When you work as a subcontractor on a project, the general contractor is the one who gets paid by the homeowner or building owner. The general contractor then pays you. If you aren't paid, you can file a mechanic's (also sometimes called a contractor's) lien against the property. Once you are paid, however, you'll need to execute a conditional waiver and release upon final payment to remove the lien.
Nonpayment by a General Contractor
There are many reasons a general contractor might not pay you for your work or materials: The contractor might not have been paid by the property owner. The contractor or property owner might be going through a bankruptcy. Sometimes general contractors use money they are paid to settle up their past projects, essentially using the money they owe you to pay other overdue bills. These kinds of contractors are eternally behind on payments. A general contractor also might withhold payment if they are not satisfied with the work or product you produced on the project.
The first thing you should do if you are not paid is to talk to the general contractor and try to find out why. Maybe you need to resubmit your invoice because it was lost. Maybe there's a small fix you can make that will satisfy them. Often, the contractor will promise payment shortly. Chasing money that's owed to you can be time-consuming and stressful.
It might seem a bit strange that you can place a lien against the owner's property if the owner didn't even personally contract with you for the work. Your beef is really with the general contractor, but a mechanic's lien is available to give you a way to force payment, since your work or materials contributed to the project and are now part of the property. Even if the owner has already paid the general contractor, if you haven't been paid by the general contractor, you have a right to file a lien to ensure you will be paid.
Before you file a lien, it's important to check your contract with the general contractor. Some general contractors insert a clause that prohibits you from filing a lien. In most states, to be able to file a lien, you have to give the property owner notice of what you are contributing, within a month of when you finish the work or provide the material. If you aren't paid, then you can file a lien with the county where the property is located.
Once the lien is filed, you have several months to work out payment. If you aren't paid, you can file a lawsuit to force a sale of the property to satisfy the lien amount. The lien remains in place until you are paid. The existence of a lien makes it difficult for the owner to sell or refinance the property until the lien is resolved.
Resolving the Lien
When you do receive final payment for your work or materials, the lien that you filed must be removed. A conditional waiver and release upon final payment is the form you need to fill out to do so. It functions like a receipt for the payment you receive or are about to receive. The form is only binding once final payment is actually received, so it's okay to fill it out and send it to the property owner if they are going to send you a check. They can then fill in the information about payment. The property owner then files the form (along with evidence of payment, like a cancelled check) with the county and the lien on the property is removed. Each state has its own form. For example, if you're in California, you can find the form you need online.
To fill out the conditional final release, you'll need to fill in the following information:
- Your name
- The name of the customer (who hired you)
- The location of the job (this should be the actual job site)
- The name of the property owner
- The person who wrote the check
- Check number
- Who the check is payable to
- Any claims that are still disputed
- Your signature
A conditional waiver and release states that you've received your final release payment for your work. The document offers legal proof that the lien you placed against the property has been satisfied.