It’s complicated: Is homeowner responsible for unpaid subcontractors?

Q. My husband and I hired a local contractor to build an addition off our house. Although there were some problems along the way, the work was eventually done, the contractor was paid and we were basically satisfied with the job.

A couple days ago, we received, via certified mail, a Subcontractors Notice of Lien. As best we can tell, our contractor did not pay for some of the materials used in the project. We have spent the last two days attempting to contact our contractor, with no success. The amount of the lien is approximately $9,500.

What do we do now? We paid the full amount of the contract with our contractor. Isn’t he the one that owes the $9,500?

A. Let’s start by going through how you, as the homeowner, should handle this from start to finish correctly and then we will try and determine where this went south.

To start, you should have a written contract with your contractor, specifically detailing what he is going to build, reasonably detailed specifications and a price. Once that is agreed upon, the contractor should have provided you with a sworn statement, which is a legal document detailing every party that will be furnishing either labor or materials to the project and what they will be paid. Those figures, when added to your contractor’s overhead and profit, should total your contract price.

Now, some contractors will do most or all of the labor themselves, so their sworn statement may only include the contractor and a few material suppliers. Some contractors act simply as a general contractor and subcontract out the labor, such as electricians, plumbers, concrete and HVAC. In that case, all those subcontractors should be listed on the sworn statement along with how much they will be paid.

So, when your contractor comes to you and tells you he needs $7,000 for the electrician, before you make that final payment to the electrician, you demand a “final lien waiver.” This is a sworn document that indicates he has been paid and he “waives” the right to lien your property. As you move along on the project and as you make payments, ideally you are obtaining lien waivers for the amount you are paying at any given time. The goal here is at the time you make your final payment, you have obtained final lien waivers from all the parties on the sworn statement and equaling the contract price.

So, what went wrong with your project? One possibility, you never received a sworn statement. This is pretty common, especially on smaller projects. Many homeowners don’t know enough to request the sworn statement and some contractors are happy not to provide the sworn statement as they would prefer the homeowner not be fully informed of his costs. If the homeowner reviews the sworn statement and only sees, for example, $4,000 in labor and materials, the homeowner may wonder why he is paying the contractor $12,000 for the project.

Another possibility is that the contractor furnished a sworn statement but did not fully or accurately disclose either all the subcontractors or the amounts he was paying them. If the contractor fails to disclose a subcontractor, the homeowner will not know to obtain a final waiver of lien from that party and may end up paying the general contractor the full amount while certain subcontractors retained their lien rights. In some way, shape or form, this is what happened to you.

Regardless of what you and your husband did or did not do, let’s look for ways to defeat the lien claim, or at least make this claim your contractor’s problem, not yours. Pursuant to 770 ILCS 60/21(c), on owner occupied housing, the subcontractor must give 60 days’ notice to the homeowner from the first day labor is performed at the property:

“It shall be the duty of each subcontractor who has furnished, or is furnishing, labor, services, material, fixtures, apparatus or machinery, forms or form work for an existing owner-occupied single family residence, in order to preserve his lien, to notify the occupant either personally or by certified mail, return receipt requested, addressed to the occupant or his agent of the residence within 60 days from his first furnishing labor, services, material, fixtures, apparatus or machinery, forms or form work, that he is supplying labor, services, material, fixtures, apparatus or machinery, forms or form work provided.”

If you did not receive this notice, you can possibly defeat the lien claim. And, as the subcontractor did not have a contract with you, there is no contract claim. The subcontractor’s only claim is against the guy that hired him, your contractor. The exception to this rule is you must have been prejudiced by the subcontractor’s failure to provide the required notice. That is legal talk for … will paying the lien claim cause you to end up paying more for the project than the stated contract price. If yes, and the notice was not properly or timely served, you can likely defeat the lien claim.

If you were not furnished the sworn statement, you may have a claim against your contractor. If the contractor did provide a sworn statement but did not disclose this subcontractor, you may have a claim against your contractor. You may very well have other defenses to the claim available to you.

Mechanics lien law is complicated and the rules regarding mechanics liens must be strictly followed. I strongly suggest you contact an attorney familiar with this type of work as soon as possible.

• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to tom@thomasresnicklaw.com or call (847) 359-8983.