When a contractor does not pay subcontractors, workers, suppliers and other payments, these individuals will go to the property owner to demand payment. This is regardless if the owner had paid the contractor in full with the expectation that the contractor would take care of all the subsequent payments needed for construction or renovation. The conditions for payment are different for projects that build a new structure and for projects that only added on improvements and renovations. But by law, both types are subject to legal claims called construction liens. Material suppliers and builders can file for liens within ninety days after they have stopped delivering supplies or stopped working. In some states, a pre lien notice is required before filing a full lien petition for payment. This is to give the property owner a chance to pay without having to go through mediation of a government agency. But in other states, a pre-lien notice is not required.
A lien can be applied for with the assistance of a lien service online. You can also download construction lien forms in PDF format from the internet. Another option is to go visit the government office responsible for lien application and get your forms from the clerk. Application forms are submitted by mail or directly to the government office. Do not forget to attach supporting documents with your applications. The documents need are used to show how much labor and supplies are valued that require payment. You can show receipts and time cards to indicate work completed and supplies that have been delivered and used.
Before full payment the property owner needs to ask for a notice of complete lien release. This is a document that states all transactions have been completed in full and no further payments can be collected. The business of paying contractors and later liens gets more complicated when the property owner is using a lending company to pay subcontractors and suppliers with funds from a mortgage. A property owner can be petitioned with multiple liens at the same time from different parties, which is why they need to ask their primary contractor to let them know about all possible lien claimants, a list of subcontractors, suppliers and other laborers. This needs to be done before construction begins and should be documented in paper. Should the property owner get petitioned by lien claimants in the future, they would know if they were on the list of potential lien claimants provided by the prime contractor.
Liens are designed to protect subcontractors, suppliers and their businesses. Which is why it is prudent for a property owner served with a liens notice to get the advice of a lawyers should liens claims become confusing. For property owners, using an escrow payment system is a safer way to pay for your building and renovations.
About the Author: Joseph Criswell is a builder and homeowner. He owns his own business that specializes in building and renovating retail commercial spaces.