Church Law and Tax 1990-09-01 Recent Developments

Construction Projects

A Florida state appeals court ruled that a church was not liable on a mechanic’s lien filed by a company that supplied materials to a subcontractor working on a church construction project. The supplier filed the lien against the church’s property when it was not paid for materials that it supplied. The court ruled that the church was exempt from any mechanic’s lien arising out of the construction project since the general contractor (pursuant to the construction contract) had obtained a “payment bond” in favor of the church from a bond company that insured payment of all subcontractors and material suppliers on the job. Under Florida law, a payment bond exempts a property owner from liens of subcontractors and material suppliers, who must proceed directly against the bond company for payment. This case illustrates a very important point—churches may be liable for “double payment” of some construction expenses if subcontractors or suppliers are not paid. In many states, this risk can be eliminated by purchasing a payment bond. Such bonds should be considered prior to the beginning of any construction project. The risk of double payment also can be reduced by withholding progress payments until “lien waivers” are obtained from subcontractors and material suppliers. The risk of double payment is a real one that should be considered by church leaders prior to any construction project. Corporation of the President of the Latter Day Church or Jesus Christ v. Seymour Electric Supply, Inc., 558 So.2d 88 (Fl. App. 1990).

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