I’m a supplier of brick and wood materials. I provided materials to a general contractor who was building a new home in a suburban area. We agreed on a price and a quantity, and had a written contract.
But now the contractor isn’t paying me. He’s claiming that the homeowner never paid him, and so he doesn’t have the money to pay me or other suppliers of materials. What can I do to get what I'm owed?
This is a tough situation, and it is not uncommon in the construction industry. The owner pays the general contractor, often in large installments. The general contractor, in turn, pays subcontractors and suppliers from those payments.
As a material supplier, your contract is with a contractor (or sometimes a subcontractor). You may have never even met the owner or developer of the project, and your only knowledge of the project comes from the contractor who asked you to provide materials. In legal terms, you have no “privity of contract” with the owner, which makes it difficult to sue him.
However, you still do have a number of recourses if you are not paid.
First, you should send the general contractor a formal demand letter. This letter should state the amount of material the contractor ordered from you, the date you supplied the material, and the invoices you’ve sent to date. This letter creates a clear “paper trail” to show that you made diligent requests for payment. If your claim is small enough, perhaps the contractor will find a way to pay you, despite the fact that the owner has not paid in full.
Next, you should file what's called a mechanic’s lien. You will need to file this with the clerk of the county where the property is located. Its purpose is to secure the interests of an unpaid subcontractor or supplier, especially in a situation like this one where the owner has not paid the general contractor for the supplies.
Liens cost a nominal fee to file, and are subject to strict filing limitations. Thus, you should act fairly quickly to preserve your lien rights. Contact your county clerk’s office if you are unsure of the filing procedure. Expect a one-page form that can be filed without an attorney’s assistance.
Liens create a cloud on the homeowner's title, making it difficult for the person to sell or refinance the home. Thus, a lien might pressure the homeowner into paying the money that’s owed to you.
Third, you could simply sue the contractor. Notwithstanding the homeowner’s failure to pay the general contractor, he still breached his agreement to you. A lawsuit might put the necessary pressure on him to pay off your outstanding invoices.