How do I ensure that all the subs sign a lien waiver?


Old 07-01-04, 08:55 PM
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How do I ensure that all the subs sign a lien waiver?

I have a main general contractor who''ll sign a lien waiver (form to prevent subcontractors from suing me by claiming they weren't paid for their work and thereby placing a lien on my home)

but how do I ensure that anyone performing work on the property signs the form?

I can't possibly be watching 10 hrs/day to make sure anyone who enters the premises signs the form or is that my only option?

i.e. what if the general contractor 'mistakenly' excludes some of the subs from signing the lien waiver and those subs come back later to sue me after they haven't been paid by the main general contractor?

Old 07-02-04, 06:18 AM
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In my business, I not only do Design and Drafting but I also am hired to provide services as Project Manager. Whether you are homeowner or Manager, what I am suggesting should be incorporated by all. Also may I point out that many General Contractors are reputable. The problem is that those few who betrayed the trust with clients, subcontractors and suppliers have lead to many not believing the General Contractor, regardless how good or honorable they are. Thus the information listed below virtually guarantee that you never have to pay twice.

I want to bring up one important fact, if you did your homework in hiring a General Contractor, checking references, seeing jobs and checking with his vendors on how he pays his bills, you have given yourself a 99% chance tht all things will be done right across the board. However, the remaining 1% is the issues of concern as you may be the one job that has problems. The Contractor may have over extended himself, maybe a divorce is in the works or a death in the family, robbing Peter to pay Paul or there are delays in making payments to subs/suppliers as an example. This is when the problems may occur, if at all and I stress, if at all.

First, before starting work, a contractor must provide you with a disclosure statement that advises consumers about lien releases. Usually this is at the bottom of any signed contract and a good written one at that. You should receive company name, contact name, address and phone numbers of each. This requirement applies to projects that have a combined cost of labor and materials in excess of $1,000. Understanding lien releases is very important because a contractor's $6,000, $10,000 or $12,000 bond (if applicable in your state) may not be enough to cover a claim if one arises on your job. If any supplier of materials, worker or subcontractor is not paid, a lien may be filed against your property to force you to pay. As you mentioned, you could pay twice for the same work. Or worse, an unpaid lien could lead to foreclosure. For remodeling projects, liens can only be filed for the amount left unpaid to the General Contractor.

Liens can be avoided. If during your project you receive a "Notice of Intent" or a "Lien Notice" to file a lien on your property, you may ask your general contractor to provide you with lien release documents from the supplier or subcontractor who has sent this notice. These notices can be hand delivered or mailed to you. If mailed to you, they are usually registered to validate that it was received and thus enforces the lien rights of the sending party. You can make the check payable to both the contractor and subs or supplier. Some Generals don't like this but so be it, protect your investment!

There are guides to the time frame when this "Notice of Intent" must be presented to you by any subcontractor or supplier. Call your State Attorney Generals office for the rules pertaining to this. Here is one example,

"NOTICE TO OWNER (A LAW) (a) Person or companies furnishing labor or material for the improvements of real property may enforce a lien upon the improved land if they are not paid for their contributions, even if such parties have no direct contractual relationship with the Owner. However, subcontractors who have no direct contract with the Owner must supply the Owner with a prelien notice not later than 20 days after first furnishing labor, skill or material for the improvement in order to have the right to place a lien against the property if they are not paid. If they fail to give such timely notice, such subcontractors may not file a lien, and therefore, no lien waiver will be provided for the work they did b)Minnesota law permits the Owner to withhold so much of the contract price as may be necessary to meet the demands of all other lien claimants, pay directly such liens and deduct the cost thereof from the contract price, or withhold amounts from his Builder until the expiration of 90 days from the Completion of such improvement unless the builder furnishes to the Owner waivers of claims for mechanics' liens signed by persons who furnished any labor or material for the improvement and who provided the Owner with timely notice."

The contractor is required to provide you with more information about lien release documents if you request it. If you have requested lien release documents, avoid making final payment until you have received a lien release from suppliers/subcontractors who provided a "Notice of Intent" as applicable by your State law.

Second, when you receive an invoice from a General along with the lien waivers from him and/or subs and suppliers, do not feel like you must cut a check right there on the spot.

Remember, if you have not received a lien notice from any sub/supplier within 20 days (as an example from above) from the start that the service or supply was first delivered, as applicable by your State law, then no lien waiver will be provided as they have not met the lien right requirements. This means no lien can be enforced upon your property.

Any names seen, that you were not given initially, must have attached contact name, address and phone numbers. No information given means no payment to General Contractor. Remember that you are the boss, not the General. They work for you and as such, payment can be delayed by one day or two.

Third, when you receive the invoice with lien waivers, make the calls to the subs/suppliers to ensure that what you received was paid in full. It is also true that lien waivers may be a "Partial". This may be due to the fact that what was done is not completed i.e. heat, plumbing or electrical rough-in, lumber. The General may have paid only a portion of the money due to each sub/supplier which is normal. The key is at time of final payment for all services/supplies received, you should receive a "Full and Unconditional Lien Waiver" releasing you from any potential problems. Failure to receive liens means that you can withhold monies that are still outstanding to subs/suppliers payable by your General.

Final note, in todays world, everyone says they are too busy, don't have time for this or that but yet always have time to seek a lawyer and sue. The issue here is that you must make the time, for if you fail to take the steps required to protect your investment and pocketbook, you will loose. Nothing you do after the fact will replace the money lost.

Hope this helps!

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