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Is a Release of Lien voided if a GC retroactively subtracts money from a previous job by shorting the current one?

MinnesotaLien Releases

I am a subcontractor who has completed 5 projects for a GC. He has paid the contracted amount on the 4 previous jobs, but on the 5th he is claiming we overcharged on that and 4 previous jobs and is subtracting the amount from the final payment of the 5th job. We signed Release of Lien for the previous jobs, but if he is retroactively taking back that money then those would no longer be valid correct? We have not paid for the material on 3 of the jobs and there have been additional cost incurred that we have sent invoices for but have not been paid on. The supplier pre-liened, but we did not as we didn't sign up for this service until recently and hadn't had any issues (didn't know any better). I wan to allow the supply company to collect the money owed them by liening the owner. That way our material account is cleared and in a way we have collected our money. We are in MN and one of the jobs was here. The other 2 were in WI and IL respectively. Any issues with this plan?

1 reply

Apr 15, 2020
A contractor withholding payment on an unrelated job wouldn't retroactively invalidate a waiver on a totally separate job, regardless of their reasoning. Alleged issues on one job shouldn't be carried over to another job. And, the contractor isn't entitled to claw back what they owe on one job if they think they've been overcharged on another one. If a prior job has been paid in full and a final lien waiver was exchanged on that job - I think the most prudent way to think about that is as if the job is completely closed out. If you're not getting fully paid for another job, then treating the issue separately is the safest way to proceed from a collection standpoint. So, using collection tools available on the current unpaid job might be the best way to get squared away. Tools like sending demand letters and Notices of Intent to Lien can help to get paid without initiating a dispute, as you may know. And, filing a mechanics lien may be an option for recovery depending on where the unpaid project is located, whether notice requirements were followed, what the lien timeline looks like, etc. And, other options - like pursuing legal claims or sending the debt to collections - could also be useful for making sure you get paid. Finally, regarding suppliers - if you've been fully paid on a job, then the supplier should certainly be paid for the materials they supplied for that job. I'm not sure it'd be good business practice to instead hold onto their payment and force them to file a mechanics lien. This is especially true considering you'd likely be liable for failing to pass funds to them when a portion of your payment was supposed to go to that supplier. Again - treating separate jobs separately is generally best practice, even if relationships span multiple jobs.
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