If the homeowner fails to pay the contractor
California law gives every contractor and supplier the right to lien real property for labor and material they’ve incorporated into a property, but for which they haven’t been paid. For example, let’s say a homeowner hires a contractor to build a deck and the contractor then hires a subcontractor with employees to pour concrete footings for the project. If the homeowner fails to pay the contractor, that contractor can put a lien on the homeowner’s house. This sequence of events is logical and fair.
Seemingly less logical is the subcontractor’s ability to place a lien on the homeowner’s property. This can happen in a situation where the homeowner pays the contractor, but that same contractor fails to pay the subcontractor for the concrete work related to the project. Under law, a general contractor is not only the employer of its subcontractors, but also the subcontractor’s employees. The employees of the subcontractor may then seek redress from the homeowner instead of the contractor. Since the homeowner’s house is collateral against all transactions, it’s his house that gets a lien put against it. This is true even if the homeowner paid someone else for that labor and materials.
A homeowner could be legally responsible to pay the contractor twice
In a worst case scenario, a homeowner could be legally responsible to pay twice for labor and supplies. This could happen if a homeowner were to hire and, under the terms of the agreement, pay a general contractor for a project. If and when the contractor fails to pay his crew or his suppliers, the homeowner could be legally obligated to pay for the supplies and wages himself. A foreclosure on a lien could force him to sell his house to pay the debt. The homeowner could, of course sue for recovery of the losses the contractor.
Contracts quite often employ the use of progress payments. Prime or general contractors must in turn make progress payments to subcontractors within 10 days of receipt of the funds from the home owner unless there is a written modification to this rule. If the prime contractor fails to pay, he may be subject to a levy.
DiJulio Law Group