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Kjesse · 07-03-2014, 02:10 PM

Thanks to Troutman for linking my firm's very helpful (IMHO) lien guide.

If you hire a contractor, you have the right to hold back payment to the contractor on his invoices in the amount of 10% per invoice. This is something you should do every time, but not many homeowners do. (I haven't even done it with my own home renovations... but I was aware of the risk.) You would then pay the holdback you've maintained over the course of the series of invoices once the work is complete, and once you know either, (1) all the subs have been paid or (2) the 45 day period to register a lien has lapsed, you release the holdback to the contractor.

In exchange for the "right" to hold back that 10%, all of the subs can only recover from the owner 10% of the full value of the contract-- this is the trade off in the Builders Lien Act... without lien rights, the subs would not have the ability to claim against the owner because there's no contract between them.

So for example, assume a contractor has quoted your reno job at $20,000. He has the work done, and you pay him in full. As it turns out, he didn't pay his subs, and they register a total of $5000 in liens on your land. Your liability to the subs (with whom you don't have a contract) is limited to the holdback you could have withheld... $2000.

There are lots of different possible scenarios. Stick with the lawyer's advice you got not the advice you get on a forum, including mine

. Sounds like the sub may have been out of time with his lien, if so, there's an easy and inexpensive way to deal with it.

07-03-2014, 02:10 PM	#17
Kjesse Retired Join Date: Oct 2003 Exp:	Thanks to Troutman for linking my firm's very helpful (IMHO) lien guide. If you hire a contractor, you have the right to hold back payment to the contractor on his invoices in the amount of 10% per invoice. This is something you should do every time, but not many homeowners do. (I haven't even done it with my own home renovations... but I was aware of the risk.) You would then pay the holdback you've maintained over the course of the series of invoices once the work is complete, and once you know either, (1) all the subs have been paid or (2) the 45 day period to register a lien has lapsed, you release the holdback to the contractor. In exchange for the "right" to hold back that 10%, all of the subs can only recover from the owner 10% of the full value of the contract-- this is the trade off in the Builders Lien Act... without lien rights, the subs would not have the ability to claim against the owner because there's no contract between them. So for example, assume a contractor has quoted your reno job at $20,000. He has the work done, and you pay him in full. As it turns out, he didn't pay his subs, and they register a total of $5000 in liens on your land. Your liability to the subs (with whom you don't have a contract) is limited to the holdback you could have withheld... $2000. There are lots of different possible scenarios. Stick with the lawyer's advice you got not the advice you get on a forum, including mine . Sounds like the sub may have been out of time with his lien, if so, there's an easy and inexpensive way to deal with it. Last edited by Kjesse; 07-03-2014 at 02:48 PM.