In most cases, you can't legally withhold payment from a subcontractor when the job you've been contracted on fails to pay on time or, even worse, doesn't pay at all. If you're not absolutely certain that your reasons for withholding payment are legal and legitimate, the subcontractor may be able to take action against you and win. Payment can be withheld from subcontractors under very limited conditions. If you're a contractor, it's only a matter of time before you end up working with a subcontractor that doesn't perform their portion of the job according to the standards of the contract you both agreed to. Subcontractors usually specialize in specific areas such as: When Can Contractors Withhold Payment From Subcontractors?Ĭontractors normally bid on large projects and then hire subcontractors to perform a significant portion of the work to be performed. While this is one of the rules that subcontractors can utilize to get paid, a lot depends on the agreement and whether or not there is a condition requiring subcontractors to submit to binding arbitration or allowing them to sue. Remember that going to court costs money. They are breaching the law if they do not. What Can you Do if a Contractor Won’t Pay You?Īnother way to do this is to contact a lawyer for advice. There is an attorney fee.
The contractor would need to charge in a shorter period of time than that to be able to launch a case if not paid. How Long Does a Contractor Have to Bill You for Services?ĭepending on your state, a lawsuit to recover money owed under a written or oral agreement to undertake work must be filed within five years.
They can also pursue similar action when a contractor delays in paying a subcontractor for longer than the state allows. Subcontractors are not restricted to taking such action only when they aren't paid. Penalties of up to two percent of the original bill.For example, in the state of California, a subcontractor can sue for the following: Exact rules and penalties associated with failing to pay a subcontractor will vary from one state to the next. Subcontractors can also report contractors to the appropriate state licensing board if they fail to pay. Subcontractor Not Paid by ContractorsĪn alternative to filing a mechanic's lien is to go after the contractor directly. Still, it's a good idea for a lien claimant to be aware of their lien rights and deadlines, as well as to be prepared in the event that something goes wrong. Mechanic lien should only be used if there is a major payment issue and the deadline for filing a claim is approaching. There are laws in place that are designed to protect a subcontractor and make sure they get paid, even if that means that the property owner has to pay more than once for the work that's been done. In cases like this, it doesn't matter whether or not the owner of the property has paid the contractor in good faith. A mechanic's lien can be used to foreclose on the property in question as a means to collect the money the subcontractor is owed when the property sells. If the owner then fails to pay, the subcontractor can then file the lien. The first thing they'll need to do is notify the owner of the property. If a subcontractor doesn't get paid, they can file what is known as a "mechanic's lien" against the property they've been working on.
Usually, though, it's easier to pursue action against the owner of the property than it is to go after the contractor. In the event that a subcontractor isn't paid, they may have grounds to pursue legal action against the contractor. One of the contractor's responsibilities involves making sure each of the involved subcontractors and suppliers is paid for their work. Usually, the main contractor is responsible for coordinating and supervising all of the subcontractors. Subcontractor's Rights When a Contractor Won't Pay The construction industry list goes on but this is a general list of the types of projects. Building projects normally involve multiple subcontractors such as: What should you do? When a contractor refuses to pay subcontractor, the subcontractor has grounds to pursue legal action to collect the money that is owed to them.
This is the biggest nightmare for subcontractors. You have put in the hard work of committing to a project and now the contractor won’t pay you. When Can Contractors Withhold Payment From Subcontractors? What Can you Do if a Contractor Won’t Pay You? 7. How Long Does a Contractor Have to Bill You for Services? 6. Subcontractor's Rights When a Contractor Won't Pay 3.
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