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I paid the GC but the subs didn't get paid. Am I responsible if a lien is filed on the project?

MinnesotaMechanics Lien

Anonymous General Contractor

I contracted out a new home construction.minnesota.contractor received the first installment 140000 in cash .did not pay his subcontractors and looks like he is going bankrupt. the subcontractors bill total 63000. there were ample funds from me to pay them. am i still responsible if there are mechanics liens as mn says if i paid gci only have to pay once. is this correct? at least the ag s website says so

2 replies

Feb 5, 2020

Minnesota is generally an "unpaid balance" lien state, such that a property owner is protected from double payment in some circumstances. Specifically, Minnesota statute § 514.03. Extent and Amount of Lien, states in part: "The total sum of all liens . . . shall not exceed the total of said contract price plus the contract price or reasonable value of any additional contract or contracts between the owner and the contractor or additional work ordered by the owner, less the total of the following: (i) Payments made by the owner or the owner’s agent to the contractor prior to receiving any [preliminary] notice prescribed by section 514.011, subdivision 2; . . ." So, if payments are made to a GC prior to receipt of a preliminary notice from the subcontractors (when required) the sum total of any possible liens from sub-tier parties cannot exceed the total of the original contract price minus the amount paid the GC prior to receipt of the subcontractors' preliminary notices. Generally, preliminary notice is required from subcontractors on residential projects of 4 or fewer units. And, when required the preliminary notice must be provided within 45 days of the subcontractor's first furnishing of labor or materials to the project in order for the subcontractor to retain any lien rights at all. Plugging in numbers from above, if $140,000 was paid to the GC prior to the receipt of preliminary notice from the subcontractors, the total contract amount would need to be at least $203,000 in order for the lien-able amount to be the $63,000 claimed by the subcontractors.

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Feb 5, 2020

The total contract was for 682000 excluding the land which I own free so I guess I have to pay the liens correct? Thanks so much for helping out

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