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Contractor breaks contract/subcontractor liens


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By Mark in Springville, UT on 5/22/2009


Hi,

I live in Utah and have a question regarding liens.

I hired a subcontractor and had a written contract for some concrete work. 
 
The written contract called for certain additives and reinforcement. The cement sub ignored the written contract and used an inferior product.   

In addition, there were lots of other quality issues with the workmanship.  

I have insisted that the subcontractor honor the contract and redo the job to the correct specs, and also fix other problems.   He has refused and we have reached an impasse.

The supplier (the company that supplied the concrete) has filed a lien.  I understand the supplier's point of view totally, but this is all the fault of the subcontractor. He chose to use an inferior product (and thus ignored our written contract).  I am left with a job that I need to tear out and start over again.

The cement sub never completed the job.   

Anyone got any advice?  Do I need to pay off the supplier?  

This job did not require a building permit and neither the supplier nor subcontractor filed a notice of commencement with the Utah State Construction Registry.

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By Faye in Marseilles, IL on 5/22/2009


The only way you can get the lien removed is to pay the supplier directly and get a lien release.  However, the subcontractor can still also put a lien on your property. More than likely they will. I do not know how much the contract was for or what your damages are, so it is difficult to give advice.

I have been on both sides of this type of situation -- as a subcontractor and as an owner-builder. In one case, I had to hire an attorney and sue. The case cost me $7K in legal fees and two years of my life to collect $22K. The second case involved shoddy work by the contractor who did my foundation. Similar to you, they did not honor the contract. Rather than go through a long legal battle -- I opted to negotiate a settlement with them and had the job finished by others.


If you cannot  reach some kind of settlement with the contractor -- you will have to go to court to get any liens released. Without having more information about your situation, that is about all I can tell you.  Good luck.

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By Kenneth in Lees Summit, MO on 5/24/2009


Where are you in the building process and how much time do you have before you need to close your mortgage loan (vs. your construction loan which is open)? The reason I ask is that all liens need to be cleared before you close your mortgage loan, but if you have time it may be worthwhile to let it work to your advantage from a supplier lien. You hired a concrete contractor, who in turn used a ready mix supplier. That supplier is entitled to payment for material they provided to the contractor.

Fair enough, but do you think the only recourse the supplier has for payment is a mechanics lien against your property? I know for most of my large subcontractors I also got lien releases from suppliers as well, but when I called the ready mix plant my concrete contractor used six weeks after the job, they still hadn't been paid. I asked if the account was delinquent, and they agreed that it was. They also identified that this was typical of the contractor I used (slow pay) and that they had methods to receive their money other than mechanics liens, such as waiting until he had a large job with a concrete pump booked for an entire day, and stopping delivery half way through this job until he paid his delinquent amount in full. If you have time on your side, their supplier may have other methods of retrieving their money.

I had another concrete subcontractor (I went through several) that the last truck of the day wouldn't leave until the concrete was paid for in full. At that point, the person with the checkbook had already left, I called my subcontractor, wrote the check myself, and deducted this amount from their bid amount. Again I figure this payment requirement was in direct response to the historical subcontractor paying habits, again another technique besides mechanics lien that gets exercised by suppliers.


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By Mary in PA on 5/24/2009


Ken,

I'm still a bit in the dark on lien waivers. I've got the basic ideas and downloaded a form from the free-download section of this site. But I'm not sure on the mechanics (no pun intended) of how to do it. Given your comments above, could you expand on the following questions?

For your major subcontractors, where you also got lien waivers for their suppliers, how did you go about this?

For example, how did you know who the supplier was? If you got the name from the subcontractor, does this have the potential to damage the relationship with the sub (i.e. "I'm afraid you might not pay your bills so I need to know your supplier") or is it pretty much expected?

Were there any problems with getting a supplier to sign the form? Do you personally get the signed form, or did the contractor get the supplier to sign it?

Any other input you have on this topic would be appreciated.

Thanks,

Mary


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By Faye in Marseilles, IL on 5/24/2009


Mary,


You can have your contractor get the lien waivers from the suppliers or  you can pay the bill and get the lien waiver yourself.  I paid for my own supplies and paid for the sub's labor separately.  If your sub is supplying materials than they will need to pay for the supplies in order to get the lien waiver -- then wait for payment from you. 

Some subs may not have the lines of credit or cash flow to do that, especially with the current economic climate.  I found that my subs had no problem with me purchasing supplies. You should ask them about this when you are getting bids and interviewing them.  Good luck.

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By Kenneth in Lees Summit, MO on 5/25/2009


Mary,

I paid attention to who showed up on site and what name and phone number was on the truck.

Lets use my ICF subcontractor as an example, because he used several different suppliers and subcontractors. He used forming lumber for the footers from Lowe's, the chances of getting a lien release from Lowe's is slim to none, however the chances of getting a mechanics lien from Lowe's is also low. However, when pouring the footers, he had a concrete pumper show up and ready mix trucks show up, both with names on the trucks and clearly suppliers that should be paid. Next comes the ICF and reinforcing steel, again this came from a supplier with a name on the truck. If nothing else, this gets me the large suppliers. I can call them directly, or I could have my ICF subcontractor provide lien releases from suppliers before the next draw (he needs a draw to pay suppliers so the lien releases only come after the draw, but before the next draw). I used both techniques (calling suppliers directly, having subcontractors provide them), and neither had any problems with either technique.

Now then, for some subcontractors (sheetrocker), the only truck that showed up was from them. The supplies came on their truck, I have no idea who their supplier was. However I also figure if the supplies came from their truck, the supplier probably didn't know they were being installed on my house, and the chance of a mechanics lien is again slim.

I would at least get the large suppliers. Your carpenter will have lumber (or trusses) delivered from somewhere, the plumber will have plumbing delivered from somewhere, the electrician will have electrical materials delivered from somewhere, your concrete flatworker will have concrete delivered from a ready mix plant and may even have a pumper show up, etc. Delivery is free so why would these subcontractors drive over and put this on their truck to unload at the job site? Even better, these suppliers will pick up the excess. However load this onto your subcontractors truck and they no longer deliver, unload, and pick up excess, and your subcontractor needs to take a trip out of their way to go get parts. Due to this service, I didn't even know where some of my suppliers were physically located. Now then there are always small parts that come off the trucks; I had Home Depot, Lowe's, plumbing suppliers, electrical suppliers, etc. all within easy driving distance to go pick up last minute items, I didn't expect lien releases from these suppliers for every item. If it was delivered by a supplier to the job site, that was an indicator that I wanted a lien release.


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By Mary in PA on 5/26/2009


Thank you both Faye and Ken — this extra level of detail is very useful information!

Regards,

Mary


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