Ask any homeowner renovating or constructing a home and you will get unanimous agreement. Nobody wants to pay for labor or materials twice. However, with frequency, this happens in Missouri. Homeowners must beware when signing proposals and/or contracts with anyone providing labor or materials for their home. Consider these guidelines and suggestions in this important area of the law.
General Contractors and Subcontractors—What is the Difference?
A general contractor is one who has a direct contractual relationship with the owner(s) of the property. Typically, a general contractor will hire subcontractors more proficient in their respective trades to complete various portions of the work. This is true for most builders of residential homes. They hire a framing crew, an electrician, a plumber, a cabinet and trim carpenter and others who perform labor and supply materials for the project while they serve to coordinate the work and communications with the owners. What happens if the general contractor fails to pay the subcontractors for work that is done after the owner has paid for such work? The homeowner becomes exposed to a subcontractor mechanic’s lien and most likely, very costly litigation. Let’s explore some prerequisites for mechanic’s liens.
Contractors must supply statutory notices before they have a right to assert a mechanic’s lien.
A general contractor is required by Missouri law to provide a special notice to owners before filing a mechanic’s lien. The Notice must be conspicuous and must be provided at the front end of the project. Specifically, the Notice, to be compliant with § 429.012, RSMo., must state in at least 10 point type:
NOTICE TO OWNER
FAILURE OF THIS CONTRACTOR TO PAY THOSE PERSONS SUPPLYING MATERIAL OR SERVICES TO COMPLETE THIS CONTRACT CAN RESULT IN THE FILING OF A MECHANIC’S LIEN ON THE PROPERTY WHICH IS THE SUBJECT OF THIS CONTRACT PURSUANT TO CHAPTER 429, RSMo. TO AVOID THIS RESULT YOU MAY ASK THIS CONTRACTOR FOR “LIEN WAIVERS” FROM ALL PERSONS SUPPLYING MATERIAL OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT. FAILURE TO SECURE LIEN WAIVERS MAY RESULT IN YOUR PAYING FOR LABOR AND MATERIAL TWICE.
Special rules apply for subcontractors who seek mechanic’s lien protection on residential construction. They are required to obtain a consent form signed and dated by the Owner(s) as follows:
CONSENT OF OWNER
CONSENT IS HEREBY GIVEN FOR FILING OF MECHANIC’S LIENS BY ANY PERSON WHO SUPPLIES MATERIALS OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT ON THE PROPERTY ON WHICH IT IS LOCATED IF THEY ARE NOT PAID.
This executed consent form, also made in ten point bold type, is a prerequisite for the filing of a mechanic’s lien by a subcontractor, supplier, architect or engineer in a building contract for the repair or remodeling of an owner-occupied residential property of four units or less. § 429.013, RSMo. However, this consent does not apply to a newly constructed residence. Further, this consent form only applies to subcontractors, suppliers, architects and engineers–the original contractor’s lien rights are predicated on the owner receiving the notice provided in § 429.012, RSMo. Why? Because the owner and general contractor are deemed to be in communication on project issues and have better knowledge of what each is doing in the performance of their agreement.
The 10 Day Notice Rule Applicable to Subcontractors
Every person except the original contractor, who may wish to avail himself of the benefit of the provisions of Missouri’s mechanic’s lien law, shall give ten days’ notice before the filing of the lien, as herein required, to the owner, owners or agent, or either of them, that he holds a claim against such building or improvement, setting forth the amount and from whom the same is due. Such notice may be served by any officer authorized by law to serve process in civil actions, or by any person who would be a competent witness to prove service of the Notice. § 429.100, RSMo.
The 6 Month Rule on Mechanic’s Lien Filing
Both general contractors and subcontractors have six (6) months to file their mechanic’s lien from the date their last labor or materials were supplied to the property and incorporated into the construction which is essentially “when the indebtedness” for such items becomes due. § 429.080, RSMo. Subcontractors must watch their deadlines very carefully because their Notice must be delivered to owners before the 6-month period expires. Timelines are critical with mechanic’s lien filings and perfection.
Homeowner Protection with Lien Waivers
Lien waivers signed by the general contractor and also subcontractors performing labor and/or supplying materials to the project can be a very important protection for homeowners. A lien waiver operates as a bar against double payment for the items set forth in the wavier. Lien waivers should always be obtained prior to payment by the owners for work performed. They should be carefully and clearly drafted so they will hold up in a court of law.
The Role of Legal Counsel
Many people will agree to sign contractor proposals for significant sums of money for home construction and improvements, but fail to seek attorney guidance and recommendations in advance. Homeowners should consult with an attorney at the beginning of the project and along the way to make sure they will not pay for materials or labor twice and to best protect their rights under contract documents so project expectations are met. Special contractual provisions should be inserted in contracts to provide homeowners with protections on payment, workmanship, warranties, insurance, and mechanic’s lien avoidance, just to name a few. Moreover, homeowners should also know exactly who is performing work or supplying materials on their property. Requesting a contractor to provide a certified list of laborers and suppliers is highly recommended.
Advice in this area of the law is key to avoid costly litigation when the general contractor fails to perform his side of the bargain. The construction season is upon us and the litigation group at Carnahan, Evans, Cantwell & Brown, P.C. is ready to consult with owners in this specialized area of the law as new projects are planned for residential or commercial construction.