GCC Lien Laws & Construction Finance

Question 1

What is a mechanics lien in the context of construction?

Accepted Answer

A legal claim filed against real property by unpaid contractors, subcontractors, or suppliers

Answer

A mechanics lien is a security interest in a property granted to those who have supplied labor or materials but have not been paid, giving them a legal claim against the property itself.

Question 2

Under the Miller Act, what bonds are required on federal construction contracts exceeding $150,000?

Accepted Answer

Both a performance bond and a payment bond

Answer

The Miller Act requires contractors on federal construction projects over $150,000 to furnish both a performance bond (guaranteeing completion) and a payment bond (guaranteeing payment to subs and suppliers).

Question 3

What is the primary purpose of a preliminary notice (pre-lien notice) in construction?

Accepted Answer

To preserve the right to file a mechanics lien by notifying the property owner of the claimant's involvement

Answer

A preliminary notice alerts the owner and general contractor that a subcontractor or supplier is working on the project and may claim lien rights if not paid, and failure to serve it can forfeit lien rights in many states.

Question 4

What is retainage in a construction contract?

Accepted Answer

A percentage of each progress payment withheld by the owner until substantial or final completion

Answer

Retainage (typically 5–10% of each payment) is withheld to give the owner financial leverage to ensure the contractor completes all punch list items and corrects deficiencies before final payment is released.

Question 5

What does a payment bond primarily protect against on a construction project?

Accepted Answer

Non-payment to subcontractors, laborers, and material suppliers when liens on the property are unavailable

Answer

A payment bond guarantees that subcontractors and suppliers will be paid even if the general contractor fails to pay them, and it is especially critical on public projects where mechanics liens cannot be filed against government property.

(GCC) General Contracting Certification Practice Test

(GCC) General Contracting Certification Practice Test

GCC Lien Laws & Construction Finance