Payment Bond Claims on Public Projects

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This commentary is designed to be used with the Public Project Bond Worksheet. You may wish to attach a worksheet to each public works job file.

In comparison to mechanics’ and materialmen’s liens, the steps required to preserve the right to sue on a public works payment bond are fewer; however, they are critical. Therefore, note the date of each step on the worksheet, and calendar the next deadlines to preserve your rights as beneficiary on the bond.

The Arizona law relating to contractor claims on public buildings and improvements (A.R.S. §§ 34-222 et seq.) is known as the “Little Miller Act.” It is patterned after and generally consistent with the federal Miller Act, which governs contractor claims on federal buildings and improvements.

  1. Immediately upon contracting, send a written request for information. Send the owner of the property or the general contractor a written request for the information you will need for your Preliminary 20-Day Notice and for information on any project payment bond.

    See Form A, "Written Request to Owner for Information for Preliminary 20-Day Notice," available in PDF and edit-ready Word formats

  2. Serve the Preliminary 20-Day Notice. A.R.S. § 33-992.01(B) requires service of the written Preliminary 20-Day Notice of lien to: (a) the owner or reputed owner, (b) the original contractor or reputed contractor, (c) the construction lender or reputed construction lender, and (d) the person with whom he contracts.

     See Form B (Part 1), "Preliminary 20-Day Lien Notice" (PDF • Word)

    Send a copy of the Preliminary 20-Day Notice to the payment bond surety as well. In fact, the bond itself may require you to serve the surety. When you receive a copy of the payment bond, review it carefully to make certain that you understand all the conditions for payment.

    Prepare the Preliminary 20-Day Notice and serve it in the same manner as described in the discussion of mechanics' liens, by either first-class mail with a certificate of mailing, registered mail, or certified mail, postage prepaid, and addressed to the business or residence of the party served.

  3. Prepare Affidavit of Service. You must be able to prove that you served the Preliminary 20-Day Notice. The notice form contains an "acknowledgment of receipt." In the event you do not receive the acknowledgments within thirty days, however, prepare an affidavit of service stating the time, place and manner of service. It’s a good idea to prepare the affidavit of service at the same time you serve the Preliminary 20-Day Notice, while the information is fresh.

    See Form C, "Affidavit of Service" (PDF • Word)

    Note that the certificate of mailing or mail receipt must be attached to the affidavit (A.R.S. § 33-992.02). Keep the affidavit in a safe place with a copy of the Notice and the U. S. Postal Service certificate of mailing or delivery receipt.

  4. Exceeding the 20-Day Notice amount. When the value of the labor or materials you provide exceeds the 20-Day Notice amount by 20% or more, you must serve a supplemental 20-Day Notice.

    The initial Preliminary 20-Day Notice will protect your lien rights only up to 120% of the amount stated in the notice. If the value of your labor or services exceeds the amount stated by more than 20%, you must prepare and serve a supplemental Preliminary 20-Day Notice within 20 days. Serve the supplemental notice in the same way that you served the initial 20-Day Notice (see Steps 2 and 3 above).

  5. Record the last date when you provide labor or materials under your contract. This date is critical because it determines the deadlines for the 90-day notice and for filing a lawsuit on the bond. Work done solely to effect repairs, make corrections, or complete a final inspection does not qualify as work on the original contract and will not extend the deadline. Make certain that you have completely performed your contract, and record the date when you complete performance. Then calculate the 90-day deadline for serving your 90-day notice.

  6. Serve your 90-day notice within 90 days of completing work. Subcontractors and material suppliers covered by the Miller Act who do not have a contract directly with the general contractor must give a 90-day notice within 90 days after performing work or providing materials under their original contract.

     See Form E, "90-Day Notice for Bonded Public Works" PDF • Word

    Note that work done solely to make repairs or corrections or to complete a final inspection does not qualify as work on the original contract, and it will not extend the deadline.

    Serve the notice in the same manner as provided for 20-day preliminary notices (see Step 3 above), by either first-class mail with a certificate of mailing, registered mail, or certified mail, postage prepaid, and addressed to the business or residence of the party served.

  7. File an action on the payment bond within a year. The time for filing a lawsuit on the payment bond expires one year after the last day on which you perform work under your contract, as described in Step 5 above. If you are an early provider on the project, this deadline may arrive before the project closes and retention monies become due.

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