Consider this scenario: Your client is the owner of a construction project nearing completion when she is approached by her general contractor and told that he owes more money to his subcontractor than she owes (or will owe) to him. To add to the distress, a mechanic’s lien has been filed by one of his subcontractors and your client is concerned that additional liens may be filed. What are your client’s options if she does not wish to increase the contract sum and continue working with the general contractor?

Addressing your client’s concern regarding existing and future liens, it must first be noted that while the unpaid subcontractors can file notices of lien for the full amount owed by the general contractor, the owner’s liability for such liens is limited by the amount unpaid to the general contractor at the time of the filing of the liens. This unpaid amount is known as the “lien fund.” Thus, in the absence of a lien fund, a lien by a subcontractor is invalid against an owner. In our scenario, however, your client has exposure to the previously filed lien because, at the time of the filing, monies were due to the general contractor.

A Successful Approach