How to deal with contractors and liens??

[Joel Owens]

Okay looking to start some flips first of the year.How do you handle paying contractors??

If you use a GC and they don't pay their subs then they will lien your property for non-payment.

What do you do in those situations in where the GC doesn't pay the subs or you are the GC but have bad subs and you get rid of them and they lien you?? Do you have them sign lien rights waivers before starting the job??

Thanks for any help...........................

[J Scott]

I've had this happen once....

You can certainly go down the path of requiring lien waivers from your GC and his subs -- basically, the waivers get signed by all subs before the GC gets paid, which means the GC is likely paying the subs upfront (as Jeffrey pointed out, they won't sign until they get paid). So, it does require that the GC trusts you to some degree.

While I don't use lien waivers, I do talk to the subs every chance I get, and I will flat out ask if they're getting paid, if there are any issues with payment (late, checks bouncing, etc), and if they express any concern or indicate that there might be a problem, I'll pull the GC aside and have a chat with him,

But, I've only had one problem, and had I been a little more perceptive, I could have avoided it (it was on my second project and I wasn't proactive enough).

Also, it's always good to ask the GC (and the subs) if they've worked together before. If there is a relationship, there is generally less risk.