With both new construction and major renovation projects staying strong in Texas, disputes between contractors and subcontractors are increasingly common throughout the construction industry . This is to the complexity of projects, clashes between newcomers and legacy companies, tight deadlines, and budget constraints.
The most common issues remain the classics: payment disputes, quality of work concerns, and project delays.
These issues to the claiming and filing of Mechanic’s and Materialman’s liens (“mechanic’s liens”), which are legal claims that can place a hold on a property to ensure payment for work done or materials provided.
This FAQ article addresses common questions about these common areas of disputes, offers tips for preventing them, and explains how to handle mechanic’s liens, including how to remove them.
Q. What are the three common causes of disputes between General Contractors and Subcontractors?
a. Payment & Budget Issues
Payment-related issues are the most prevalent in general contractor and subcontractor disputes. These can include late payments, partial payments, and disagreements over the amounts owed.
b. Quality of Work
Disputes often arise when the completed work does not meet the agreed-upon standards or specifications. This can include the use of subpar materials or poor craftsmanship.
c. Delays
Delays can be caused by factors such as subcontractor scheduling conflicts, supply chain issues, weather conditions, and unforeseen site conditions.
Q. How can subcontractor disputes be prevented?
a. Build Good Relationships and Maintain Clear Communication
Strong, transparent relationships and communication between contractors and subcontractors can prevent many disputes.
b. Contract Review
Having an attorney review your existing construction and development contracts can help clarify your rights and obligations as a general contractor or subcontractor. The Sul Lee Law Firm offers contract review services to help prevent disputes.
c. Draft a Well-Written Construction Contract
Starting a construction project without a solid contract can lead to costly disputes down the line. A well-drafted construction contract is key to setting clear expectations and minimizing risks. It’s crucial to have the right legal support to navigate any challenges that may arise, ensuring your project stays on track.
Q. What should you do when facing a subcontractor/contractor dispute?
a. Send a Demand Letter
A demand letter is often the first formal step in resolving a dispute. It is a written notice sent to the other party outlining the specific issues—such as unpaid invoices or contract breaches—and demanding payment or corrective action within a certain timeframe.
b. File a Mechanic’s Lien
One of the most effective ways to secure payment is by filing a mechanic’s lien. Mechanic’s liens, however, require adherence to strict statutory requirements, including the filing of notices and specific documents with the county in which the project is located.
c. Litigation
When a demand letter does not lead to resolution, the next step may be to file a lawsuit. A construction related lawsuit often brings claims for breach of contract and/or negligence. Litigation involves taking the dispute to court, where a judge or jury will determine whether the contract was breached and what remedies should be provided. While litigation can be costly and time-consuming, it is sometimes necessary when other methods fail.
What is a Mechanic’s Lien?
A mechanic’s lien is a “hold” against the property, serving as one of the most powerful legal tools for securing payment for unpaid labor, materials, or equipment provided to a privately-owned property. This lien provides a legal claim against the property, ensuring that the party who filed the lien has a financial stake in the property’s value. If payments for services or materials are not received, a mechanic’s lien allows contractors, subcontractors, architects, engineers, material suppliers, and laborers to assert their rights to be paid.
- Lenders typically will not provide permanent financing or refinance a property with a lien filed against it.
- Property owners, especially on new construction, must resolve the lien before completing the project, refinancing, or selling the property.
- The presence of a lien can significantly delay or halt the progress of a project, making it a critical issue for property owners to address promptly.
Q. What is the deadline for filing a mechanic’s lien?
- Commercial Projects: You have until the 15th day of the fourth month after the contract is officially ended, whether through written termination, completion, final settlement, or abandonment, to file the Lien Affidavit with the County Clerk’s Office in the county where the property is located.
- Residential Projects: The deadline for submitting the Lien Affidavit to the County Clerk’s Office in the property’s county is the 15th day of the third month after the contract has been terminated in writing, fully completed, finally settled, or abandoned.
Q. How do I remove a mechanic’s lien?
- Contact an Attorney Immediately: Seeking legal advice promptly is crucial when dealing with mechanic’s liens. An experienced attorney can help you understand your rights and obligations, evaluate the validity of the lien, and develop a strategy for removal.
- Settlement: One of the quickest ways to remove a mechanic’s lien is to pay or resolve the debt. Negotiating a settlement with the lienholder can lead to the lien being released by the lienholder once the payment terms are met.
- Forced Foreclosure: If the lienholder decides to pursue foreclosure and the property owner does not pay the amount owed, the property can be sold to satisfy the lien. Avoiding foreclosure by resolving the debt is often a better option for all parties involved.
- Deposit Money in Court (Bonding) : In some cases, you can deposit the amount of the lien with the court. This action, known as “bonding off” the lien, allows the property to be free from the lien while the dispute is resolved. The court will hold the funds until the matter is settled. This is often done while legal proceedings are being resolved.
Disputes between general contractors and subcontractors can be complex and challenging. Understanding common causes and implementing prevention strategies can help manage and resolve these issues effectively. If you face a dispute with your general contractor or subcontractor, seek legal assistance immediately to protect your rights and interests. Experience team of attorneys at Sul Lee Law Firm is here to assist with contract reviews, dispute resolution, and removing mechanic’s liens.