How to Protect Oneself from a Mechanic's Lien?

minimonster17

Well-known member
Jul 22, 2013
84
Hey, all. I've continued my research into building my future pool, and I have read of some bad experiences some homeowners have had with pool builders, and their subcontractors. Namely, homeowner paying pool builder, pool builder not paying subcontractor, and subcontractor filing mechanic's lien against homeowner's property.

I have learned of the importance of subs signing lien release forms... Where do I get those with the proper verbage? What do I need to insist to be in my contract with the poolbuilder to protect myself? What other things do I need to take into consideration?

I realize that in many of these instances, the laws vary from state to state... I am located in FL, and looking for information that particularly pertains to here. Can anyone on here that has had a pool built in FL please comment?

I would also like to hear from anyone else in other states as well. Again, I am aware that this stuff is not universally applicable, but I would like to hear general safeguards to protect myself from anyone that would care to contribute. Thanks in advance.
 

gwegan

TFP Expert
Apr 19, 2013
2,769
Sacramento, CA
I'm in California, so much of this may not apply.

1. Hire a integrated pool builder whose own crews do all the work ( except gunite and flat concrete). Your chance of a problem diminishes astronomically. From a mech lien standpoint, this is the one thing that reduces risk the most but you pay for it in other ways. Historically, these are the survivors, which is where you want to be.

2. Have PB give you a list of suppliers and subs before you start.

3. Keep a daily job log listing what trades and subs were on the job each day, what work they did, material delivered and problems. Do not allow rented equipment to be stored on your site. It should br removed each night. Try to avoid rented equipment.

4. Have pool builder provide a payment package containing lien releases and acknowlegement of payment, from all subs and material suppliers in a phase for their phase work with the invoice for the phase. Final payment should not be due until five days after the end of the lien filing period. These requirements should be in the contract. Before making the final payment, either have a title company give you a title endorsemet you are lien free ( expensive) or go to the county recorder and run your own basterdized title search.

5. Your PB should have sufficient capital to pay suppliers and subs prior to your payment being due. If he is not, walk away. Ask him if he is sufficiently capitalized. You deposit should be zero or 10 percent no more, and your final payment should be at least 10 percent if not more. Try to back load the contract but 10 percent on either end is fair in the pool business.

I hired a large integrated builder and didn't worry about most of this except final payment requirements. hire an established well capitalized PB and don' t worry about most of this.

California forms are set out in the statue so you can use the forms the PB supplies. Stationary store forms are junk, and don't trust an Internet form unless a lawyer has said its ok. Title company's are good sources.

The above is cocktail party talk, it's not legal advice.
 

jv92red

LifeTime Supporter
Mar 7, 2013
117
SoCal
This is another reason why checking references is important for a future new build. Asking past customers of this PB will give you first hand experience as it relates to this specific PB and on how the PB handled this for them. Ask them about the payment schedule and forthcoming the lien releases were from the scheduled tasks being completed by the subs.

On my build our PB did most of the build (they sub'd out the dig, steel & shotcrete and did everything else themselves.) After the sub'd out stages were done I asked my PB lien releases and got 3 separate releases signed by each sub. I still had half the build left with the PB so more scheduled payments due so I had leverage if I didn't get the lien releases when I asked for them. Supplying lien releases was written into my contract but my builder wasn't proactive in telling me he was working on getting them to me right after the sub'd out stages were completed. I had to ask him for them and then after I asked he said it would be no problem. Got them a few days later.
 

AZHeat

Active member
Feb 7, 2013
42
Just do an internet search for lien release. There are plenty of examples. Look for one specific to your location.
 

minimonster17

Well-known member
Jul 22, 2013
84
The guy that I am going to go with when I am ready is a very experienced, established and reputable local builder. He has been in the area since the mid seventies, and has not had a single complaint filed against him with the BBB.

He does most of the work in-house, including the excavation, gunite, plaster, decking/coping, etc. The one major portion of the job he outsources for is the screen enclosure. At $9100, it is a major part of the pool project investment.

That all being said, I still want to be sure I know what to stipulate within the contract to protect myself to the fullest extant possible.

I know my guy has his own equipment, but why the hesitance towards rented equipment? Does the rental bill that accumulates get pretty high? Or is it that indicates a sign of a questionable builder? Or both?

Any/all comments welcome.
 

gwegan

TFP Expert
Apr 19, 2013
2,769
Sacramento, CA
My point number 4 in my post above is what should go in the contract. Technically they are not lien releases they are lien waivers or partial lien waivers. Those are the requirements for payment in most construction loans.

If you have an integrated builder then only he has a right to record liens and you don't have to worry about unpaid subs.

Rental equipment:

1. If its on your job then the rental company will lien your property for the unpaid bill even though it was just sitting there for a week doing nothing. Make sure it leaves every night.

2. Excavators and backhoes are comparatively cheap and renting over the long haul eats profits. If you PB doesn't have his own equipment then he is very very new, expanding rapidly or going broke. None of the three are very good.

Remember you need a PB who is financially strong enough to pay the subs and his crews even if you or some other customer doesn't pay because of a dispute or some other reason. It doesn't matter how long he has been around or if he builds great pools, it is whether he is currently in good financial condition.

Finally, forms off the internet are great. But not here, laws vary from state to state and change all the time. Last year all of California's forms for creating a Mech Lien changed and some contractors (who should know better ) are still using the wrong forms. This is the title to your house. Your contractor should have the correct forms. or get them from a title company.

Finally for everyone -- I am talking about ways to avoid liens -- but if a lien is recorded against your house you need to talk to a real estate lawyer now.
 

sd_dave

LifeTime Supporter
Jul 2, 2013
61
San Diego, CA
Here in CA there are two types of lien releases that should be signed by your pool contractor (and all his subcontractors) before providing any progress payments. The first is a "Conditional waiver and release upon progress payment" for progress payments. The second is a "Unconditional waiver and release upon progress payment" which should be filled out and signed prior to the final payment.

Here is some sample text to give you an idea what the wording should be: - Unconditional form shown below (NOT LEGAL ADVICE)

THE UNDERSIGNED has been paid and has received a progress payment in the sum of $_______________________ for labor, services, equipment or material furnished to [CUSTOMER NAME] on the job of [JOB NAME] located at [PROJECT ADDRESS] and does hereby release any mechanic’s lien, stop notice or bond right that the undersigned has on the above referenced job to the following extent.
THIS RELEASE covers a progress payment for labor, services, equipment or materials furnished to [CUSTOMER NAME] through _____________ only and does not cover any retentions retained before or after the release date; extras furnished before the release date for which payment has not been received; extras or items furnished after the release date. Rights based upon work performed or items furnished under a written change order which has been fully executed by the parties prior to the release date are covered by this release unless specifically reserved by the claimant in this release. This release of any mechanic’s lien, stop notice, or bond right shall not otherwise affect the contract rights, including rights between parties to the contract based upon a rescission, abandonment, or breach of the contract, or the right of the undersigned to recover compensation for furnished labor, services, equipment, or material covered by this release if that furnished labor, services, equipment, or materials was not compensated by the progress payment..

EXECUTED on this day of _____________, 20____.

Subcontractor _________________________

By __________________________ __________________________________
Signature Title

NOTE: This document waives rights unconditionally and states that you have been paid for giving up those rights. This document is enforceable against you if you sign it, even if you have not been paid. If you have not been paid, use conditional release form.
NOTE: This form is to be used to the extent that a progress payment has actually been received by the releasing party.

--

You also need to have a page to have all the subcontractors sign off which should look something like this:

THE UNDERSIGNED HAVE PERFORMED LABOR FOR WAGES ON THE PROJECT DESCRIBED ABOVE AND HAVE BEEN PAID IN FULL TO DATE

__________________________________________ _ ________________________________
Signature of Individual Performing Labor for Wages Date

__________________________________________ _ ________________________________
Signature of Individual Performing Labor for Wages Date
 

sd_dave

LifeTime Supporter
Jul 2, 2013
61
San Diego, CA
A good resource for more information in your area would be to contact the State Contractor Licensing Board for assistance (http://www.cslb.ca.gov in California). They should be able to tell you if your contractor and subcontractors A) Have a license B) Have proper bond and insurance C) How long they have had their license and if any complaints against their license exist/are outstanding
 

jv92red

LifeTime Supporter
Mar 7, 2013
117
SoCal
Always a good idea to check business licenses and insurance before even speaking with a builder. In CA you can type in their license # on that site and find out if the license is current along with business license type and insurance coverages (bond amount and workers comp) with history:
https://www2.cslb.ca.gov/OnlineServices/CheckLicenseII/CheckLicense.aspx

Before I called PB for quotes I checked the PB's websites and obtained their license #'s to check before contacting them. Most PB's will list their license # on their website.
 

HouTex

LifeTime Supporter
Mar 7, 2011
413
Houston, Texas
Good thread. This can be a real problem. My PB didn't finish my pool and he was in to me for about $12k plus he didn't pay two subs. I ended up hiring the electrician--at a bit of a premium--because he could have filed a lien, but the plumber got screwed and never filed a lien on my home. The Texas lien statutes are fairly complex (assuming the pool is built on a homestead), but the homeowner should be protected if he/she withholds the statutory retainage (10% of the contract price) for 30 days after the conclusion of the job. There's a host of hoops a sub must go through in Texas to obtain and enforce its lien.
 

minimonster17

Well-known member
Jul 22, 2013
84
I REALLY appreciate all the posts, everyone. I failed to ask my builder how financially stable he is. I just assumed that because he's been in business a long time, and performs good work, without complaints to the BBB that he was ok. I will ask him about his stability in my next meeting with him.

I believe he owns all of his own equipment, as well as producing most of his own work, with the screen enclosure construction being the main exception. (Hence, I still have a need of worrying about a sub.)

On another note, I was shocked that when I performed a thread search on here that I did not find a direct thread on the aspects of protecting oneself from mechanic's liens during a pool build. I mostly found references to doing so in posts, and the negative consequences some members have faced from not doing so in posts.

The contributions made by the members in this thread really enlightened me on the intricacies of this aspect of pool construction. Again, I really appreciate the time you guys spent typing the posts you did to answer my question. Thank you!
 

jv92red

LifeTime Supporter
Mar 7, 2013
117
SoCal
I'm not sure asking a contractor who is trying to earn your business how financially stable they are is going to get you a straight answer. I highly doubt that they would give you any idea if they weren't in good shape that indeed they are having problems and to stay away from them. Both good contractors who are financially stable AND contractors who are going out of business will tell you they are financially sound, it's up to you to dig more to find out as much as possible.

Checking licenses with the state, asking for referrals from people you know or trust, checking references of jobs recently completed by the PB your thinking about going forward with along with checking online reviews (yelp, Angie's list ect...) I'm not sure what else you can do to make sure your on board with a competent builder.
 

minimonster17

Well-known member
Jul 22, 2013
84
I had failed to mention that he gave me a copy of his building license with the other pool literature he gave me. He also mentioned having built for clientele such as doctor's, judges, etc, and is willing to put me in touch with them, and other recent customers of his so I can view the work, ask questions, etc.

I just reread what I wrote earlier, and that one portion about asking him about financial stability didn't make too much sense, lol. I've been up too long today. Thanks again for the advice.
 

grottoguy

LifeTime Supporter
Aug 24, 2014
458
NJ
How about asking each sub to sign a document (prior to giving the pool builder the job) relinquishing their statutory right to file a lien on your property. In other words you would be asking them to agree to look solely to the PB for payment. If they have been dealing with the PB for a long time I suspect they will sign it. They may ask for a provision permitting them to file a lien in certain cases (for example if you fail to pay the PB in bad faith).