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What if the homeowner has all the documentation to prove he paid the contractor and I am putting a lien on the property as the supplier, can the homeowner sue me?

Hi, I have 8 branches I work with in Texas, Virginia, Florida, Oklahoma and Louisiana. In the past I have sent Notice of Intent and Liens to properties where the contractor has not paid us, I am receiving phone calls from the homeowners telling me they paid in full and have documents to prove it. My question is, can this homeowner who paid the contractor in full turn around and sue me as the supplier for putting a lien on their property?

1 reply

Dec 6, 2018

That's a really good question. First, it's worth noting that regardless of whether there's any merit to their action, an owner can threaten to file suit - and they can actually file that suit. Whether their claim has a sound basis is another story altogether, and that will vary by state. Plus, where a lien has been filed and ultimately challenged as invalid, if push comes to shove, the lien claimant can typically release their lien claim without much issue and pursue some other method of recovery. Before going any further, it's worth noting a few things: (1) An owner's dramatic response to a lien filing (or the threat of a lien filing) is what makes them effective in the first place, (2) the majority of lien claims are paid before any legal action is taken or becomes necessary, (3) even where a lien is filed against the owner, the GC isn't off the hook - they're still responsible for payment and the owner can bring claims against that GC, and (4) even if a lien is accidentally exaggerated, that doesn't necessarily result in legal liability - there's a difference between a fraudulent lien and an honest mistake, and a lien can even be reduced by the claimant or the court in most cases to the appropriate amount. Moving on, generally, each state falls into one of two categories - an Unpaid Balance Lien state and a Full Price Lien state. In Unpaid Balance states, with some exceptions, a mechanics lien may only be filed for the amount that has not yet been paid to the general contractor. This rule is instituted in order to prevent a homeowner from having to pay twice for work. In Full Price Lien states, a mechanics lien will be effective the full price of what's owed to the claimant - regardless of what has been paid to the general contractor. It's important to note, though, that even where a state might be an "Unpaid Balance" state - there are situations in which a full price lien might be available. You can find a map here: Full Price Lien or Unpaid Balance. As per that blog post, Oklahoma and Louisiana are both considered "full price" lien states (so, the full amount of what's owed to the claimant can be liened, regardless of payments to the GC). On the other side of the coin, Texas and Virginia are both considered "unpaid balance" states - but it's not quite cut and dry. In Texas, as long as a claimant has been sending the required monthly notices, the claimant preserves the right to lien the full amount of their claim - regardless of what payments have been made to the contractor. Looking to Virginia - despite the label of an "unpaid balance" state, Virginia subs and suppliers are entitled to lien for amounts that are currently due to the general contractor (at the time of the claim) and amounts that will become due to that general contractor. Thus, if a supplier files their mechanics lien and the GC is currently paid-up, if that GC will be paid at some point in the future (and the amount to be paid exceeds the amount of the lien claim), then that subcontractor won't be limited by the fact that payment has been made to the general contractor. As for how to handle an owner threatening suit - that may vary on a case by case basis. But, when a claimant reminds the owner that they would rather not have to file a lien and that the issue is the fault of the GC (or whoever else didn't make payment) - it might become easier to work with the owner to put pressure on the nonpaying party.

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