General contractors usually take the risk on construction projects by ensuring that all the subcontractors who provide labor, services and materials are paid in full and on time. The property owner pays the general contractor for the entire project, and the general contractor passes this money down to the subs. A contractor's sworn statement provides a list of who did what work and what that person is owed. Completing a statement can dramatically reduce your risk of double payments, construction liens and bond claims.
What is a Sworn Statement in Construction?
Simply, it's a list of every subcontractor, supplier, company and individual who has provided labor, services or materials toward the construction project. It exists to tell property owners and general contractors who is owed money, how much and for what work. It's basically a record of all the various expenses that the general contractor is billing the property owner for, so everyone knows who's been paid what and what each sub is still owed.
Why Do You Need a Contractor's Sworn Statement?
Sworn statements are necessary because of lien law. With most construction projects, the property owner will pay the general contractor, and the general contractor is responsible for making payments to the various subs and suppliers who worked on the project.
What happens if the payment process goes wrong? First, the property owner could wind up with a lien against his home. If the general contractor fails to pay a subcontractor, then the subcontractor could file a notice of lien against the client even though the client has already written a check. Second, you could get an unscrupulous subcontractor sending an invoice (and filing a lien) for work that he hasn't actually done. The general contractor takes the risk here and could wind up paying the invoice to honor his commitment of providing a lien-free job.
Contractor's sworn statements will protect against these risks by ensuring there's a full record of the work that has been carried out, when and by whom. That's why a sworn construction statement is so important whenever payment is requested or made. Insurers may refuse to give coverage unless you use them, which means they're an absolute requirement on bonded jobs.
What Does It Mean to Make a Sworn Statement?
A sworn statement looks a lot like an affidavit. It contains a record of all the facts related to an event – in this case, who is providing goods and services in a construction project – and it contains a declaration that the facts are true under penalty of perjury. You'll need to sign the statement in the presence of a public notary.
Giving false information on a sworn statement is a crime, punishable by fines as high as $10,000 and up to 10 years incarceration, depending on where you live. This is serious stuff.
How to Complete a Contractor Sworn Statement
It's easy to fill out a contractor's sworn statement. Most construction professionals will have a blank form on their systems; otherwise, you can download a free contractor's statement form online. Make sure it's the right form for your state. Fill out the required information, which includes:
- Project details
name/description of the project, client (property owner).
- State and county; address of the project.
- General contractor name and address.
- Subcontractor/supplier name and address (if this person is filling out the sworn statement).
- Brief description of the contract.
- A table that lists:
After signing and issuing the sworn statement, the recipient must give notice that he or she has received it. Notice may be given in writing, over the telephone or in person. The recipient must also provide a copy of the notice to any sub that requests it within 10 business days.
- signing a contract image by William Berry from Fotolia.com