Protect Yourself From Costly Construction Liens
Anyone who has ever gone through a remodel or addition knows it isn’t all a bed of roses. Floor plans are altered, windows get relocated and carpenters, plumbers and electricians call in – and your contractor is orchestrating every detail, ideally without a problem. You simply write him a check at agreed-upon intervals to cover the full range of subcontractors, laborers, and material suppliers. But what most homeowners aren’t aware of is that each of those individual parties could potentially file a lien against their property or force them into foreclosure if their general contractor fails to pay any of these parties. Luckily there are safeguards you can (and should) take to legally protect yourself from an unwarranted lien.
The first thing you should know is that your written agreement with a general contractor grants that contractor the right to pursue legal action if you fail to pay. But subcontractors and suppliers don’t have a contract with you, so they don’t have the same recourse.
If you pay a general contractor and they fail to, in turn, pay their subcontractors or suppliers, the only recourse those secondary parties have is to file a mechanics lien. If they file a lien against your property, you could ultimately become responsible to pay them – even though you’ve already paid through your general contractor. Even worse, they could force you into foreclosure to satisfy that obligation or leave you with an unsettled matter on your property title – and this could hinder your ability to sell or refinance in the future.
Protect yourself. Your first line of defense is hiring a reputable contractor who is licensed, properly insured, and has a proven track record. Slate Ltd. ensures this and much more for you. Before you sign a contract, ask your general contractor for the names of his subcontractors and material suppliers. Your contract should include a schedule outlining project phases and when payments are due. These will help you track when those subcontractors and suppliers are to be paid.
Finally, ask your contractor to get a conditional or unconditional waiver and release form filed from each potential lien claimant before making any subsequent payments. If your contractor doesn’t handle this, you can contact each and get these signed yourself. Slate Ltd. provides conditional and unconditional, interim and final waiver and release forms for home-owners. Click HERE for us to send them to you free of charge.