you that any U.S. Federal tax advice contained in this communication (whether distributed by mail, email or fax) is not intended or written to be used and cannot be used by any person for the purpose of avoiding U.S. Federal tax penalties or for the purpose of promoting, marketing or recommending any entity, investment plan or other transaction.

Skelton Taintor & Abbott is a full service law firm providing legal services to individuals, companies, and municipalities throughout Maine. It has been in operation since its founding in 1853.