When owners discover that their contractor has not paid
subcontractors and suppliers, anxiety immediately sets in. Contractors who are not adept at running
their businesses end up with cash flow problems and operate on credit. The situation then catches up with them and
they stop making payments. Suddenly the owner
finds himself being contacted by subcontractors and suppliers who are demanding
The law in Massachusetts is clear; a subcontractor or
supplier can only collect against an owner if it records a properly perfected
mechanic’s lien. Then he can only expect
payment to the extent that money is owed to the contractor at the time the lien
is filed. That said, the owner has the
right to finish the job. If there are no
funds left, the subcontractor or supplier can only go after the general contractor
liens are complicated. They consist of
two documents: a Notice of Contract and Statement of Account. After filing these documents, the sub or
supplier must file suit within 90 days, or the lien is no longer valid. Contractors and construction companies
frequently fail to properly perfect or record their liens. If this occurs, they may be dismissed.
in MA, liens must be filed within 90 days of when the general contractor or someone
working through him was last at the job.
If an owner pays subs during the period that others can still record
liens, he “pays them at his peril.” For
that reason, the owner should record a Notice of Termination with the Registry
of Deeds. That starts the clock running
and all liens must be filed within 90 days of the recording.
that point, the owner has a decision to make.
Should he file a motion to dismiss the lien because no money is owed to
the general contractor, or negotiate with the sub or supplier and pay them
something to dissolve the lien?
Unfortunately, the answer is, it depends.
order to have a lien dissolved, your lawyer has to file an application to
dissolve the lien with the court, and schedule a hearing. The whole process may take ten hours or more of
your attorney’s time. As with any matter
before a judge, there is no guarantee that the decision will go your way, even
if the facts are on your side.
the sub or supplier will agree to a smaller amount to pay the general
contractor’s debt, it may be worth it to pay and have him sign a release. This may be a preferable and perhaps the only
option if the subcontractor still has work to do, or if additional supplies are
needed from the same supplier. It is
generally more expensive to hire someone new to come in and complete work that
has been started by someone else.
the other hand, the amount owed may be so large that it is more economical to
fight it out in court. If money is still
owed to the general contractor, then that amount will be distributed pro rata
to the subs who have filed properly perfected liens. Unless one can get all of the subcontractors
to agree, it is better to obtain a court order decreeing the amount owed and
how it should be distributed.
is extremely stressful for an owner when subcontractors and suppliers start
knocking on his door. Given the complexity of the situation, it is advisable
for an owner to contact a construction attorney to determine how to best
resolve the matter.