Should I require lien waivers from both General Contractor & Subcontractors?

Question

When flipping a house and using the services of a General Contractor, should I have both the GC and every subcontractor working for the GC sign lien waivers? Also, should I require them to sign an unconditional waiver vs a conditional waiver?

Eliott Elias · Answer

Your GC should sign a waiver stating any sub contractor they hire is the GC's sole responsibility.

Kevin Ivey · Answer

My general answer is YES!!!!

Mohammed Rahman · Answer

Hey @Don Frost - if they've done the work and been paid, then a lien waiver only makes sense. Conditional lien waivers show how much money is owing through a particular date, and unconditional lien waivers show how much money has been paid for work through a particular date

Luciano A. · Answer

I would say in theory that will be great and will protect you but in practicality, I don't see many so-called GC signing. Most guys that are in construction don't even have clean accounting let alone understand what they are signing. IF a GC is broke they will sign anything and everything to get that check so don't be fooled that a signed paper will protect you. It will still cost you in legal fees etc if you go to court.

A few things I would do:

Get a GC from referrals from other investors you know and trust.

Sign a contract that details the scope of work

Do a draw schedule so everyone knows when payment comes due

If they ask for % upfront to buy materials you can ask to have the store call you to pay over the phone. Now, this is not always possible and some contractors will not be happy with this because in many cases they were planning on using your funds to finish the last job. That can be a red flag. An option can be you buy materials and pay them just for labor plus a GC fee to oversee all trades.

IF they have insurance ask to be listed as additionally insured. Or at least a Certificate Holder.

Not sure what State you are in but here in Texas outside of Electrical/Plumbing/Mechanical you don't need a license. In my experience as a builder, if your trades have insurance and workers comp they are professionals so the likelihood of them running off with your money is less. Not saying it cant happen.

Best of luck

Scott Mac · Answer

Liens laws are location specific, you need to know what works in your local area.

Good Luck!

Bruce Woodruff · Answer

Yes. But go through your GC. You should not be talking with the Subs anyway.

Ronald Rohde · Answer

I would get unconditional final lien waivers and conditional for progress payments. Just depends on what you can risk.

Bruce Woodruff · Answer

The GC requests the lien waivers from his subs after their work is complete, and inspected and cleared by you and the GC. They won't give him one unless they've been paid and the check cleared. So if you get a lien from a Sub (from your GC) that means everything is good.

Tom Gimer · Answer

@Don Frost You'll of course need to check local law (and confirm with a construction law attorney if unclear) but if the GC is paid by the owner that typically extinguishes potential claims against the property owner by subs... they would need to pursue the GC.

Don Frost · Answer

Thank you very much for sharing our experience! What perplexes me now is exactly when, where and how I receive lien waivers from the GC's subcontractors. If I pay him and the don't get paid, I've got a problem with the waivers.

Should I require lien waivers from both General Contractor & Subcontractors?

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