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Re: Sub contractor refuses to provide lien - NJ

4417 Views 8 Replies 6 Participants Last post by  Aggie67
Re: Sub contractor refuses to provide lien - NJ

Job has not started yet but sub contractor as per his ACCOUNTANT'S advise refuses to provide "Lien Waiver" builder respects that and states not in contract. would any dept. in state of NJ would assist me, feels like sub will definately put lien on my property even though i will have to pay the builder 100% of the payment. what are my options, builder also refuses to retain another sub contractor. says has signed the contract with his sub.

i am asking lien waiver after i pay my builder and after my builder pays his sub. but builder and his sub refuses to provide lien waiver knowing builder has been sued by 5-6 home owners just wanted to protect myself, builder was contracting to build house without builder's risk insurance all he has was insu. to remodel only
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Why do you want a waiver if the job has not even started?? The sub has a right to be paid, and sometimes that is his only recourse. With a lein waiver, you are basically telling him, if you don't pay, tough tooty.
Vinnie, are you asking for a conditional release with a clause such as;

The undersigned does hereby release all mechanic's lien, stop notice, equitable lien and labor and material bond rights against the premises described below for all materials, supplies, labor services, etc., purchased, acquired or furnished by or for us and used on the premises* described below up to and including March 18, 2009.

This release is for the benefit of, and may be relied upon by, the owner, the construction lender, and the principal and surety on any labor and material bond.

This release is CONDITIONAL, and shall be effective only upon final payment to the undersigned in the sum of XXXXXXXXXXX and XX/100 dollars ($XXXXXX.XX). If payment is made by check, this Release is effective only when the check is paid by the bank upon which it is drawn.

if you are, the sub should understand he releases no lien rights unless proof of payment can be provided
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First question:
Why are you working with a builder known for not paying subs?

No contractor in their right mind will waive their right to lien before the job begins. However their should be a lien agent (usually on a new house being custom built it is the bank the loan is through). The sub-contractor should provide the lien release after they have been paid.

Second Question:
Why are you using a builder that does not have builders risk and the appropriate general liability for what they are doing?

Without builders risk any damage that occurs to the home while it is being constructed is either the builders problem or yours. This includes vandalism, fire, theft of materials, etc.

Without the right general liability insurance if anyone is injured on the job his insurance will deny the claim and the injured person will sue you!
I would be willing to bet the subs he is using are improperly insured to.

Terminate your contract with this guy and put it out for rebid or hire another general contractor to act on your behalf. You do have grounds to terminate the contract if he is not licensed or insured properly for the work he is doing. A couple of years back they caught a painter out here trying to build additions and do remodels for people. :laughing: He had a license and insurance. :whistling2: Just wasn't for the type of work he engaging in. :eek:
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Vinnie, I came back and see you edited to add "I am asking ..."

with that info I agree w/ Ari ... find someone else
They should provide lein waivers in exchange for payment for the project. I might be missing something, but I think they'd be crazy to issue lein waivers for a project they haven't received payment on. You pay them, and you immediately receive a lein waiver that is a binding promise that if they choose to not use your payment to pay their subs or suppliers then you can't be leined.
The lien waiver is a good tool for the owner, but I think it's disingenuous to require a lien waiver from a sub prior to the job starting, or prior to getting paid. That's basically telling a sub "dude, you're not getting paid." It's supposed to be an item to be executed at time of final payment. An "ok here's the final check, sign the lien waiver and we're done" type of deal. You state in the contract that final payment will hinge on signing an unconditional lien waiver, and that any subs your GC hires will be subject to the same contract terms, and you make sure you have a written list of subs and all their insurance certs, and they know in writing that they're subject to the same terms as the GC.

But you'd be surprised how that tool gets used.

I dealt with a big construction management firm (well known to anyone in the business) a few years back on a plant expansion. Humongous multimillion dollar job. Our work had just been granted substantial completion, so we were due the final payment from the schedule of values, less the retainage, which would be released at the time of commissioning according to our contract. The CM firm sent us a letter stating we had to sign a lien waiver prior to receiving that final lump. That was just crazy. We said no way, and pay us according to the terms of the contract we all agreed to. We'll sign a lien waiver after we get paid the retainage. We got paid the final lump (2 months late), but they forgot about the lien waiver and hung on to the retainage even after the plant went on line. We had to call the plant owner, and we found out the CM had been paid everything already, but had complained to him that they didn't make enough money and had been looking for extras. We hadn't submitted a single change order, and we asked the owner to call the CM, because according to our records, we still hadn't signed a lien waiver and we were considering executing a lien on his property (we had only a handful of days left where we could). We got paid by the CM within 10 days.

So in that case, the CM tried to use the lien waiver on us as his fall back: in case he didn't make enough money, he wouldn't have to pay. In the end, we used the unsigned lien waiver to demand payment.

Bottom line, this guy you have isn't insured to do the work. If you ANY trouble putting a scope or a contract together, or need help evaluating something, contact me. I don't come to Nathan's site to sell anything, so understand that this an offer of help. I'm in NJ, and I've been around the block.
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Aggie, That's great that you are close enough to help him. I just wanted to caution you to double check the contract laws up there before you put something together. Several states have put language into affect that make AIA contracts non-enforceable in court. I'm not sure if you are in one but I know PA and New York have done so and Virginia is considering.
ARI, thanks for the tip. I just sent the company lawyer an e-mail to research this. We have our own contracts, but we do see AIA contracts pretty regularly.
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