I am a home owner that hired an excavator to complete my single family home project. I have a mutually signed contract/estimate stating the work they will do. I paid 30% down ($18K) to get started and they excavated the main footprint of the house using a rented piece of equipment from a local rental company. I then had my foundation poured by another sub and was ready for backfill in early January. The excavator made a plethora of excuses as to why he needed additional money and delays in his schedule. I then paid an additional $10,000 for him to complete the foundation drain and backfill, which never occurred. I then received an intent to lien notice from the local rental company because the excavator never paid for the rental ($5,800). I called the rental company and apparently they had to repo the piece of equipment because they could never get ahold of the excavator for payment. My question is: do I have any legal recourse on the excavator since I paid him to provide the equipment (which I was never informed he needed to rent)? Also, should I pay the rental company personally to prevent any potential liens on the property?
Your fact pattern implicates the mechanic's lien trust fund statute. Really anyone you pay on your project has a duty to hold all funds you hand them in trust for application to the project, including payment of suppliers and laborers. A violation of that statute can amount to civil theft, which entitles you to three times the amount of the violation and attorney fees.
Since this is residential, you have a potential defense against the rental company's claim to a lien that you paid in full for the work performed and the rental. Ideally, I'd like to see draw requests and line item/pro forma types of documentation to support full payment for work performed, but frequently it isn't there and it's just a question of fact to be resolved.
What you should and shouldn't do is really legal advice that can't be given in this forum. There are other factors that need to be considered as well and aren't clear from your question, like whether this is being built under a construction loan requiring you to clear the liens prior to conversion to permanent financing, how much equity is in the property otherwise, and does it make more sense to bond around any lien than pay it.
You should contact a lawyer or two for a consult. We're at 7205007855.