To File a Lien — or What?
This is a thoughtful discussion of the power of liens — or the threat of a lien — to compel payment, along with considerations of how to maintain good relations with people in the deal who you may want to work for again. April 21, 2011
Question
I have a large project we recently completed. When final checks were sent out it was only a partial of the remaining balance. The GC claims that the building’s owner is short paying them therefore they cannot pay all the subs in full. This is a job that went through the bank, instead of their usual private funding.
If we lein the property we risk angering the building owner who may or may not be short paying the GC and could lose potential future business. In the end it is the GC's responsibility to pay since our contract is with them, but putting the lein on the property would be a pretty sure fire way to collect as they have not finalized the loan yet, and the building owner would not be able to begin collecting on his lease. Any thoughts or ideas would be appreciated.
Forum Responses
(Business and Management Forum)
From contributor E:
Why would you want future dealings with someone that will not pay you in full now? If your contract is with the GC it's his responsibility to pay, regardless if he's paid or not.
From the original questioner:
I understand the not working for the GC, but how can you lein so that does not adversely affect the relationship with the building’s owner who would be the source of future work?
From contributor J:
I had this experience before. It was for a state historical society project. The GF was not a good payer. After the final install, 90 days had gone by with no money. I called the project manager from the historical society and told them the situation, and that I would be placing a lien in a few days if not resolved. I had a check very quickly. The threat of the lein may be as powerful as the lien itself - especially if the owner has paid and the GC is using you as a bank to finance the next project. The owner will understand, and shouldn't hold a grudge. We know the bank paid their portion.
From contributor M:
The best way to maintain a good relationship with the owner is to keep them informed when the GC's actions threaten to jeopardize the owner's position. An email with everyone CC’d is probably all that it will take.
From contributor K:
A draft letter to the GC (which will be CC'd to the owner/bank) detailing your agreement with the GC, and payments received, the deficit of in the final payment, the explanation provided by the GC that the owner short-paid the GC and that he was passing the loss along to you and other subs, and that this situation was unacceptable, and that your only remedy was the lein (which your letter of intent details that you will file if payment is not received by XXdate) should snap all parties to attention, and the truth will come out and you will know what you are dealing with.
Provide the draft letter to the GC and his reaction will tell you all you need to know. Let him knows he has three days before it is forwarded to all parties. If he was legitimately shorted (not that it has anything to do with your payment), then he should not begrudge you in any way in filing the lien to protect your money that is due you with the owner/bank as that is what lien's are for in the first place. If there is more to the story, which is most likely the case, it will become apparent quickly upon presentation of this letter.
From contributor Y:
Go talk with an attorney about this; and before you do another job. There are specific legal procedures that need to be followed in most states to perfect a lien. If your clients get mad because you protect your interest by following the law, then you don't want them for clients anyway. Spending $20 to record a few documents to protect yourself before commencing a job is prudent, not spending it is just plain out stupid.
