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what remedy does an owner have against a defaulting contractor who failed to pay his subs?

the owner of the property did not comply with statutory retainage requirements and the general contractor failed to pay his sub. the sub filed a lien against the property. the general contractor is paid in full. 1. is the only remedy for the owner to pay the sub directly and attempt to collect from the general contractor? 2. if the owner does pay the sub, then what can the owner collect from the defaulting general contractor? thanks, Beth

1 reply

Dec 9, 2019

When a subcontractor has filed a mechanics lien, there are a few different ways an owner might respond to that claim. An owner might pay the claim and then try and recover payment from their contractor, as you discussed above. Or, the owner might try and dispute the lien claim or even try and force their contractor to resolve the issue or bond off the lien. There's no single way to respond to a lien claim, and this resource discusses a few of those options: A Mechanics Lien Was Filed on My Property – What Do I Do Now? Still, let's look at some relevant Texas-specifics to keep in mind.

Texas mechanics liens by subcontractors after the contractor is paid in full

Generally, Texas property owners are able to push their contractor to resolve a lien dispute when the owner has paid their contractor in full. Alternatively, if an owner has to step up to the plate and resolve the issue themselves, the owner should be able to pursue claims against their contractor to force payment.

Pushing a contractor to resolve the dispute

Under Texas Property Code § 53-153, if a mechanics lien is filed by a subcontractor or supplier, the contractor must defend the owner in any suit brought on the claim. Reminding the contractor of this responsibility and demanding that they resolve the issue could be helpful since the contractor will legally be required to jump in if the dispute escalates to a lawsuit. Additionally, pushing the contractor to bond off the filed lien could be helpful, too. Bonding off a lien doesn't make the lien disappear, but it will take the lien off of the property title. Then, it'd be up to the contractor and their surety to resolve the payment dispute. And, even if an owner can't force their contractor to bond off the lien, the owner can do so themselves in order to free up the property title. In either case - it can be helpful for an owner to send legal threats to their contractor and assure them that the lien claim is very much their problem, too. Doing so via attorney demand letter could be particularly helpful.

Claims against a contractor after paying subcontractor's lien

If feasible, it might be easier to pay off a subcontractor's lien claim and then pursue payment from the prime contractor. If an owner has to pay their contractor's debts, the owner should be entitled to recover payment above and beyond what the owner owed to their contractor. So, an owner could certainly elect to pay the claim and pursue recovery from the party who was supposed to make payment. However, note that if the contractor isn't paying their subs or vendors, then they might not be able to pay any judgment that is won.

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