Commercial Construction Billing Process that Protects You, the Owner!
Congratulations on starting your new construction project! It is always exciting to build a new building or renovate a new space. This means your business is growing or you’re starting a new chapter. Either way you look at it – it’s exciting, but at the same time it can be nerve racking. However, there is no need to worry.
The good news is, there are processes in place, to protect you as the owner. Here is what you need to know to protect yourself, keep your project on time for completion and to ensure your money is going to the right people. Here is what you can anticipate throughout your construction project.
- Invoices & Sworn Statements – You can expect your contractor to invoice you monthly for work completed. Each invoice should include a sworn statement. A sworn statement is a legal document that itemizes all the costs that have been incurred thus far, including all the subcontractors and suppliers involved in your project. In addition, monthly invoices may also include an American Institute of Architecture (AIA) Application for payment. The AIA is a standard form used for billing.
- Payments – Your bank will review the invoice. They may conduct a jobsite walk through, to ensure that the work completed matches the invoice amount. Once your bank approves the invoice, payment is made to you, the owner, or directly to your general contractor. When your general contractor receives the funds, they will pay each of the subcontractors the amounts listed on the sworn statement. This certifies that you are not paying for work that hasn’t been completed.
- Waivers – Upon receiving payment, each subcontractor is required to sign a partial or full unconditional lien waiver. When a subcontractor signs a waiver, they are releasing all lien rights for the portion of work they have received payment for.
At the end of the project, your General Contractor should supply you with full unconditional waivers from all subcontractors. This is your confirmation that all liens have been waived and will ensure a clear title to your property. If the above processes are followed you will be ready to begin your new journey in your newly constructed or renovated space.