The fact that the subcontractors have done this suggests that there is some legal justification, but i must admit that i was surprised. I would have assumed that, if i ask Company A to build something for me, and i sign a contract with Company A and make all my payments direct to Company A, then if Company A undertakes to order supplies and/or labor from Companies B, C, and D, the only person liable to those subcontractors is Company A.
Is this not the case? Do contracts for things like building pools contain clauses that leave the homeowner responsible directly to the subcontractors, even if the homeowner has paid the main contractor?
That’s the way it tends to work. If a subcontractor doesn’t get paid they have the legal right to put up a lien of the property they did work on.
It kind of sucks that the homeowner gets stuck with the legal burdens caused by a bad general contractor but it’s the system we have. I suggest when hiring a GC you do your homework on them to make sure they are honest and reliable then actually make them print up a contract.
Thanks for the correct term. I just read up on mechanics’ liens in Wikipedia. You learn something every day. Not only are they legal and common practice, but the state of California is apparently unique in having such liens as a constitutional right.
I must say that i find this sort of thing somewhat troubling, even though i’m sure that smarter people than me have thought through these issues much more closely and determined that this sort of lien is a necessary instrument.
I guess i just don’t understand why, if i engage a contractor to do work on my house and the contractor goes into bankruptcy, the subcontractors who did work or provided material at the request of that contractor should have a stronger legal remedy than i do for ensuring that they are not out of pocket.
If subcontractors are worried about not being paid, they should insist that the contractor pay them up front, or at least provide partial payment before work is done, the same way that the contractor does with the homeowner.
Besides finding an honest general contractor, you can also mitigate this sort of problem by insisting to directly pay for materials and subcontractors yourself. That is, when a contractor I’ve hired wants to sub some bit out, I don’t pay him to pay the sub. I pay the sub directly. Same for materials. Of course, you have to make sure the original contract covers this–those subpayments reduce the amount the general contractor gets (but not his markup, so an honest one won’t complain).
There might be some risks to this process (I’m not sure how insurance works in these cases), but it keeps the general contractor from misusing funds.
If this is true, i tentatively withdraw some of my objections to the mechanics’ lien. It appears the law does provide some protection for the homeowners against this sort of thing, but the homeowner needs to be aware of the law, and needs to be willing to refuse payment for work not yet completed.
Corporations and people can disappear, while property has a much harder time doing so. The laws are set up to protect contractors. If someone does work on a property they should be paid for it. Allowing those contractors to put liens on property ensures that if the property is ever sold for profit the contractors will get compensation for any work they did to improve the value of said property.
Without the laws as written anyone could form a corporation, have said corp hire contractors to work on their property then after the work is done file bankruptcy and dissolve the corporation, leaving them with a house built on their property essentially for free.
Maybe if we removed bankruptcy as a concept and went back to debtors prison we could go with a different system.
For a big job, I would insist on the contractor putting up a performance bond. If he fails to finish the work, the performance bond pays out. That is how govt entities do it. Smaller contractors probably won’t be able to comply though so it will narrow your range of choices.
Maybe I misread, but did it say that one of the suppliers was going to put a lien on the house - the cement company was it? I’ve never heard of that. So in CA, even though the responsible party is the contractor or subcontractor, a supplier can still go after the home owner? That’s bullsh*t in my humble opinion.
Another protection for the homeowner is getting a lien waiver from the subcontractor. This is a document signed by the subcontractor where he basically says ‘I’ve been paid, so I waive my right to place a lien against this property’.
So when the general contractor says “the concrete company is here to pour the concrete; they need to be paid $4,000 up front”, the homeowner can say “I’ll write a check for that; give me a copy of the lien waiver from the concrete company”. So the general contractor doesn’t get the check until the homeowner gets the lien waiver.
How would that work in a place like Calfironia, where the subcontractor’s lien rights are guaranteed by the constitution. I know you can do things like waive your right to remain silent, but how easy is it to explicitly waive a right like this?
I think it was the cement company going after the delivery or labor for the forms.
In my experience liens go to the cost of labor. If you want the cost for materials or the materials themselves back that’s a small claims issue which is handled separately.
I’ve run into many amusing stories of contractors being awarded right to reclaim materials from unpaid jobs. Contractors get to pull out things like electrical panels through ‘reasonable means’ ie pair of cutters and a crowbar leaving the deadbeat homeowner with a huge mess they’d have to hire another electrician to fix.
My experience with non-payment is pretty limited overall. I’ve been fortunate/have had good enough judgment to only end up with paying customers. Only a few rare times have I had to take out a lien, in those cases the homeowner paid very shortly after the lien was put on.
I do not subcontract out. If called to a job by a general contractor I expect a check from the homeowner.
I have no interest in handling subcontractors for my profit. If I need to bring in someone else I would rather opt to have the home owner select someone of their choosing or if they want go with my recommendation. Either way they pay that person directly. Most the other companies I work with are the same way. We make no percentage on each others work. Simply pass each other work when able.
The underlying right is your right to get paid for the work you did. So the fact that the waiver is given upon receipt of payment, and specifically acknowledges the payment, probably makes such a waiver acceptable for waiving your rights.
But we’d have to get a California lawyer to get an authoritative answer.
Either that, or the general contractor puts up a labor and materials payment bond, which would ensure that the subs’ labor and materials were paid for, even if the general left them unpaid. Even better, the subs can usually claim against an L&MP bond themselves, without going through the general.
I don’t see any reason why a smaller contractor couldn’t get a bond, assuming that the contractor meets the qualifications. The question is, can that contractor find a surety willing to write a smaller bond? A call to a surety broker would answer that question quickly enough.