Miller Act Claims
Mechanic's liens are not permitted on federal projects (or city or state projects - more on that here). We do not want unpaid contractors selling public property at auction through a foreclosure sale. At the same time, contractors need to be protected. The Miller Act is the solution.
The Miller Act.
The Miller Act requires prime contractors on projects of $100,000 or more to procure a payment bond to secure subcontractors' and suppliers' right to payment for work performed. Instead of recording a mechanic's lien, the subcontractor or supplier make a claim against the payment bond. If the surety fails to make payment, the claimant can file suit against the surety to force payment from the bond instead of foreclosing on real property.
Who MUST Submit a Written Claim?
In order to preserve a claim, subcontractors and materialmen who do not have a direct contractual relationship with the prime contractor furnishing the payment bond must provide written notice to the prime contractor within 90 days or the date of the claimant's last work. This requirement is a condition precedent to filing a Miller Act claim. Failure to submit this written claim bars an action against the payment bond in the same manner failing to record a mechanic's lien bars a foreclosure suit. Subcontractors who have a direct contract with the prime contractor do not need to submit a written claim because, presumably, the prime contractor is aware of the fact that it has not issued payment.
However, just because a subcontractor is not required to submit a claim does not mean that it should refrain from doing so. Sending a written claim to both the prime contractor and the general contractor often draws pressure from the surety on the general contractor to explain the reason for nonpayment, especially if the claims start to pile up.
When CAN a Contractor File Suit?
The Miller Act builds in a delay before a contractor can file suit. A subcontractor's rights do not accrue until 90 days after the date on which the labor or materials were last performed or furnished on the project. Presumably, this is intended to reduce the amount of litigation by giving more time for payments to flow. Any suit filed before the expiration of this 90 day period will be dismissed.
When MUST a Contractor File Suit?
Contractors must file suit no later than one year following the date of last work on the project. The date of last work can be a moving target. The work must be substantive, not punch list work or inspections. It never hurts to file early (as long as the 90 day waiting period has passed). Filing late can be devastating.
How MUST a Contractor File Suit?
The Miller Act has specific requirements regarding how a contractor must file suit. First, the suit must be filed in the name of the United States "for the use and benefit" of the claimant. Additionally, the action must be brought in the federal district court where the project is located.