Construction liens and contractor non-payment issues can be a serious problem for construction projects. Having a lien placed on a property can ruin a relationship with a subcontractor or contractor. It can also lead to the end of a relationship between a contractor and a property owner, affecting any future work that may be available. No one wants to place a lien on a property. However, it becomes necessary if subcontractors are not paid for the work that they do. For a legal advocate who can help you file a lien against a property owner to collect your debt before you miss a deadline, contact a Houston construction lien lawyer.
Avoiding liens is as simple as making sure that subcontractors are paid on time. Most liens are filed by subcontractors that tried other methods of seeking payment with no success. As a contractor or property owner, it is your responsibility to ensure that everyone on the job is paid. There are several steps that you can do to facilitate that and avoid having a lien placed on a project. In this article, we’ll discuss construction liens and contractor non-payment issues.
What is a Construction Lien?
A construction lien is a legal method of forcing a contractor or property owner to resolve payment issues. Unlike other businesses where the product can be repossessed, subcontractors and contractors cannot repossess materials or other items of value once the work has been done. Without liens, property owners could avoid paying subcontractors for their work. A lien is also a legal alternative to filing a lawsuit, which can be costly for everyone. Houston contractor lawyers often help construction companies handle liens in Texas, which may require legal assistance to properly file or remove from a property.
When a subcontractor files a lien against the property, that lien remains attached to that property until it is resolved. Depending on where the property is, this gives the subcontractor different methods for collecting payment for the work. In some places, that property may not be used for its intended purpose. In other places, a property can be repossessed in order to cover the payments subcontractor. Regardless of what the method is, a construction lien can lead to serious issues for the property owner.
You can reduce your chances of dealing with a construction lien by taking simple steps in the beginning and throughout a project to ensure that everyone is paid for the work that they do. Many of these steps include detailed records-keeping to ensure that invoices are processed properly. You can also ask a Houston construction lien attorney about different ways of handling liens. They are often asked for assistance when trying to file or resolve a lien or payment issue.
Notice of Commencement
One of the problems that property owners and subcontractors face is that they rarely interact with each other if there is a general contractor on the project. The general contractor hires subcontractors, and the property owner deals directly with the general contractor. This means that the subcontractor, who is most likely to file the lien, is unknown to the property owner. Furthermore, the property owner does not have copies of invoices or payment records since that is the general contractor’s job. To fix this, some states require the use of Notices of Commencement.
A Notice of Commencement is a notification sent to the property owner by a subcontractor informing them that the subcontractor was hired to do work on the project, details of the contracted work, and payment details. The notice should be sent before work on the project begins. The property owner can keep this information for later reference when a subcontractor files a construction lien. This way, all the parties involved in the projects are notified of the work that is about to be done, and the property owner can follow up with the contractor to make sure that any subcontractor that sent a Notice of Commencement is paid. When you reach out to one of our Houston construction lien lawyers, we’ll assess your situation and help you meet the appropriate notice deadlines.
Properly managing invoices is another way to avoid a construction lien at the end of a project. Invoices are essential to get paid on a project. If they are not properly managed, you’re sure to have payment issues.
One of the big issues with invoicing is contractors and subcontractors not turning in invoices on time. Contracts generally established payment terms for when invoices must be submitted. Missing the deadline can create issues with getting paid on time. It also creates issues with getting paid at all since invoices are generally processed in batches from the date that they were submitted. If your invoice is late, it may not be processed until the next batch is done. This commonly leads to issues making sure that older invoices are added to later processing batches.
The construction lien waiver is a document that waives your right to file a lien in response to non-payment for a specific invoice. Many contractors and subcontractors use them as an incentive to receive payment on time and to be chosen for work by a contractor or property owner. By offering the construction lien waiver, it gives the contractor or property owner added security and peace of mind. As a result, they are more likely to pay invoices on time and ensure that those invoices are paid in full.
The construction lien waiver also serves a purpose in record keeping. It outlines the details of the payment that the waiver is for. For contractors, this is proof that the invoice was paid, which can be helpful when resolving payment issues later in the project. It is important to only offer a construction lien waiver after payment was received as it can be used against you if the contractor or the property owner fails to pay you according to your invoice.
Placing a lien on a property is a problem for everyone involved, which is why it is the option of last resort. However, not being paid for completed work can create major problems when trying to run a business or earn a living. The best way to protect yourself and your business from liens and payment problems is to have a better understanding of how payment works in construction contracts. If you have questions about liens, invoices, construction contracts, and payment issues, contact Houston contractor attorneys from Cotney Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.