Tag Archives: construction lien

Place a lien if you are not paid for your work

Instances where a contractor is not paid for his work are few but they do happen and this is when the poor chap does not know what he should do to claim his money. Construction companies give contracts of their projects to various contractors. The number of contractors involved in a project is completely dependent upon the size of the project. If the project is big and it requires several men to work on it, then the construction company will involve more than one contractor or else he will simply go with just one. The construction company pays the contractor on the basis of the work that has been completed. The pay to the contractor is dependent on which phase the work is on. So as and when the contractor completes each phase, he is paid for his work and simultaneously he in turn pays to the sub-contractors.

There are some construction companies who faces severe monetary crunch and are unable to pay the contractors on time. However, the contractors do not stop the work with the hope that he will be paid after the completion of the next phase and will also receive the amount in arrears. Now suppose he completes the entire project and keeps calling the construction company to pay him but see nothing coming out of their pocket. This is when he needs to take the legal course. All that he can do is place a lien on the project which means that as long as you are not paid for your work, no banks can mortgage the property. So for instance, if you are engaged in building a condominium for residential purpose and you are not paid in full by the company, you can place a lien on the entire project which will prevent the buyers to avail mortgage from banks.

This means that the construction company has to first clear all your dues and only once the lien is removed that he will be able to sell the apartments. Such types of instances are rarely seen but they do happen and whenever it happens, the best way to tackle it is taking the legal course and places a lien on the property. The construction companies are also aware of this phenomenon and therefore they ensure that they pay their contractors their full due. They also make sure that the contractors in turn clear the dues of other sub-contractors who were engaged in the project.

In case you need to place a lien on the project, the best way to do so is by talking to an attorney who will advice you on how you can proceed with it. Remember that placing a lien should be the last option and you should not do this if you do not find the company paying you. By doing this, it can also tarnish the relationship and hence it is suggested to be taken only after you have taken every possible option to claim your money.

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Placing a lien when you are already paid can be a serious problem

There was a time when construction companies once having taken a project will complete the entire project on their own. They will not like the involvement of any other party in the work. However, the dynamics have changed completely. Now big construction companies only take up projects and let it to other construction companies who further sub-let it to small construction companies or contractors. So one big project is worked by many different companies and the main company who initially took the work has to ensure that all the parties involved in this work are paid in full because if either of the party is not paid then it can have serious repercussion on the project.

The parties who are unpaid can place a lien on the project which means that only when they are paid first that the owner of the project will be able to sell anything to anybody. It also means that the parties who are unpaid and have placed a lien are in a way the actual holders of the property. However, once they are paid in full they will withdraw their lien and then it becomes lien free. As a lien on a project can have serious impact on the project owner in the same fashion if someone has wrongfully placed a lien to harass the project owner, it can again have serious impact on the person for taking incorrect advantage of the lien. Contractors and sub-contractors are allowed to place lien so that they can safeguard their interest if they are not paid by the project owner. But this should not be in any way misused or else the entire purpose of having a mechanism like this goes for a toss.

The law in the United States is strict enough to weed out any menace like this. People who take place wrong liens are punished once they are proven guilty. However, an equal opportunity is given to both the project owner and the contractor to prove their point and if it is found that the project giver has paid in full but it was because of some kind of confusion the contractor did not receive the money and placed a lien, then the court tries to clear out the confusion and at times also gives the contractor a warning to check things first before placing a lien.

Ideally, a lien is supposed to be placed after a series of discussion between the project owner and the contractor and nothing has come out of it. One can’t just go and place a lien when things can be solved via discussion. Placing a lien should be the last option. Therefore, it is suggested that the contractor gives ample of time to the project owner to pay him for his work. If he places a lien without giving sufficient time, it may back-fire him. By no means should the contractor do anything that will place him into problems. If proven guilty he may end up paying good chunk of money as penalty and may also have to be behind bars for few months.

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Lien Law for Construction Contractors (Advantage Contractor Business Success)


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