As a subcontractor in North Carolina, disputes with general contractors (GCs) can feel like David versus Goliath situations. Whether you’re dealing with payment delays, scope changes, or disagreements over work quality, these conflicts can threaten your business’s cash flow and reputation.
Understanding your rights and having a strategic approach to dispute resolution can make the difference between a costly legal battle and a favorable outcome.
Common Sources of GC-Subcontractor Disputes
Before diving into resolution strategies, it’s important to understand the most frequent causes of disputes between general contractors and subcontractors.
Payment issues are by far the most common source of conflict, involving delayed payments, partial payments, or complete non-payment for completed work. While North Carolina’s prompt payment laws provide some protection, enforcement requires understanding your rights and proper documentation.
Scope creep and change orders create another frequent battleground. Disagreements often arise when the scope of work expands beyond the original contract without proper documentation or compensation. GCs may expect additional work without corresponding payment adjustments, leaving subcontractors caught between completing the project and protecting their bottom line.
Quality and performance disputes can be equally challenging. When disagreements arise over whether work meets contractual specifications, they can lead to demands for rework, delayed payments, or claims for damages.
Schedule delays round out the most common issues, as finger-pointing between GCs and subcontractors can escalate into formal disputes, especially when delay damages are involved.
Your Rights as a Subcontractor in North Carolina
Understanding your legal protections is the foundation of effective dispute resolution. North Carolina law provides subcontractors with the right to file a mechanic’s lien against the property for unpaid work, though strict deadlines and notice requirements must be followed to preserve these rights.
The state’s prompt payment statute requires payment within specific timeframes and provides penalties for late payment, including interest and attorney’s fees in certain circumstances.
Under certain conditions, you may also have the right to suspend work when payments are significantly overdue, though this should be done carefully to avoid breach of contract claims.
Step-by-Step Dispute Resolution Strategy
1. Document Everything
Before any dispute escalates, ensure you have comprehensive documentation including original contracts and any amendments, change orders and scope modifications, all correspondence, delivery receipts and work completion records, photos of completed work, and payment records with outstanding invoices.
2. Review Your Contract Terms
Carefully examine your subcontract for payment terms and schedules, dispute resolution clauses such as arbitration or mediation requirements, notice requirements for claims, termination provisions, and liability and indemnification clauses.
3. Attempt Direct Communication
Start with professional, documented communication by sending a written demand letter outlining the dispute, requesting a meeting to discuss resolution, keeping records of all communications, and setting reasonable deadlines for response.
4. Consider Alternative Dispute Resolution
ADR, or Alternative Dispute Resolution, may help with your dispute and typically involves either mediation or arbitration.
Many construction contracts require mediation before litigation. This process involves a neutral third party helping both sides reach a voluntary agreement. Mediation is typically faster and less expensive than court proceedings.
If your contract includes an arbitration clause, you may be required to resolve disputes through this process rather than traditional litigation. Arbitration decisions are typically final and binding.
5. Preserve Your Lien Rights
If payment is the issue, take immediate steps to protect your lien rights by determining if you need to file a Notice to Lien Agent, calculating the deadline for filing your lien claim, ensuring proper service of lien documents, and considering whether a Notice of Claim against payment bond is required.
6. Know When to Escalate
Sometimes direct negotiation isn’t enough. Consider escalating when:
- The GC refuses to communicate or respond to reasonable demands within two to three weeks from the last date upon which you worked at the property
- Payments are significantly overdue without explanation
- The dispute involves substantial amounts that threaten your business
- The GC is making unreasonable demands or acting in bad faith
The Value of Experienced Construction Law Representation
Working with the North Carolina construction lawyers at Anderson Jones can provide significant advantages. Our team has:
- Industry Knowledge – Our construction law attorneys understand industry practices, standard contract terms, and common dispute patterns, allowing us to anticipate issues and develop effective strategies.
- Procedural Knowledge – Lien laws, bond claim procedures, and court rules have strict deadlines and technical requirements. Our experience ensures compliance with all procedural requirements.
- Negotiation Skills – Our attorneys are experienced in construction disputes, and know how to effectively negotiate with GCs and their counsel to achieve favorable settlements.
- Litigation Experience – When disputes can’t be resolved through negotiation, our experience with construction litigation helps protect your interests in court or arbitration.
Moving Forward With Anderson Jones Once Disputes Arise
Ready to protect your business interests? Contact Anderson Jones, PLLC at (919) 277-2541 for a confidential consultation about your construction law needs. Our experienced team understands the challenges facing North Carolina subcontractors and is ready to help you navigate disputes and protect your business.