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How can I be sure liens will not be filed on my property after work is complete and I have paid my contractor in full?

I am having a custom home built by a local home builder. Work is almost complete and I am required to pay a final draw after a CO is issued. All prior draws have been paid to the contractor in a timely manor, (within 3 days of request). I have not requested any documentation of payment of material suppliers, sub-contractors, or labor to this point. What should I ask my contractor to provide prior to making final payment to protect me form liens that may be filed after the work is complete?

1 reply

Jun 17, 2020

The best step an owner can do to avoid potential mechanics lien disputes on the project it to require their GC to collect lien waivers. Even if lien waivers hadn't been utilized up to that point, collecting unconditional lien waivers for the work that's already been paid for will be useful, and so will collecting conditional lien waivers for work not yet paid. More waiver discussion, here: (1) How To Handle Requesting & Tracking Lien Waivers; and (2) The Property Owner’s Guide to Lien Waivers. Additionally, requiring the contractor to provide you an affidavit stating that all of their subs and suppliers were fully paid for their work might be another step worth taking. If the contractor can't or won't provide that, it might be a red flag.

Alabama is an "unpaid balance" state

Finally, it's worth mentioning that Alabama is generally considered an unpaid balance lien state. Meaning, if the owner has fully paid their GC, subcontractors and suppliers typically can't file a valid and enforceable mechanics lien claim. If a supplier has sent a Notice to Owner, though, they will be entitled to file a mechanics lien for the full amount that they're owed - regardless of what the owner has paid their GC. Further, if the owner has received a Notice of Unpaid Lien but still pays their GC in full, then the sender will have full mechanics lien rights. But, if neither of those notices have been received, the risk of a valid lien shouldn't be all that great once the GC has been paid in full. Regardless - nipping payment issues in the bud is a worthwhile exercise. Even if potential lien claims might be improper, the owner may still have to deal with the headache of battling lien claimants if they don't make sure everyone's gotten paid on the job.

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