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What guarantees are you offering in return. If I waive my rights to a lien then I want my rights protected and guaranteed in some other, equitable fashion.
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Guys, just need your take on this, please. As many of you know, I'm about to do a pretty major remodel to my house, part of which is ripping the roof off and reframing it, and replacing the HVAC system, etc., etc. I'm intereviewing contractors, and I've been asking, politely, friendly-like, if they get lien waivers from all their subs before they begin the job.
While they've all seemed to be amenable to this, they do look at me strange and the most common reaction is, "Well, if you want me to I can..." as if this isn't SOP. Am I reading them wrong? Is this not SOP for major remodels? And if not, am I somehow insulting them, unknowingly, by asking for lien waivers from their subs before their subs work on my house?
I think a lien waivers are reasonable and fair for me to ask for.
*Lien wavers are customarily asked for at time of payment, not before the work is begun. I wouldn't give up my lien rights a priori. What you need to do to protect yourself is make sure that the subs sign lien wavers when you pay the general for their services. Make the waver a condition of payment.
*Excellent idea, Mike, thank you so much! You're right, that makes much more sense; why didn't I think of that? This is my first time hiring a contractor, can you tell? (LOL)Okay, I'm going to interview another contractor tonight. I will ask, instead, if he will get lien waivers prior to payment.
*Mike is right on. I too wouldn't supply a waiver until the very end. But, if you go with Mike's advice, make sure you get the right kind of waiver. There are four types as recognized by the CSLB (Contractors State License Board in CA). They are conditional progress, conditional final, unconditional progress, unconditional final. What you want is an unconditional final waiver. This is given to you upon release of final payment to each contractor. Make sure their employees who may or may not have the right to lien have signed and dated too.
*cls-you should make lien releases a requirement before final payment to the contractor. Copies of current insurance and workers comp cert. from each and every sub...
*What guarantees are you offering in return. If I waive my rights to a lien then I want my rights protected and guaranteed in some other, equitable fashion.
*tedd,You get paid; what other rights are you after?
*b TVMDCIn California it is customary to give Conditional Waivers both for progress and final payments. These are produced by material and service vendors, subs (and their workers) and the general (and his/her workers). These Conditional Releases "only become effective when the check, properly endorsed, has cleared the bank."However, I would NEVER, NEVER give an unconditional lien release unless paid in cash. Not even a cashier's check would tempt me.But watch out for this problem: Calif.'s conditional waivers state, "Before any recipient of this document relies on it, said party should verify evidence of payment to the undersigned." One of my clients got a notice of intent to lien even after I had both the roofer's release and his supplier's. Turns our my sub's post-dated checks to his vendor bounced and I had to make the vendor whole before I got paid!!!Don't ask your contractors if they would mind giving you releases: tell them that releases are a condition of payment and that you are going to verify that payment has been received. Period.If you would like a copy of the CA conditional release, I will be happy to e-mail you one.Good luck.
*CLS, Are you shopping around for contractors that you don't know? Gosh girl, don't want to see you get in trouble. Are they at least referred? I don't want to get into the lien waiver debate, but I haven't been asked to sign or get subs to sign for years. And this is working for lawyers too. Don't mind seeing you go by the book, but it suggests you're starting out with a little lack of trust. Say it ain't so.
*Bill brings up a good point - Lein waivers should definitely be comditional if the law allows it. We had a guy buy a set of roof trusses once. He paid with a check, and asked for a lein waiver as a condition of payment. We gave him a lein waiver, and he stopped payment on the check. Taking him to court didn't do any good. The judge took the guy's side and we never saw a dime. Turns out he did this to several people.
*No, Calvin. I'm not completely crazy! (lol) I asked for recommendations from our architect. I figured he had a vested interest in the job being done right, since it's HIS work being "created". He gave us 3. We have intereviewed 3.Frankly, though, I have the distinct feeling I'll be going with the guy we interviewed about 6 months ago who referred us to the architect! He'll be much more expensive than the others, but I'll be guaranteed outstanding work. And, frankly, I like him. He's tough, he's honest, he's straightforward, and he's in charge. He'll exercise client control (no matter how nice I think I am, I'm sure I'm going to need someone to politely tell me to stay out of his way and let him work). Gotta respect that. And his carpentry skills are art! Plus he has lots of experience doing the kind of work we are doing in very old cottages. He owns a house in our town that was very similar to ours once upon a time, and he's completely remodeled it, so I figure he already knows how to deal with the more unique aspects of old homes.
*Thank you, Barry. Tedd, I have every intention of paying my bill in full on time and on demand. I have to much integrity and too much respect for your particular trade to do otherwise. But in return I want a guarantee from the contractor that will use the money I give him to pay the subs and I won't end up paying for my construction twice if the subs aren't paid and go after me and my single biggest investment! I think that's fair, don't you?As a sub, if the contractor get's paid by the client, but doesn't pay you, your beef is with him/her, and yet, you can put a lien on the clients property and they may have to pay you off, in essence, paying twice for the construction! Is that fair? No. Of course, there are legal remedies for that, but I don't want to pay an attorney or go through the hassle. So I'd like my waivers up front.
*Thanks, ya'll. You are always a huge help. I appreciate your advice and insight, as always. I'm sure I'll be back. This is the first time DH and I are renovating, and I must admit to being nervous as hell! But it's going to be gorgeous when finished, and much more livable. Thanks again...CLS
*>(no matter how nice I think I am, I'm sure I'm going to need someone to politely tell me to stay out of his way and let him work).Nice ? Now who went and accused you of being nice ? : )
*Attn: Canadians. I'm just curious; I've never been asked for a lien waiver, never seen or heard tell of one, but maybe I've been sheltered (or the total dollar value for the stuff I do doesn't warrant it). Or is it an American thing?
*CALLS, In my experience as a AC in California conditional lien releases are often required by owners and or lenders from subcontractor and material suppliers each time progress billing are presented and final lien releases on final billing. This is especially true with larger projects and new custom homes.
*CLS, sorry for the typos; I didn't quite understand how the spellcheck function worked
*Hi Adrian,There called "Statutary Declarations" and they are a standard form available from your local construction association office.It's a sworn statement that all you and your subs, suppliers and employees have been paid in full except for any value shown on the document.This document is required before final payment/release of holdbacks is made on most structured jobsites.Gabe
*That's okay Ted. Let me give you a lesson on how the spell check works - it doesn't! We've all learned that the hard way, trust me!
*Adrian, basically, in this country, if you are a contractor and you perform work on property and then you don't get paid, you can file with the County Recorders office a Lien on the persons property for the amount you are owed. This is a problem because if they want to sell the property or do anything with it, they can't until the lien is cleared up. Also, at least in Ohio, if the lien isn't released within a certain period of time, the contractor can force foreclosure on the property and have the property auctioned off to recover their money. Does't matter how much the lien is for.Worst case scenario: you have work done on your house, you pay the contractor, and the contractor doesn't pay his subs but instead skips out. The subs can then go and put a LIEN on the persons property, even though the client has paid. Theoretically, the client would have to pay the subs off in order to clear their title. Of course, there are legal remedies to this, but they involve attorneys and courts and additional time and money which is much better circumvented by having lien waivers as a condition of final payment. That's a very broad explanation, and very basic. But that's how it works in a nutshell. Don't ya'll have such a thing in Canada? What do you do if someone doesn't pay you, besides sue them? Don't you have any remedies?
*Yeah; I know how it works, I've just never seen one used, and I've never had a client ask for one. But I'm almost always dealing one on one with my clients,never so far through contractors, and we rarely even have a formal contract (though I have one, and I'm trying to get better at that). I'm pretty trustworthy, my clients know that, and it seems to work okay.We do have liens. The only time I've tried to use one (a scumsucking Yankee call centre company came to town and wouldn't pay me for four months after completion), I couldn't; the lien goes against the owner of the property (in this case the province), and not the tenant (the scumsucking Yankee company). My lawyer gave me an education as to exactly how powerless I am as a vendor in case someone decides to screw me.
*Oh - we can lien against the owner and the person who contracted us (the tenant) in most cases here in Ohio. The only way it works to make the tenant pay is that most "rental" clauses for commercial property has a clause about mechanic liens - if they cause one it is a breach of contract and they can be kicked out. They usually come up with the money.
*CLS,Interviewed 3 contractors and I still haven't gotten the call from you??? Heck, maybe you could just let me come by afterhours and sweep the driveway or something.Oh!! Wait a minute..... It just hit me, you don't have my phone number. Right? Try 216-573-1700. Maybe I can even get Big Cal to come into town for a few weeks and team up with me.Pete "your local contractor" Draganic
*I was talking to another parent at a school function the other night; she mentioned that she was doing some re-modelling and needed a quote. 'OK' I thought, my nephew does great contracting work., I'll give her his name. Then...... she said..... 'we've interviewed five, and I want to get some more ideas. I think we're going with the first guy.' So I decided to save him the grief. He has better things to do with his time. How many quotes are reasonable??
*b TVMDCHow many quotes are reasionable? If you have worked with a particular contractor in the past and have a high confidence level, one is enough. I have been fortunate to develop a group of subs for Stucco, Paint, Electrical, Plumbing, Concrete and Iron and usually accept their bids as is unless I'm tight on the job. But I have raised my iron guy's bids a couple times because I though he bid the work too low and I had room to help him out. That's called long-term relationships.But when I was doing project work, I would start with 3 bids. If I had a big spread, say, $10k, $18k and $21k, I would throw out the low or high bid and get a 4th bid. When I got 3 that were pretty close, I would go with the one who was the most professional no matter the price. I've see too many owners go with the lowest bidder only to shoot themselves in the foot and wind up paying more than the top bidder's price to make corrections after the low bidder was fired.As for contractor liens, in California there is a time limit after which no liens can be filed: 90 days for people contracting directly with owners and 60 days for subs, suppliers and workers if NO notice of completion has been filed. If a NOC has been filed, the window shrinks to 60 and 30 days respectively. Additionally, (with the exception of workers) subs and vendors have to file a Preliminary Notice with the owner advising the owner that 1) they will be providing improvements to his property, and 2) they are providing statuary notice that if not paid, they can file a lien.California may be a little strick with its consumer protection laws, but if that is what they are, we work with them just fine. Your state's laws may be different.By the way, I never execute subcontracts with my subs: it's a hand-shake relationship. I've never burned them and never will.
*Hey CLS, If they don't know the in's and out's of lien waivers, they're lightweights and should be subs for someone else.I always thought the interview process was to establish who does the best work for the best price, with the best crew, with the best looking portfolio, with the best dang site work, with the darn best timeline, with the damn best quality around, regardless.Now CLS, I haven't been around much to keep up on your project, thought you had done this already! gal! Set the mark high and see who reaches it. Referrals are always the best and make sure the work you have, is the work they have done. If you need to find additional contractors drive the better neighborhoods and see who's there and doing what you're doing.If we got over that far, I'd do it for pie just to sample some. As for lien waviers, just a good business practice and everyone should do it. Just don't hold up a close of fail to execute properly or they'll never work again in my area. You might want to discuss this with a good title/mortgage company and follow their lead in this area. Mortgage or not. If you haven't lined one up yet, you might as well delay until next summer, don't take the ones that don't have enough work, there is normally a reason for that.Just my two cents.
*Pete, I thought you didn't do residential work?! It didn't occur to me to call you. I thought you didn't do residential renovation.
*Anderson, where have you been?! ;-)Actually, the work has to be done this summer/fall. Our roof will go one more winter, but frankly, we don't want to push it. I want it done. The guys we've interviewed were all recommended by our architect, and since I figure he has a vested interest in seeing his design done correctly, I'm sure he recommended they guys who were most competent. I still have one more contractor to interview - actually we intereviewed him back in January, but he hasn't seen the plans yet so we need him to take a look and get us a number. I'm on the fence. It may come down to numbers - not sure. This is so hard. I'm trusting my life savings to whoever does this! AHHHHHH!
*i Don't mind seeing you go by the book, but it suggests you're starting out with a little lack of trust. Say it ain't so. Calvin, sorry, must have missed that first time. Guess I have some weird form of dyslexia. ;-)It's not a matter of trust for me. I wouldn't hire someone I don't trust. But I don't know the subs, do I? Besides, being a pragmatic sort, and also working for an attorney who specializes in mechanic liens and contracts on behalf of many, many subcontractors, I don't feel very comfortable unless I have them.
*CLS,I do a bit of residential and commercial. I am just so handy that I can't stand it.I am working on a deck now, just finished a 2 story addition in Shaker Hts. and before that I did a finger nail shop in Euclid, a Travel agency in Beachwood and portions of two assisted living facilities in Bath and Bainbridge.Since I moved I have slowed down considerably due to the need to get so much done on this new house and the two others in Cleveland. I am starting back up and trying to establish a customer base in the western and southern suburbia of Cleveland. Previously most of my work was Eastern area stuff that is just too far now. Guess I am just getting picky in my old age.Anyhooo, if you need anything, call me. Even if you have a contractor you are comfortable with I would be glad to lend advice where needed.Pete Draganic216-573-1700
*Well, I tell you what. Like a few others mentioned, I have rarely been asked to sign or have my subs sign a waiver. Once, 18 yrs ago to satisfy a SBA guaranteed loan and that's just about it. I don't have a problem signing when final payment is given and I'm sure subs wouldn't either. The lack of trust is a whole diff. ballgame of which some might think is becoming evident when your concerns are of a waiver nature. I hope you and who you pick form a bond that puts that job in the one of a kind, best I've ever seen category. It doesn't happen often enough nor to all good people. Here's hoping it goes good. Don't forget to bake for the guys doing the work. It'll get you that little extra. And nothing fancy is necessary. And don't feed em any of that lemon stuff in the basement. No alcohol for that something extra. It doesn't work. Best of luck.
*CLS,Don't fret over the lien waiver. I couldn't fathom anyone being shocked at the site of you with a waiver to sign in one hand, and a check for them in the other.Waivers may go by the wayside as relationships are developed, but since you're working for the first time (and possibly the last time as well) with these folk, a waiver is simply a good business practice. While I wouldn't think a waiver would be a "point of negotiation" between you and the GC, asking about the payment-for-signature protocol with the subs is a perfectly legitimate question.As you've read from previous postings (and as you're no doubt aware from your work), law does vary with locale. The extent of lien use varies as well. Nowadays, many banks in my area require a signed lien as part of the distribution process for construction loans. It's pretty common and not looked upon as a "trust" issue...it's simply another step in the paperwork quagmire.Do the proper thing and protect your six.
*I was figuring on baking, once I have a access to the kitchen again. It's also losing it's ceiling. I figure if I feed them several times they'll forgive any "client-oriented-faux-paux's" I may unknowingly commit. I'll leave the lemon stuff in the basement for the day the job is finished, okay? How's that, Calvin?
*Thanks, Mongo. That's kinda what I was thinking. To me, it's not a trust issue - I wouldn't hire someone I don't trust. It's a business issue. Nothing personal, just dotting i's and crossing t's. Just like I wouldn't go into the project without a contract. Same difference.
*Many times presentation is the key. Letting others know that it is a condition of "my lender" (lender could be you) prior to releasing funds usually gets over the hump and also sends the message that you have the costs covered (not a "let me scounge up the bucks" type of operation. Sometimes its what you DON'T say. Thor
*CLS,As a GC doing restaurant remodeling, we obtain lien waivers from all of our subs, as a normal part of the payment process. After we've received all of the signed, notarized lien waivers on the project, we photocopy the waivers, and mail the originals to the owner.That is the typical process for us....However, we have encountered problems with subs being slow to return lien waivers. The waiver goes with their checks, & the checks are stamped "Please Complete Lien Waiver, Return ASAP by US Mail".Sometimes it takes 6 weeks to receive a signed, notarized lien waiver, sometimes it takes multiple phone calls. The point I'm getting at is this: When in doubt get the correct paperwork, completed, properly. Also, if in a pinch, your GC can provide a copy of the cancelled check (both sides), as proof of payment, until the tardy sub returns the lien waiver.As you said you are trying to protect your single biggest asset. Why risk it for the sake of a piece of paper? Get the lien waivers and enjoy the remodel process.Baking for the workers,hmmmmmm great idea!
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CLS,
The GC I'm framing for currently stamps a lien waiver (very fine print) in the endorsement area of all the checks he writes. When I endorse these checks for deposit I am simultaneously signing a lien waiver. I wouldn't feel comfortable working for anyone who doesn't ask for a waiver. Good luck.
The Machine