As a result of the coronavirus outbreak, governments have imposed partial and full lockdowns all over the world. The Pandemic has also affected the construction business by completely shutting down projects subjecting to long delays. There are several setbacks to be considered by the construction businesses, including a shortage of physical labor, supply chain disruption, and non-payment issues.
However, if you consider government lockdown, there is one more problem that might affect your business, and that is inspection delays. With offices and government agencies closed down or offering limited services, it means no inspectors are working on the field; therefore, no project is being inspected. This situation raises a critical question: How to get paid if inspection of your project is delayed?
Addressing Construction Inspection Delays Due to Coronavirus
The inspection process and delay might not be the first thing that came to your mind when you considered the effect of coronavirus crisis on your business, but it poses a serious payment issue. Inspection is a major hurdle even in case of projects that been declared essential by the governments. Amidst the coronavirus outbreak, no building inspector is willing to arrive-on-site to make sure the work meets the standards.
How Inspection Delays Affect Your Business
As the Coronavirus continues to spread and the number of causalities increases every day, issues are being raised across all industries. This situation ultimately leads to problems of non-payment and delays. Contractors are worried about their due payments because the owner or the General Contractor (GC) may not be inclined to pay you before the inspection of your work.
In some situations, the owner or the GC might use the withholding payment as leverage over you and ask you to do work that is not part of the contract. While the project is waiting for inspection, the GC or owner might use the situation to hold your payment and leaving you with little cash flows to keep your business afloat during the crisis. Therefore, it is recommended to consult a Quantum expert to make sure you are paid in time to protect your business from the current economic crisis.
Contract Delay Provisions
You must be worried about your payment because you might think that the timeframe of your contract will expire due to COVID-19 related delays like inspection delay, then you are wrong. Not all is lost as your contract protects you in such cases.
According to the AIA Delay Provisions Section 8.3:
“8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work by (i) an act of neglect of the owner or Architech, of an employee of either, or of a Separate Contractor; (ii) by changes ordered in the work; (iii) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 18.104.22.168, or other causes beyond the Contractor’s control … then the Contract time shall be extended for such reasonable times as the Architect may determine.”
It means you will not be held responsible for missing deadlines due to construction delays related to Coronavirus. Therefore, you should always carefully read and understand the contract before signing it.
What to do if Payment is Held Up by Inspection Delays
Given the current global pandemic situation, you may feel like you don’t have any option left because the project is being held by powers outside of the owner’s control. But the reality is, according to your contract, you have a right to be paid for your work on the property.
If you have completed the work, but payment is being held up due to coronavirus-related inspection delays, then you have a right to take a step forward and remedy the situation. Here are the top three ways to ensure payment during such a crisis.
- Preliminary Notice
Now is the time to start sending out preliminary notices to all the concerned parties on your job; this is more important now than ever! These preliminary notices not only inform the owner and the GC about the payment issue but also protects your right to a lien.
- Notice of Intent to Lien
If there is no word from the owner or the GC and you have started facing the non-payment issue, sending a notice of intent of lien notifies the GC and owner that you plan to get your payment for your services. Notice of Intent gives the parties a specific time limit to settle the payment; otherwise, they will face a lawsuit in the form of lien, and no business wants to deal with a lien against their property.
- Mechanics Lien
If preliminary notice and notice of intent have failed to get the attention of the owner or GC of the project, then filing a mechanics lien defiantly will. If the owner and GC have not decided to pay for your services due to issues like inspection delays, then a mechanics lien will make sure that you are paid in full for the work you have completed. Therefore, consulting a Quantum expert for the proper filing of a lien seems like a better approach than going to a court without any preparation and losing your payment.
Understand and Enforce your Rights to Payment during COVID-19
Delays on construction projects are common, especially in times of a crisis like the present Coronavirus outbreak. Therefore, the best way to protect your interest is to understand your rights and all available options.
Considering the current situation and crisis, it might take additional 2-6 months to develop further. Therefore, don’t wait for GC or owner to resolve the payment issue, and exercise your right to payment, so you have enough capital to keep your business afloat during the crisis.