Posts Tagged ‘Subcontractor Lien’

Avoiding Subcontractor Liens

August 6th, 2010 Contract Smart No comments

Last week, three of the largest national consumer protection agencies released their annual joint report on the most common consumer complaints, along with their recommendations.  As a result of repeated complaints about contractors, The Consumer Federation of America, National Association of Consumer Agency Administrators, and North American Consumer Protection Investigators indicated in that more laws are needed to “Regulate home improvement contractors and protect consumers from subcontractors’ liens.”

Although most people have heard a story or two about a home improvement contractor that acted less than professionally on a project, many are not familiar with the subject of subcontractor liens, also known as mechanic’s liens.  In short, a subcontractor lien occurs when a subcontractor, typically working under a general contractor, makes a claim against property they have worked on as a result of non-payment for their time and materials.  Although a subcontractor lien often arises because a general contractor has failed to pay a subcontractor from monies provided by the owner to the general contractor, some can occur well after the job is complete.  The latter instance sometimes occurs when a subcontractor finds himself in a financial bind, even if he was originally paid for his efforts on the job he’s filed a lien on.

Regardless of when a lien is filed, it is usually costly and time consuming to have it removed, and is an especially frustrating process when the owner unfairly suffers from misbehavior by a general contractor or subcontractor.   So how can an owner avoid these annoyances?  By having each subcontractor that works on their project sign a lien release or lien waiver in conjunction with payment.  A subcontractor lien waiver is strong evidence that the subcontractor has received payment for their work. The waiver can serve to deter subcontractors from filing invalid liens on an owner’s property or have invalid liens removed more quickly.

While additional laws and regulations may help protect consumers, they may be a ways off from being drafted and passed.  And even with laws on the books,  there is no substitute for a lien waiver for each contractor that works on a project as well as a good contract that provides each party with legal protections.  In Colorado, Consumer and Contractors alike can take advantage of the contract drafted by Contract Smart’s attorneys, who have significant expertise in the field of construction law.   When a contractor uses the Bid and Contract Management System from Contract Smart, he provides the owner with a third party contract that is designed to be fair and balanced and to provide the owner and the contractor with important legal protections.  He also has access to a subcontractor agreement to cover any subcontractors on the project, as well as subcontractor lien releases that can be completed as each subcontractor on the project is paid.  And since he Contractor can e-mail the owner a contract and an up to date summary of tasks for your project, you can stay in the loop during each step of the project.

If you’re an owner and you like to learn more about why the contractor on your next job should use Contract Smart, click here.  Or, if you’re a contractor, and you’d like to know how Contract Smart can help you better protect you and your customers, click here.

Finally, while we do our best to provide useful information to contractors and owners regarding the home improvement process, we are not attorneys and we do not provide legal advice.  We recommend that you always consult an attorney to address legal matters.