The general contractor has been paid all scheduled draws plus upgrade charges (4 advance draws of $15,000 each plus a final draw of $10,000). I even paid an additional $3,000 in February of the last $10,000 draw ahead of schedule when he claimed he was over budget. I am now receiving claims from sub contractors that they have not been paid - what should I do?
Although the general contractor is the person or company directly liable for payment of sub-contracts (unless you contracted directly with the subs, which does not appear to be the case), you, as the owner of the property, may have no other choice but to pay the sub-contractors to keep them from placing liens on your property and foreclosing. Sub-contractors have lien rights and may use your property as security for the payment of their contracts. They may even sue to foreclose their liens and have your property sold to produce the money they are owed by the general contractor. You may have various defenses, but an attorney knowledgeable in construction lien and real estate issues will need to discuss your case with you.
You very likely have a case against the general contractor, if not for breach of contract then for various other possible claims, such as unjust enrichment, etc. If the general contractor refuses to honor his contracts with his sub-contractors, you may have no other option than to sue him.
I would recommend that you address the situation sooner rather than later and consult an attorney.
The information contained in this response is general legal information and should not be construed as legal advice to be applied to any specific factual situation. You should consult an attorney to discuss the specific, relevant facts of your case. The information provided in this response should not be used as a substitute for legal advice. This response does not create an attorney-client relationship.
The first question is to determine whether the scope of work required a state licensed contractor and if so, whether your contractor has the required state license. If the work required a state licensed contractor and the contractor was unlicensed, then state law provides that the contractor cannot enforce its contract in law or in equity and has no lien rights. Because the subs would be claiming a right through the contract with the unlicensed contractor who does not have a lien right, it appears that the law would say their liens are invalid. If the work performed did not require a state contractors license, the analysis changes.
Filing a lien is merely a preliminary step, additional steps are required to try to perfect that lien. Whether the lienors will take these additional steps to attempt to enforce their lien rights against you or to collect from you is a question. I would not recommend paying the lienholders until you have discussed this matter with an attorney.
Additionally you also have to issue of completion of the project and whether the remaining money you have is sufficient to complete the work and any punchlist items (as well as pay off any valid subcontractor liens, if any).
If I can be of help, please contact me.
You should discuss these matters with legal counsel.
Disclosure: This answer and any information contained in this answer is not intended to be treated as legal advice. It is for informational purposes to educate about legal issues. You should contact an attorney for specific legal advice for your situation. Specific legal advice based on full knowledge of your specific situation and all facts may differ from general information. This posting does not create an attorney-client relationship or privilege of any kind. This attorney actively licensed only in the State of Georgia. If this is a Georgia matter, you may of course contact me to discuss possible representation. FEEDBACK: Both AVVO and other readers are interested in your feedback on the quality of the answers. Please check the “thumbs up” symbol if you find an answer helpful.
Contractors are notorious for this type of behavior and hid behind legal entities, aliases, etc. In the future, it is a good idea to make them take out a bond which protects you incases like this. Many people find themselves in similar circumstances but the previous attorneys gave you stellar advice.
Good luck with this frustrating situation.
This response does not create an attorney client relationship nor should the advice be relied upon because it is not specific to your legal situation. Before you depend on legal advice, you should retain competent counsel.
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