Construction Law

This article appeared in the June 2003 issue of "The Construction Advisor" published by Lang Baker & Klain, PLC. Free Subscription to the Construction Advisor View the Construction Advisor index

If you are a materials supplier, subcontractor or general contractor, there are simple and inexpensive steps you can take yourself to collect your accounts receivable.

Small Claims

Where the amount owed is relatively small and all you want the court to do is award to you a money judgment, the Small Claims Division of the Arizona Justice Courts may be a viable alterative. You can file a Small Claims complaint at the Justice Court to collect up to $2,500. File the claim in the precinct where your defendant resides (if an individual) or does business (if a company). Summons and complaint forms are available from the Justice Court.

Filing fees for Small Claims are reasonable (see a Court Fees summary). You will also need to hire a process server to deliver the complaint and summons to the defendant. Although the procedures are not complicated in Small Claims court, the court clerks are not authorized to give advice and will not help you complete the forms. If a question arises that the clerk cannot resolve for you, talk to your attorney.

Justice Court

If your claim is between $2,500 and $5,000, you can file a claim in Justice Court. As with Small Claims, the Justice Court provides forms for these claims, and you will have to hire a process server to serve the defendant with the summons and complaint.

The Justice Court filing fee is a little steeper than in Small Claims, a Justice Court claim is somewhat more complicated. It requires more paperwork and additional court appearances, and attorneys can be involved.

Nonpayment by a licensed contractor is also grounds for disciplinary action by the Registrar of Contractors. Contact the Registrar at www.azroc.gov to obtain a claim form.

Keeping Records

Whether you file a claim in the Small Claims Division or elsewhere, the burden is on you to prove your case.

Winning your Small Claim or Justice Court claim is going to depend first on the quality of the proof you can show to the court. That means beginning every project with written contracts, keeping your records complete and organized, and documenting the issues that arise in the field.

The attention you give to your project file before problems arise will pay off greatly if you have to file a claim of any kind to collect payment. Having your contract, proposals, bids, proof of costs, purchase orders, and documented changes in good order will be your most valuable asset when you walk through the courtroom door.

Stop Notices

If you are not paid in full and on time, even if the amount is small, you can take action immediately by serving a stop notice on the owner or construction lender. Arizona's stop notice law gives contractors, subcontractors and suppliers the ability to demand that the owner or construction lender immediately withhold amounts of the undisbursed construction funds to satisfy your claim.

A lawsuit to enforce the stop notice may be filed as early as 10 days after the notice is served and requires no title search on the real property. You can pursue a stop notice during construction without impeding the project, and you retain your lien rights if enforcement of the stop notice does not satisfy your claim.

In order to file a stop notice, though, you must be eligible to file a lien, and the rights to serve a stop notice and file a lawsuit to enforce the stop notice expire with your lien rights.

More information about stop notices and lien rights