- As at the end of the first quarter of 2018, the number of construction debtors was nearly 40 thousand, and their arrears to banks and contractors totalled PLN 4.57 billion.
- If a subcontractor does not receive remuneration from the contractor, the subcontractor may demand the investor to pay under joint and several liability.
- Prior payment of remuneration to the contractor does not release the investor from joint and several liability and the need to pay also the amount due to the subcontractor.
Construction industry is one of fields that most frequently face problems with liquidity and timely payment of receivables. This can be attributed to many factors, among others, volatile construction material prices, problems concerning delays and acceptance of works or warranty claims. It happens that, due to contractor liquidity problems, also the subcontractors’ waiting period for remuneration is prolonged. On such occasions, the investor is in a difficult position since the investor may be called on to pay the amount due.
4.5 billion arrears in the construction industry
The data from BIG InfoMonitor and the Credit Information Bureau (BIK) demonstrate that the number of construction debtors at the end of the first quarter was 39 382, and their arrears to banks and contractors totalled PLN 4.57 billion. The percentage of construction companies affected by such problems in the total of construction firms increased in the 6-month perspective from 4.9% to 5.7%. Specialist explain that such situation was caused, among others, by an accumulation of public investments, which in turn led to an increase in prices of construction materials, equipment, raw materials and labour costs.
– If a subcontractor, for various reasons, does not receive remuneration from the contractor for the construction works carried out, the investor is jointly and severally liable for such payment, as set out in Art. 6471 of the Civil Code. However, the detailed scope of the works must be notified to the investor by the contractor or subcontractor before their start. Under the amendment of the discussed legislation of March 2017, an investor is liable for payment to the subcontractor of the remuneration agreed in the contract between the subcontractor and the contractor unless the amount in question exceeds the remuneration owed to the contractor – says Jacek Kosiński from the law firm Jacek Kosiński Advocates and Legal Advisers.
Joint and several liability is not discharged by prior payment of the contractor’s remuneration
If the subcontractor does not receive remuneration from the contractor, such responsibility passes to the investor, even if the investor had previously paid all the amounts due to the contractor. As a result, there is a risk that the investor will have to pay twice – to the contractor and the subcontractor. A solution to that situation is to make a recourse claim, thanks to which the investor may seek refund of the amounts paid from the contractor or, where the latter’s remuneration has not yet been paid, to set off the amount due against such remuneration. A problem arises where the contractor turns out to be insolvent.
– It must be remembered that the investor must consent to the engagement in a given investment of a third party, that is a subcontractor. It is highly important that the investor does not neglect that question because the amended version of the act introduces a presumption of the investor’s consent to the performance of specific works by the given subcontractor, which means that on such occasions silence implies consent. Both the notification of subcontractor and the investor’s refusal must me made in writing on pain of invalidity, and the investor has 30 days for submitting an objection. Unfortunately, provisions on joint and several liability are mandatory, which means that they may not be superseded by appropriate contractual provisions – adds Jacek Kosiński.
*Data from BIG InfoMonitor and BIK