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Options for Owner who paid builder in full but he has unpaid subcontractors

We paid a builder in full but have discovered he failed to pay several subcontractors. The builder just passed away. If we are able to avoid mechanics liens, can the subcontractors or suppliers still pursue us for the builder’s debts and if so what form would that take. Many thanks, Simonne

1 reply

Jan 23, 2020

Generally, Colorado is what's considered a "full price lien" state. Meaning, subcontractors, suppliers, etc. will be entitled to file a mechanics lien for the full amount of what they're owed even if their contractor was paid in full by the property owner. So, in some situations, an owner may end up paying for work twice. When payment is owed but unpaid between a contractor and their sub, the sub may be able to hold the owner accountable via lien claim, as mentioned above. And, a claim like unjust enrichment could be on the table as well. But, most legal claims that a subcontractor might have would come against the contractor and not the owner since the contractor is the one who failed to make payment. Additionally, on the lien front, I think these resources might be valuable: (1) I Just Received a Notice of Intent to Lien – What Should I Do Now?; and (2) A Mechanics Lien Was Filed on My Property – What Do I Do Now?

A contractor's debts don't disappear if they pass away

It may sound a little dark, but a contractor's debts don't just disappear when they pass away. Rather, if the individual contractor was operating through a business entity, then that business would still very much be responsible for its debts. Or, if the contractor was a sole proprietor, then their estate could very likely be held liable for the contractor's debts. So, it could be helpful to try and steer subcontractors or other claimants there for recovery, first. Whats' more, just like an unpaid sub could hold the contractor's business or estate liable, an owner may well be able to do the same thing if a lien is brought against the owner's property. Generally, when an owner has paid their contractor in full, that owner can bring the GC into the dispute and try to hold them liable for their failure to pay via legal claims. Considering all of the moving parts here, if it looks like a lien claim or legal claim will soon be made, it might be wise to consult a local Colorado construction attorney for help sorting out the issue and protecting your interests. They'll be able to more thoroughly assess the situation, review relevant documentation, and advise on how best to proceed.

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