The Remote Claimant and the Pay-If-Paid Clause

This week:

1. Serve a written notice of nonpayment on the owner and the prime contractor, identifying the project, the claimant, the amount ($84,000, plus the contract balance), and the first and last dates of furnishing. Even where the owner has required no special notice, the statutory remote-claimant notice is the document that preserves the lien; send it certified mail and by a method that produces an independent delivery record.
2. Calendar the 90-day date from the last actual furnishing of labor or materials and treat it as a hard date. Nothing in the file suggests an extension.
3. Preserve the lien now rather than waiting to see whether the money arrives. A recorded lien is leverage; an unfiled one is a hope.

On “last furnishing”: the clock runs from the last day Summit actually furnished labor or material to the project - here, roughly 40 days ago. Idle time waiting on someone else's steel does not keep restarting it. A verbal “a few weeks out” is not a furnishing and is not a commitment Summit can prove. Under the conservative reading Summit has about 50 days left on the notice and lien clocks, not the months its owner thinks it has. Assume the shortest defensible date and act inside it.

Also: photograph and log the stored steel and any site conditions today; if Summit supplied material now sitting in a yard, that is a separate and stronger lien item and should be documented with delivery tickets.

Probably not, and certainly not on these facts alone.

• Privity first. The clause lives in the Tri-State/prime contract. Summit is not a party to that contract and did not agree to it. A pay-if-paid clause binds Summit only if it was incorporated by reference into Summit's own subcontract clearly enough to be enforceable - the reference must be specific, and the clause must be conspicuous under Tennessee's treatment of these provisions. Read Summit's subcontract; if the clause (or a flow-down clause broad enough to capture it) is not there, the defense fails.
• Pay-if-paid vs. pay-when-paid. They are different animals. Pay-if-paid makes owner payment a condition precedent to the sub's obligation and shifts the credit risk down the chain; pay-when-paid is only a timing mechanism and the obligation to pay eventually survives. Read the exact words, not the label the other side uses.
• Even a valid clause does not touch lien rights. Summit's mechanics' lien claim runs against the owner's property and is independent of the contract between Tri-State and the prime. That is why the notice and filing steps above matter more than the contract argument.
• Waiver and interference. If the prime or Tri-State caused the owner to withhold - defective work, missing lien waivers, an unfunded draw that Tri-State could have cured - the clause can be defeated on waiver or prevention grounds.

Practical position: reply in writing that Summit does not concede the clause applies, demand a copy of the Tri-State/prime contract and the subcontract flow-down language, and state that Summit's lien rights are being preserved regardless.

Do not formally abandon the contract - but do not remobilize for free either.

Risks of walking off:

• If Summit is later held to have abandoned, Tri-State can back-charge the balance of the contract, the cost to complete, and delay damages - turning an $84,000 receivable into a claim against Summit.
• Summit's lien claim is measured by the value of labor and material furnished; abandonment invites a completion-cost setoff that can exceed the unpaid balance.
• Any pass-through of the prime's delay claim.

Risks of continuing:

• Every additional dollar furnished deepens the exposure, especially with no payment bond.
• Summit becomes a co-creditor competing for a shrinking draw with no security.

The disciplined middle path:

1. Send written notice that further work is suspended pending payment or adequate assurance of payment, expressly reserving rights and stating the amount required to remobilize. That is a suspension for cause, not abandonment.
2. Demand the accounting: the status of the draw, whether the owner has paid, and copies of the prime's and Tri-State's pay applications and lien waivers. If the owner has paid Tri-State, the pay-if-paid defense collapses and Summit has a clean claim - and possibly a claim against Tri-State for misapplication of funds.
3. Offer a negotiated release: partial payment now against a conditional lien waiver, with the balance on a short schedule.
4. Keep the surety/owner informed in writing; on private work the owner's leverage over the prime is often the fastest route to money for a remote claimant.