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Are we liable for a lien from a material supplier of a subcontractor that signed an unconditional lien waiver, but never paid his supplier?

Missouri

We are a GC on a project in which one of our subcontractors walks off the project and never finishes. We paid him on 10/10/17 and he worked a bit after that then stopped. He signed a partial unconditional lien waiver when he picked up payment. We have been notified now that his material supplier intends to put a lien on the project for invoices he did not pay. They expect us to pay them. Are we liable for them? According to our contract with the owner, we are required to keep the project free of any liens. But why have lien waivers if we have to pay anyways?

1 reply

Mar 22, 2018

This is a situation that raises similar questions for parties all over the country. For being as common as they are, lien waivers are routinely misunderstood. Generally speaking, it's not allowable to waive the lien rights of another party. So, when a lien waiver is obtained from a subcontractor that particular subcontractor is waiving its lien rights, but the sub-subs and suppliers the subcontractor hired are still able to file a lien (to the extent that they have not also provided a waiver or otherwise do not have lien rights).

This is why project participant visibility is so important. Without knowing who all the sub-subs and suppliers and equipment rental companies and so on are on the project, there can be liens even if waivers were obtained from all your subs.

That being said, there may be other reasons that a particular lien may not be valid. Missouri requires certain notices to be provided prior to filing a valid lien (the notices depend on project type and the role of the lien-ing party). If a required notice is not provided, it is fatal to the lien claim. Further, Missouri is an "unpaid balance" state. Unless there is a specific consent otherwise from the property owner, the "full payment of the amount due under a contract to the contractor shall be a complete defense to all liens filed by any person performing work or labor or furnishing material." So, to the extent the project is complete and you've been fully paid, it may be impossible for a supplier to file a valid and enforceable lien.

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