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General Contractor overcharged and not paid subs


We are first time home builders and were intending to take a construction loan to construct our home. We got a cost plus GC who was in a hurry and did not wait for the bank to approve him and started the construction. Once the bank approved him, we were told that need to provide lien releases for work completed before the bank can start releasing money. The GC would give us the run around and said that it was too much work to deal with a bank. After 4 months of blindly paying the GC's invoices to the tune of $1.2 million, we got suspicious and asked all work to stop at the site until we could sort out the accounts. We confronted the GC and got hold of all the subcontractors on the project. Turns out non of them had been paid in full and found that we had been overcharged by $190k for work that was never done. All in all we were down about $400k between the subs not being paid and the GC overcharging us. This was 2 months ago. The contractor keeps telling us that he has paid all the subs whatever they are owed but we will not be getting lien releases as the subs did not prelien in the first place. We are overcharged $135K at this point. He acknowledges that he owes us money, but claims the amount is $108K. He hasn't been able to able to just show proof that the subs have been paid nor can he justify that he only owes us $108K instead of the $135K that we believe he owes us. Today we got calls from 2 of the sub contractors claiming that they have not been paid. The subcontractors are owed $120K. At this point I need all the subcontractors to be paid even though they haven't pre-liened the property. But I want the GC to pay them their dues and not be harassed by them. Do I have any legal protection from the subcontractors and any means other than filing a law suit to force the GC to pay the subs and repay our money. We are desperate for this ordeal to be over and want to continue building our dream home with a different contractor that we have lined up. Thanks

2 replies

Feb 19, 2021


You may be able to resolve this with a demand letter from an attorney and some correspondence with the contractor's attorney. If not, then I would go to the CSLB and threaten filing suit. Happy to help if you need it - 213.926.1516.

Good luck,

Greg Reaume

Feb 25, 2021
Theoretically if subcontractors have not pre-liened a job, they have no mechanics lien rights to lien the property and their only remedy is to sue the general contractor, but sometimes they may file a lien anyway. Its usually a good idea to have the contrractor give you subcontractor lien releases with each progress payment application, as you want to make sure they are paid, especially if you have a construction lender. It sounds like your contractor is a little bid iffy and may be cheating his subs, which is not good. You probably want an experienced construction lawyer to take a closer look and advise you what needs to be done to protect yourself and your property.

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