| Subcontractors have the right to file
a mechanics’ and materialmen’s lien against a property
they improve in order to enforce payment. The same remedy is
available to suppliers, laborers, and others who improve real
property. This allows those who increase the value of real property
to enforce payment against the owner of that property, even
though they have no contract with the owner. Their contract
is with the general contractor or other middleman, not the property
owner. The owner has to pay in order to remove the lien and
protect his equity in the property.
What if the unpaid subcontractor has no lien rights? This
can happen in a number of ways. Certain properties, such as
owner-occupied homes, may be exempt in some states from mechanics’
liens by subcontractors. In other cases, procedural requirements,
such as the giving of certain specified notices, have not
been followed, or perhaps the time limit for filing the lien
has elapsed.
The subcontractor can always sue the general contractor for
payment, of course. But if the general is in financial difficulty
this may be a useless remedy. Does this mean the unpaid subcontractor
or supplier is out of luck?
Not necessarily. In some cases, the legal doctrine of "unjust
enrichment" can come to the rescue.
Under this doctrine, the subcontractor or supplier can sue
the property owner for payment if the owner has not paid the
general contractor for the particular work or materials. The
theory is that the owner would be "unjustly enriched"
if he were allowed to reap the benefit of the work or materials
without paying. So, even though he has no contract with the
subcontractor or supplier, and even though the subcontractor
or supplier has no lien rights, the owner must pay.
Conclusion
If you are a subcontractor or supplier without lien rights,
do not give up if your general contractor goes under. First
determine whether he has been paid by the owner for your work;
if he has not received payment, then you can go after the
owner.
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