Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
Okay looking to start some flips first of the year.How do you handle paying contractors??
If you use a GC and they don't pay their subs then they will lien your property for non-payment.
What do you do in those situations in where the GC doesn't pay the subs or you are the GC but have bad subs and you get rid of them and they lien you?? Do you have them sign lien rights waivers before starting the job??
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
I've had this happen once....
You can certainly go down the path of requiring lien waivers from your GC and his subs -- basically, the waivers get signed by all subs before the GC gets paid, which means the GC is likely paying the subs upfront (as Jeffrey pointed out, they won't sign until they get paid). So, it does require that the GC trusts you to some degree.
While I don't use lien waivers, I do talk to the subs every chance I get, and I will flat out ask if they're getting paid, if there are any issues with payment (late, checks bouncing, etc), and if they express any concern or indicate that there might be a problem, I'll pull the GC aside and have a chat with him,
But, I've only had one problem, and had I been a little more perceptive, I could have avoided it (it was on my second project and I wasn't proactive enough).
Also, it's always good to ask the GC (and the subs) if they've worked together before. If there is a relationship, there is generally less risk.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
I've had this happen once....
You can certainly go down the path of requiring lien waivers from your GC and his subs -- basically, the waivers get signed by all subs before the GC gets paid, which means the GC is likely paying the subs upfront (as Jeffrey pointed out, they won't sign until they get paid). So, it does require that the GC trusts you to some degree.
While I don't use lien waivers, I do talk to the subs every chance I get, and I will flat out ask if they're getting paid, if there are any issues with payment (late, checks bouncing, etc), and if they express any concern or indicate that there might be a problem, I'll pull the GC aside and have a chat with him,
But, I've only had one problem, and had I been a little more perceptive, I could have avoided it (it was on my second project and I wasn't proactive enough).
Also, it's always good to ask the GC (and the subs) if they've worked together before. If there is a relationship, there is generally less risk.
Investor · Milton Florida · Member since 2010 · 51 posts · 12 votes
15y
That first post didn't show entire URL for some reason, here:
http://www.scbarkerconstruction.com/pdf/subcontractor_final_waiver_and_final_affidavit.pdf
And of course you would put your info in there instead of: " S.C. Barker Construction
Company"
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
15y
Eric,
The problem I have with conditional waivers is that there is still room for the contractor to argue that a lien is justified even when it's not. In other words, it's difficult to prove a lien was filed falsely if you use a conditional waiver, and in my experience, the threat of fines and legal ramifications for filing a false lien is the biggest reason to use waivers in the first place.
Btw, it's generally not too difficult to get past a lien that doesn't hold any weight. At least in my state, you can pay the lien amount into escrow and effectively have the lien removed. You then take the argument in front of a judge...if he rules in your favor, you get your money back...if he rules in the contractor's favor, it comes to him out of escrow.
So, as long as you have some cash reserves, the threat of false liens shouldn't cause you too much lost sleep.
The threat of GCs not paying their subs is still an issue though...as subs can lien the homeowner even if the GC is the one who didn't pay.
