As a property owner looking to build or make substantial renovations to real property, you may acquire the services of a contractor. Construction is not a one-person job, especially when intensive labor is necessary for completion. Often your contractor will also require the assistance of subcontractors, sub-subcontractors, or material suppliers. These people work on your property or provide the materials and services to do the job.
Construction projects can follow a progressive billing method, which means the people who work on your property will only receive full payment when they have made a certain amount of progress. Once they have fulfilled their specified duties, the person who owes them money must pay them in full. A problem can arise when you have already paid the total contract price to the contractor, but the contractor has yet to pay the other parties involved. They have a right to enforce their claim for payment against your property because it is the site of improvements. They become lienors, and the claim they are pursuing is a construction lien.
How Can You Prevent a Construction Lien Claim?
If an individual or entity files a construction lien against your property, you may have to sell your property against your will to pay for the labor, materials, and services. It is imperative you take preventive measures before hiring a contractor and agreeing to a construction contract. You might want to consider doing the following:
- Conduct a background check on the contractor before contracting
- Understand your construction contract in full
- Ensure your contractor provides you with a written release of lien from any person or company that presented to you a “notice to owner”
- Record a Notice of Commencement and post it on the job site before the first inspection
- Require releases whenever you make a payment, whether from the contractor or other persons who served a notice to owner
You can also ask the contractor to present you with a list of subcontractors and material suppliers so you can investigate them further. You might uncover information that will prove helpful when issues of nonpayment appear.
Construction Begins Once You Sign the Contract
Construction laws are as complicated as the construction process. There are different people involved and a myriad of procedures to follow. You should be aware of all the details before signing anything.
