Law Office of James Kaklamanos

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How a Subcontractor without Lien Rights
Can Still Recover from the Owner

Subcontractors have the right to file a mechanics’ and materialmen’s lien against a property they improve in order to enforce payment. The same remedy is available to suppliers, laborers, and others who improve real property. This allows those who increase the value of real property to enforce payment against the owner of that property, even though they have no contract with the owner. Their contract is with the general contractor or other middleman, not the property owner. The owner has to pay in order to remove the lien and protect his equity in the property.

What if the unpaid subcontractor has no lien rights? This can happen in a number of ways. Certain properties, such as owner-occupied homes, may be exempt in some states from mechanics’ liens by subcontractors. In other cases, procedural requirements, such as the giving of certain specified notices, have not been followed, or perhaps the time limit for filing the lien has elapsed.

The subcontractor can always sue the general contractor for payment, of course. But if the general is in financial difficulty this may be a useless remedy. Does this mean the unpaid subcontractor or supplier is out of luck?

Not necessarily. In some cases, the legal doctrine of "unjust enrichment" can come to the rescue.

Under this doctrine, the subcontractor or supplier can sue the property owner for payment if the owner has not paid the general contractor for the particular work or materials. The theory is that the owner would be "unjustly enriched" if he were allowed to reap the benefit of the work or materials without paying. So, even though he has no contract with the subcontractor or supplier, and even though the subcontractor or supplier has no lien rights, the owner must pay.

If you are a subcontractor or supplier without lien rights, do not give up if your general contractor goes under. First determine whether he has been paid by the owner for your work; if he has not received payment, then you can go after the owner.

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