Subcontractor Invoice 30 Days Past Due? Here Are Your Options.

Are you a subcontractor or vendor with an invoice that is more than 30 days past due? Perhaps you have reason to believe that the general contractor was paid for the services or goods you provided, but has not paid you. New York lien law offers a number of options to subcontractors and vendors including the option to lien real property. And you do not need to file a mechanics lien to avail yourself of some of the options afforded by Article 3 of the New York lien law.

Article 3-A of the New York lien law provides that monies received by a general contractor or a subcontractor for work performed or materials delivered belong to the subcontractor or vendors, and must be paid in a timely manner.

General contractors and subcontractors are required by law to keep records of all funds paid to them for work performed by subcontractors or material supplied by vendors. The law details how the books are to be kept separately for each project.

As the creditor, you have the right under law to examine the records of the general contractor (or subcontractor) 30 days from the date your payment was due. In addition to examining the books and records, you also have the right to demand a verified statement regarding trust assets and money in and out.

Section 76 of Article 3-A states that subcontractors and vendors have the right to examine books and records and make copies, or receive statements reflecting the records. This can be done 30 days after nonpayment, no more than once a month. Requests must be made in writing and delivered via certified or registered mail. The request must contain:

• The name and address of the beneficiary
• A description of the work done that is detailed enough to identify the trust
• A statement about the nature of the trust claim, again, detailed enough to identify the claim
• The amount owed and the date payment was due.

Your examination of the records should occur within 10 days of your request in the county where the work was performed unless otherwise agreed upon. You may examine the records yourself, or you can have a representative do it for you, as long as you note it in writing. If you do not wish to examine the records and instead want a statement, the trustee must provide one within 10 days of your request. The record must include who made or consented to each payment in the record. After you submit your request, the trustee can ask the court to vacate the request if they believe you are not entitled to the information within those records. If the trustee fails to respond to your request, or asks the court to vacate your request, you can ask the court to make the trustee comply.

What If The Contractor Or Subcontractor Fails To Keep Their Books?

If the general contractor or subcontractor is paid for any work performed or material you delivered, and they use those funds for any purpose other than paying you, they are in violation of the law. Section 75 states:

Failure of the trustee to keep the books or records required by this section shall be presumptive evidence that the trustee has applied or consented to the application of trust funds actually received by him as money or an instrument for the payment of money for purposes other than a purpose of the trust as specified in section seventy-one of this chapter.

Books must be maintained in accordance to Section 75 of Article 3-A. The trustee does not have to keep separate bank accounts for separate trusts as long as the books clearly show what was allocated to which trust. Records must include which trusts deposits were allocated to as well as any withdrawals.

Books must include the following:

• For trust assets receivable and trust accounts payable:
  • The name and address of every person who has a right to receive funds
  • The amount each person is owed
  • The date the payment is due, owed, or payable

• For funds received:
  • The name and address of each person funds have been received from
  • The date each payment was received, and the amount received
  • The name and address of the bank or depository were funds were deposited
• For payments made with trust assets:
  • The name and address of each person paid with trust assets
  • The date and place where each payment was made
  • The amount paid on each date, the manner of payment, and who made the payment if not the trustee
  • A statement regarding the nature of the payment to show whether it was for labor, materials, taxes, insurance, performance under contract or subcontract, mortgage interest charges, or other cost of improvement.
  • For any payments made pursuant to a contract, the date when the contract was made, whether the contract was written or oral, and the agreed price
  • A description of any items purchased
  • A statement of the amount of such funds used together with the name and address of the assignee and the date of the assignment for anything purchased using anticipated funds due or earned
• For transfers in repayment of or to secure advances made pursuant to a Notice of Lending:
  • The name and address of the person to whom the asset was transferred to
  • The date of the transfer
  • A description of the asset, including the amount of the asset
  • The amount of the advances secured or repaid, the dates they were paid or made, and the manner payment or advance was made.
  • If any payments were made using funds assigned due and earned, a statement of the amounts, the name and address of the person receiving the funds, and the date of the assignment.

If the books were not kept in this manner it is typically presumed that the money was not held in the trust for the subcontractor or vendor. As the subcontractor, you can then proceed with one or more debt collection remedies.

To learn more about your debt collection option as a subcontractor, contact Frank, Frank, Goldstein and Nager for a consultation.