Home>Levelset Community>Legal Help>As a Licensed General Contractor, am I able to legally file a lien on a customer if a subcontractor did the work? (The contract was thru our company and is signed and dated). Would that be legal or would we need to involve the sub somehow?

As a Licensed General Contractor, am I able to legally file a lien on a customer if a subcontractor did the work? (The contract was thru our company and is signed and dated). Would that be legal or would we need to involve the sub somehow?

California

As a Licensed General Contractor, am I able to legally file a lien on a customer if a subcontractor did the work? (The contract was thru our company and is signed and dated). Would that be legal or would we need to involve the sub somehow? I have looked online and on your website but can't seem to find an answer for this specific situation and question.

1 reply

Aug 1, 2019

That's an interesting question. First, to dispell any question - licensed general contractors in California are entitled to mechanics lien rights. As you know, it's absolutely common for contractors to sub out large portions of work. But, just because that particular physical work wasn't undertaken by the contractor, themselves, doesn't mean it isn't lienable. Because general contractors provide a valued service in coordinating subs, suppliers, and the work performed, those services are generally subject to mechanics liens. That, and direct contractors are clearly prescribed lien rights under the California Civil Code.

Rather, under § 8430(a), the amount of a California mechanics lien is limited to the lesser of "(1) The reasonable value of the work provided by the claimant. (2) The price agreed to by the claimant and the person that contracted for the work." And, "work" is defined at § 8048 as "labor, service, equipment, or material provided to a work of improvement." So, a direct contractor will be entitled to file a lien for either the value of the work or the agreed-upon price of the work - whichever is less.

As for coordinating with a subcontractor - the California mechanics lien statute does not require a contractor and their sub to coordinate their lien claims. Rather, each is entitled to file a mechanics lien for what they're owed. And, because California is a "full price" lien state, sub-tier lien claimants are entitled to file a mechanics lien for the full amount that they're owed - their claim won't be limited even if their contractor has been partially or fully paid, like some other states.

However, when it does come time for payment, what's actually paid to each party will, in all likelihood, end up tying to how payments were supposed to be distributed on the project. Meaning, a GC would not be able to double-dip by getting paid their full amount due when much of that sum should be passed onto a subcontractor. Though, that's generally an issue to be resolved later and would not be restrictive in what amounts could or could not be liened.

Of course, a contractor lien claimant could always decide to coordinate their lien with a sub-tier claimant rather than filing the full amount of what's owed, if that's how they preferred to proceed. But, because the business entities are completely separate and have separate interests, a California contractor is not required to discount their lien claim simply because their subcontractor will also file a lien.

I hope this information was helpful! Feel free to post another question here at the Expert Center for any clarifying questions, and we also have some other California resources that might be valuable to you:
(1) California Mechanics Lien Guide and FAQs
(2) About California Preliminary 20-Day Notices

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