The Expert Podcast

So if you're working on a construction project with a builder or a general contractor it's very important to understand the process of construction liens and lien waivers. A construction lien is recorded automatically against a property and this goes in most states when any material is delivered to the property or any labors done on the property and all subcontractors automatically are granted a mechanic's lien or construction lien on that property just by having put materials there or labor there.

So if you are a home owner property owner and you've contracted with a gc or general contractor to do work on your house and you pay them you have to make sure that all the subcontractors that have either done work or provided materials or deliveries have been paid by your general contractor and they execute what's called a lien waiver and a lien waiver is a release of that lien on your property because here's what can happen if you don't do this correctly what can happen is you could pay your general contractor if they turn out to be unscrupulous and run off with your money and never pay the suppliers or general contractors or subcontractors those subcontractors and suppliers can come back and put a lien on your property even though you paid for the work you have to make sure all the subs also sign off on this lien waiver and that's what this form is a release of progress payment um you can also have a release of final payment and a lot of times if you have a loan for this construction your lender's going to require this anyways but regardless you should have it for your own protection.

Now these construction liens also apply to materials if they're delivered by the lumber yard or by the materials contractor so if a lumber yard gets a material order for you know framing lumber or roofing shingles or some other type of substance that's used to build the property or improve the property they also have a lien until they're paid only if they deliver it if the general contractor purchases and bring on their own truck doesn't count there are also coverages for equipment so if your general contractor rents a an excavator or a lift or other equipment that's delivered by the rental place they may have a lien as well you want to make sure you get good legal advice from an attorney you know we're not a law firm we're not trying to give you legal advice we're just trying to let you know what you can do to protect yourself from a property lien affecting your upgraded home renovated home newly built home so you don't get stuck having to pay twice.

And this is a notice that in oregon the builder has to give you in the in the beginning of the process when you get a contract about construction lanes this is not a lane your contractor is required by law to provide this notice to inform you about liens this notice explain explains that construction lien law gives you steps you can protect yourself if you're buying a new home or anytime the contract price exceeds two thousand so anytime you're working with a contractor and the bill is more than two thousand they have to give you this notice before they do any work under oregon law your contractor and others who provide labor materials equipment or services may be able to claim payment from your property if they've not been paid even if you pay the general contractor if your contractor does not pay the subs their employees a rental equipment dealers or does not make other legally required payments they may place a lien against your property it's in your best interest to verify that all bills related to your contract paid even if you have paid your contractor.

So how do you go about doing that well make sure that your general contractor gives you a list of all the subs and suppliers and you keep track of that as you're seeing things done on your property seeing materials delivered to your property because if you occupy or will occupy your home persons who supply materials laborers and equipment are permitted to file a lien against your property only if they've set a timely notice so you'll get a notice from the um the lien claimant before they file a lien but by that time it's probably going to be too late so make sure you're working with a good general contractor you may also want to require that they get a surety bond to protect your rights if they don't pay their lien.

Here's some questions common questions can somebody record a construction lien even if i pay my contractor yes we already talked about that anybody who's not been paid can file a lien what is the notice of right to lien that's what we looked at above what should i do if i receive a notice of right to lean don't ignore it find out what arrangements to pay and then also maybe what legal rights you have against the general contractor.

Steps consumers can take to protect themselves you make sure that your general contractor is licensed in oregon it's called ccb it's a licensing board you can review your notice consider the using the services of an escrow agent and what the escrow agent will do is when you pay money instead of to the general contractor you pay money to an escrow agent they hold the money until they get all the lien releases cost a little bit of money but it might be a good way to protect yourself contact a title company they might be able to write a title insurance policy what precautions are taken by your contractor to protect you the other thing that can happen is if a general contractor hires subs that don't have proper insurance for workman's comp that can also affect you.

Ask the contractor to get lean waivers and lien releases from every subcontractor do this before you give your contractor a payment make sure that you don't give money to the general contractor until he's gotten your lien releases have a written contract with your whoever you're dealing with gc or otherwise it's required if the contract is more than two thousand and when you pay your contractor consider writing the check to the contractor and the subs so that way they both have to sign off on it that will be other evidence that might help you last but not least we talked about it before consult an attorney all right then they can give you good legal advice.

Construction leads are no joke they can come back to haunt you even months or a long time after the work is done if they're not paid and it could be something as small as the roofer didn't get paid for the labor on the uh the uh drying of the roof it could be that the cement contractor that delivered cement didn't get paid sometimes it's an oversight by the gc sometimes it's money problems so you want to make sure you're protected and understand lean waivers and construction liens before you start making payments so you know you're not going to have to pay twice and your general contractor gets away with not delivering you a clear and clean title to your building or your renovation.