Edgewood, WA Real Estate Blog

I was surprised to hear my significant other’s daughter and son-in-law (they live in Michigan) maybe got burned on a home improvement project. I say “maybe got burned”, because the whole story has yet to unfold. Maybe the contractor will follow through in the end.

Long story short: the contractor they hired didn’t pay the supplier from whom the contractor ordered the new siding material. The homeowners had thought they had done the right thing by thoroughly checking out the contractor’s references and reputation before signing their contract. It all seemed fine.

Never the less, they received notice the siding supplier filed a notice of intent to file a lien because the contractor hadn’t paid them (I say the story has yet to unfold because the supplier may just be preserving their lien rights with timely notice – the contractor may yet pay them.)

A mechanics lien (this isn’t necessarily a mechanic in the common sense of the word) is a lien on your property. Normally it will have to be cleared before you can sell or refinance your property. In the worst case a lien holder may force your home to be foreclosed upon to settle the lien.

Sure you can sue your contractor… if you can find them and they’re still in business and they still have any assets. But who wants to pay to go to court?

What precautions can you take up front to avoid paying twice?

I’m not a lawyer and I’m not providing legal advice, but the easiest solution includes obtaining a lien release from all your contractor’s subcontractors and suppliers (see here for more info in Washington State), paying for materials and subcontracted services with two party checks (requiring endorsement by both the contractor and supplier), and holding out final payment to your contractor until after the period in which all mechanic liens have to be filed to be valid.

You may also want some sort of provision in your contract stating the contractor will be liable for all 2nd party mechanic liens. Another alternative is to get the contractor to post a performance bond.

You’ll want to consult your attorney for specific legal advice – again, I aren’t one. You should also note procedures and rights vary by state. Normally a contractor has to be licensed, insured and bonded before a mechanics lien can be filed.

Before you sign a contract, you’ll want to discuss the above provisions with your contractor. If they’ve been in business for any length of time, they should be sympathetic to the problem. If they’re not, you may want to think about consulting another contractor…

Upon hearing the story, another friend admitted they had been caught in the past by the same thing – having to pay twice because their contractor didn’t pay their supplier.

Since it seems to be so common, I thought I’d pass this along.