Home>Levelset Community>Legal Help>Our contractor breach the contract, took quite of bit of our budget and not only that, we just found out he did not pay for some materials. Can those suppliers put a lien on our property?

Our contractor breach the contract, took quite of bit of our budget and not only that, we just found out he did not pay for some materials. Can those suppliers put a lien on our property?

We had a contractor and he just didn’t show up one day, we tried reaching out to him and he says he doesn’t have money. Our project is an addition and a garage to the existing house, he took about $40,000.00 and now we found out he hasn’t paid the suppliers. Do we have to still pay for that even though we are $40,000.00 out.? How long do we have until they can put a lien? Will that damage our credit? We are still figuring out how to finish the project, our house is a mess and we need to use whatever is left of our money wisely.

1 reply

Feb 28, 2019

That sounds like a difficult situation. I'll try to provide some helpful information below.

A GC misappropriating funds, or otherwise failing to pay subcontractors or suppliers, can result in situations in which a property owner is forced to pay twice for the same work. The property owner would then need to recover from the GC at fault.

In Washington, all parties who do not contract directly with the property owner have certain notice requirements that must be met in order to file a valid lien against the property. These parties must provide a Notice of Right to Lien within 60 days from first furnishing labor or materials to the improvement. The notice may still have some effect even if given late, however. With respect to the remodel, alteration, or repair of an owner-occupied single-family residence a late delivery of a notice of right to lien will protect lien rights beginning from 60 days prior to the date the Notice was delivered.

If the notice was delivered, the lien itself must be filed within 90 days from the last date on which the claimant furnished labor or materials to the project. If this date passes, a potential claimant loses the right to file a vlicd and enforceable lien.

In the event a lien is filed, and money is still owed to the GC, the owner is allowed to withhold amounts sufficient to cover the amounts due to the lien claimant(s) from the GC. And, further, to the extent any judgment is rendered against the owner or the owner’s property because of a lien that was filed, the owner may deduct the amount of the judgment plus costs including interest and attorneys' fees from the amount still due to the GC, and/or recover back from the prime contractor the amount that exceeds the amount remaining due to the GC.

Whether a filed lien will effect credit is a complicated question without a really good answer. It is definitely possible that a lien can be reported by a credit reporting agency - all liens, debts, judgments, etc., that are part of the public record may be reported for credit purposes. However, to make it to a credit report the agency would need to become aware of the lien filing, and it's not exceptionally common for the credit reporting agencies to routinely examine the property records of every county. If there was a judgment, however, that is more likely to have an impact on credit.

I hope that information helps a bit.

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