Lawyers Helping Contractors Profit and Manage Risk In Chicago
Jeremy has represented a variety of contractors, from curtainwall design-builders and wind farms constructors to general contractors. As an experience contractor attorney. he understands the unique pressures contractors face.
Contractors have much more to worry about than pouring concrete and erecting steel. Jobsite safety is hugely important. Maintaining the right kind and amounts of insurance coverages is key. Keeping their equipment and workforce busy and profitable is a challenge. Demanding clients and design problems are prevalent.
Many problems contractors face relate to money, the lifeblood of every project. Most project dollars run through contractors. However, they usually build first and get paid later, often much later. Contractors extend credit each month; but few view themselves as credit managers. And when their clients fail to pay, they remain liable for trade labor and subcontracts.
Can Architects and Contractors Better the Odds of Being Paid by Owners?
Jeremy has served on teams that successfully:
- Counseled a specialty contractor to manage critical defects that it elected to repair mid-project at a $34 million out-of-pocket cost.
- Defended the builder of a 71-turbine, 109.5-megawatt wind farm facing a lawsuit constitutional challenge to its special use zoning approval.
- Represented a GC who suffered a major fire on a project facing financing loss and foreclosure, subrogation, and insurance coverage lawsuits.
- Represented a prominent design-builder in an AAA arbitration in claims related to the complex mechanical systems of an ice arena.
How Can Contractors Improve Their Chances of Getting Paid on Construction Projects?
Illinois general contractors and trade contractors often have trouble getting paid promptly, forcing many to use collection measures like mechanics liens.
Contractors face difficult financial challenges. They work on the project one month, invoice the next month, and hope to be paid the following month. They might not realize it, but these contractors are essentially “extending credit” to the general contractor or project owner or real estate developer who hired the contractor. Yet, most contractors do not consider themselves “credit managers.”
Many savvy contractors who realize this try to increase their chances of being paid by assessing the creditworthiness of the project owner before work begins. If the general contractor signed a construction contract with a single purpose entity – for example, a limited liability company (LLC) that exists only on paper, for use with only one project, and has no real assets – the client might not be “creditworthy.” On the other hand, if the contractor contracted with an established business operating for years and has sufficient assets to satisfy a claim, it is more likely to be paid.
Regardless of the creditworthiness of the contractor’s client, in Illinois, on private projects, if the contractor was hired by the property owner, or someone “knowingly authorized” by the project owner to hire the contractor, a mechanics’ lien might be a useful tool protect the general contractor’s right to payment. Mechanics liens are technical and time-sensitive. Any
general contractor or trade contractor considering a lien should speak to a construction attorney without delay to ensure they do not lose their lien rights.
Which Contractors Must Be Licensed in Chicago?
Unlike plumbing contractors, there is no state-level supervision of general contractors or electrical licenses in Illinois. Practically all construction-related licensing is handled at the county or city level, with the exception of roofing licenses, which are overseen by the Illinois Department of Public Health.
If you want to operate as a general contractor in Chicago, you must receive a license from the City of Chicago Department of Buildings. These licenses are based on the value of a single contract project.
- Class A licenses have no limitation on project value
- Class B licenses are for projects valued at $10,000,000 and under
- Class C licenses are for projects that do not surpass $5,000,000 in value
- Class D licenses are for projects valued up to $2,000,000
- Class E license cover projects valued at up to $500,000
The City of Chicago Department of Buildings also handles trade licensing for electricians, crane operators, mason contractors, plumbers, and private alarm contractors.
How Does a Payment Bond Work?
Mechanics liens cannot be placed on public projects like schools, streets, and public buildings. To protect subcontractors, design professionals, and material suppliers from nonpayment, general contractors are required under Illinois law to post a payment bond for projects valued at over $50,000.
Payment bonds provide the following protections:
- The claim is made against an insurance company, so the general contractor’s financial situation is no impediment to collecting payment
- They provide an additional or secondary source of funds that can be used to pay for work and materials provided
- They are not limited to subcontractors who have contracted directly with the general contractor or bonding company
We can assist general contractors in complying with their statutory obligations under the Illinois Public Construction Bond Act.
When it comes to payments, general contracts are protected by local and state statutes that govern payment on public works projects. When you submit a payment request, the contracting entity must approve it within 30 days. Local government entities then have 30 days to pay while state entities must pay within 60 days. Any wrongfully-withheld or late payments face interest penalties at 1% per month.
General contractors are the “center-of-the-spoke” of all projects, which multiplies their risk. We have the perspective and insight to help contractors mitigate these risks and deliver projects successfully.
To learn more, contact Baker Law today.
