If you are either a subcontractor or a material supplier on a municipal project and you are not receiving payment from the general contractor or subcontractor, you may have to bring a claim against a payment bond posted by the general contractor. In order to be entitled to make a claim against such a bond, it is important that you follow the protocol required by the relevant New Jersey Statutes. If you do not follow this protocol, you may be barred from making a claim against the bond.

In the relevant New Jersey Lien Law, N.J.S.A. Section 2A:44-145, it explains that a person who does not have a direct contractual relationship with a contractor must provide explicit written notice to the contractor, which explains that the person is an intended beneficiary under the bond. Only after this written notification is provided does that person have the ability to bring forth a claim, and that right commences the day the notice is presented.

This notice should typically be sent in the form of certified mail with a return receipt, or any similar type of notification system which will verify that the party received it, requested. As a note, a subcontractor or vendor should not depend upon another party to make this notification on its behalf, but must instead provide the notification directly to the general contractor or subcontractor who issued the bond. If this procedure is not followed, this party may be prevented from bringing a claim against the bond, should there be any unpaid materials or services.

If the subcontractor or vendor has made proper notification, but they have not been paid by the general contractor or subcontractor, they can begin the process of making a claim. The first step for this is to send a formal demand to the subcontractor or general contractor who posted the bond, as well as the bonding company requesting payment. Typically, the bonding company will then request information, such as the previously sent notice, to support a claim against the bond. Once this information is provided, the bonding company will either issue payment directly to the party who made the claim, or the bonding company may deny the claim by citing other various reasons.

If payment is not issued by the bonding company to the party making the bond claim, the claimant has one year, from the last date of providing the materials or services, to file suit against the bonding company. The claiming party would not have an independent cause of action against the individual who posted the bond, unless they had a direct contractual relationship. For this reason, it is crucial that this party consult with an attorney about the proper procedure for filing a claim against the bond. Stark & Stark has attorneys who can help you through this process.