If the contractor does not pay the subs out of the money paid to him, who is responsible for paying?

04/01/2009 - Category:Contractors - Construction Liens - State: NM #15834

Full Question:

I have paid my building contractor in full, If my building contractor does not pay the sub-contractors with the money I have given him, am I responsible to pay the sub-contractors? I have only a contract with building contractor, not the subs.

Answer:

Any subcontractor or supplier providing labor, materials or equipment to a construction project who does not have a contract directly with the original contractor must file a pre-lien notice providing a description of the property to be liened, the name, address and phone number of the claimant and the name and address of the person with whom the claimant contracted or to whom it furnished labor or materials. The pre-lien notice must be given within 60 days of initially furnishing work or materials to the project, or if given at a later date, it will only be effective to support a lien for work or materials furnished in the thirty days prior to providing the notice.

A pre-lien notice may, however, not be required under certain circumstances. A pre-lien notice is never required on residential projects containing four or fewer dwelling units. On residential construction projects subcontractors and suppliers still have 90 days from the substantial completion of the project to file a claim of lien, But the right to claim a lien is subject to discharge. On full payment by the owner to any person entitled to receive the payment the rights to claim a lien upon the property is discharged unless a claim of lien has already been filed. Therefore, if a contractor receives full payment from the owner, it cuts off lien rights of subcontractors who have not already filed a lien.

To prevent liens by subcontractors, the payment must be in full for the contract work. Partial payment of amounts owed, even if payment in full for the work for which the lien is asserted, will not discharge the lieu. Similarly, where notice is not given to the subcontractor or supplier pursuant to 48-2A-4, the lien may not be discharged.

The following are NM statutes:

48-2A-2. Purpose.
The legislature finds there are practices within the industry of constructing residential properties containing not more than four dwelling units resulting in certain financial inequities and, therefore, declares that the purpose of the Stop Notice Act is to: provide for timely payment by an original contractor to persons contracted with to furnish labor or materials incorporated or to be incorporated in residential construction; define stop notices and their legal usage; encourage construction lenders to assert reasonable supervision, monitoring and control of funds disbursed to the original contractor for the timely payment of labor or materials; restrain and bar diversion of funds for purposes not directly involved with construction of the residential site improvement; and provide for criminal penalties.
48-2A-4. Requirements for disclosure; owners and construction lenders.
A. In every instance where an original contractor proposes to contract with a subcontractor or materialman or both for any site improvement, the original contractor shall inform the subcontractor and materialman of:
(1) the name and address of the owner of the residential site;
(2) the name and address of the construction lender lending the funds, if any, and the loan officer who actually made the construction loan, if any, for the site improvement; and
(3) the accurate legal description of the residential site, if available, however in all cases a description of the residential site sufficient for identification.
B. Where a subcontractor contracts with another subcontractor for labor or a materialman to provide materials for any site improvement, he shall, upon request, inform the contractor or materialman of:
(1) the name and address of the owner of the residential site;
(2) the name and address of the construction lender lending the funds, if any, and the loan officer who actually made the construction loan, if any, for the site improvement; and
(3) the accurate legal description of the residential site.
48-2A-5. Stop notices; contents.

A stop notice shall not be effective unless:

A. it is signed and verified by the claimant or his agent, accompanied with a bond as provided for in Section 7 of the Stop Notice Act, is served pursuant to Section 6 of the Stop Notice Act and states in general terms all of the following:
(1) the name of the claimant;
(2) the date the claimant files the preliminary notice;
(3) the date the claimant presented his request for payment to the original contractors;
(4) the name of the owner and original contractor of the residential site;
(5) a description of the kind of labor or materials furnished, or agreed to be furnished, for the residential site;
(6) the name of the person who ordered the labor or who accepted the materials;
(7) the total cost of all the labor or materials to be furnished to the residential site;
(8) the cost of the labor furnished or materials already furnished;
(9) the balance of the money due; and
(10) a demand that the construction lender, if any, or the owner, if there is no construction lender, withhold a sufficient amount of money from the construction loan funds to satisfy the demand of the claimant;
B. a preliminary notice was given by the claimant, in accordance with Section 6 of the Stop Notice Act, within twenty days after the claimant first began to furnish work or materials to the residential site;
C. if the claimant does not deliver the preliminary notice within twenty days after the claimant first began to furnish work or material to the site improvement, he may still deliver a preliminary notice but he shall lose his stop notice rights for all work performed or materials furnished more than twenty days before the preliminary notice actually is given; and
D. it is delivered, pursuant to Section 6 of the Stop Notice Act, no earlier than twenty days or later than thirty days from the date the subcontractor or materialman presented his request for payment to the original contractor.
48-2A-11. Discharge; penalty.
A. Payment by the owner or his successor in interest to any person entitled to payment of all and any amounts due and owing for any labor or materials furnished or other actions the performance of which could give rise to a lien pursuant to Section 48-2-2 NMSA 1978 to be performed upon a residential site shall discharge all such liens unless prior to payment any person who is entitled to such lien has filed for record his lien pursuant to Section 48-2-6 NMSA 1978. For the purposes of this section, the original contractor shall not be the agent of the owner.
B. Any contractor or subcontractor justly indebted to a supplier of material or labor who accepts payment for construction described in Subsection A of this section and knowingly and intentionally applies the proceeds to a use other than paying those persons with whom he contracted is guilty of a fourth degree felony and shall be sentenced pursuant to the provisions of Section 31-18-15 NMSA 1978.
48-2A-12. Purchase closing; penalty.
A. The original contractor, upon accomplishing completion of construction and upon acceptance of final payment from the owner, his successor in interest or his agent, shall sign an affidavit that all invoices of charges and costs received by the original contractor and related to the residential site have been paid. In lieu of such an affidavit, at the time of accomplishing completion of construction and upon acceptance of final payment from the owner, his successor in interest or his agent, the original contractor shall sign an affidavit stating:
(1) the names and addresses of persons to whom he has paid in full those invoices of charges and costs arising from furnishing labor or materials incorporated in the residential site;
(2) the names and addresses of those subcontractors and materialmen who have presented to the contractor invoices of charges and costs of labor or materials incorporated or to be incorporated in the residential site which have not been paid, accompanied by a waiver of lien for the invoices properly signed by each subcontractor or materialman; and
(3) the names and addresses of those subcontractors and materialmen who have presented the contractor invoices of charges and costs of labor or materials incorporated or to be incorporated in the site improvement and which have not been paid and which have not been accompanied by a waiver of lien.
B. The approximate amount of money represented by the total unpaid invoices of charges and costs, and not accompanied by a signed waiver of lien, as provided in this section, may be withheld at the discretion of the owner, his successor in interest or his agent. This money shall be placed in an escrow account pending disbursement of the money upon the signed approval of the contractor.
C. Any contractor who knowingly and intentionally signs an affidavit stating that all charges and costs arising from the furnishing of labor or materials for incorporation in the residential site have been paid when in fact all charges and costs have not been paid, or knowingly and intentionally fails to provide the names of persons who have presented invoices for costs and charges for labor or materials but who have not been paid for their labor or materials furnished as provided in this section, is guilty of a fourth degree felony and shall be sentenced pursuant to the provisions of Section 31-18-15 NMSA 1978.
48-2-12. Contractor liable for liens of subcontractors.
The contractor shall be entitled to recover upon a lien filed by the contractor only such amount as may be due to the contractor according to the terms of the contract, after deducting all claims of subcontractors under the contractor who have filed liens for work done and materials furnished, and during the pendency of the action, the owner may withhold from the contractor the amount of money for which the lien is filed unless the lien was asserted as a result of the owner's failure to pay the contractor for work done and materials furnished, and in case of judgment against the owner or the owner's property upon the lien, the owner shall be entitled to deduct from any amount due or to become due by the owner to the contractor the amount of the judgment. If the amount of the judgment exceeds the amount due by the owner to the contractor, or if the owner settles with the contractor in full, the owner shall be entitled to recover back from the contractor any amount paid by the owner, in excess of the contract price, and for which the contractor was originally the party liable.
48-2-13.

In every case in which different liens are asserted against any property, the court in the judgment must declare the rank of each lien, or class of liens, which shall be in the following order, viz:

A. all persons other than the original contractors and subcontractor;
B. the subcontractors;
C. the original contractors.

And the proceeds of the sale of the property must be applied to each lien, or class of liens, in the order of its rank, and whenever, on the sale of the property subject to the lien, there is a deficiency of proceeds, judgment may be docketed for the deficiency in like manner, and with like effect as in actions for the foreclosure of mortgages.

48-2-2.1. Procedure for perfecting certain mechanics' and material-men's liens.
A. The provisions of Subsections B through D of this section do not apply to claims of liens made on residential property containing four or fewer dwelling units, to claims of liens made by an original contractor or to claims of liens made by mechanics or materialmen who contract directly with the original contractor. For purposes of this section, "original contractor" means a contractor that contracts directly with the owner.
B. No lien of a mechanic or a materialman claimed in an amount of more than five thousand dollars ($5,000) may be enforced by action or otherwise unless the lien claimant has given notice in writing of the claimant's right to claim a lien in the event of nonpayment and that notice was given not more than sixty days after initially furnishing work or materials, or both, by either certified mail, return receipt requested, facsimile with acknowledgement or personal delivery to:
(1) the owner or reputed owner of the property upon which the improvements are being constructed; or
(2) the original contractor, if any.
C. If the owner or the original contractor claims lack of notice as a defense to the enforcement of a lien described in Subsection B of this section, the owner or contractor shall show that upon the request of the mechanic or materialman that the owner or contractor furnished to the lien claimant not more than five days after such request was made:
(1) the original contractor's name, address and license number, if there is an original contractor on the project;
(2) the owner's name and address;
(3) a description of the property or a description sufficiently specific for actual identification of the property; and
(4) the name and address of any bonding company or other surety that is providing either a payment or performance bond for the project.
D. The notice required to be given by the claimant pursuant to the provisions of Subsection B of this section shall contain:
(1) a description of the property or a description sufficiently specific for actual identification of the property;
(2) the name, address and phone number, if any, of the claimant; and
(3) the name and address of the person with whom the claimant contracted or to whom the claimant furnished labor or materials, or both.
E. A person required by the provisions of Subsection B of this section to give notice to enforce the person's claim of lien may elect not to give the notice, but may give the required notice at a later time. If the person elects to do so, the lien shall apply only to the work performed or materials furnished on or after the date thirty days prior to the date the notice was given. The provisions of Subsections C and D of this section apply to any notice given under this subsection.
48-2-6. Time for filing lien claim; contents.
Every original contractor, within one hundred and twenty days after the completion of his contract, and every person, except the original contractor, desiring to claim a lien pursuant to Sections 48-2-1 through 48-2-19 NMSA 1978, must, within ninety days after the completion of any building, improvement or structure, or after the completion of the alteration or repair thereof, or the performance of any labor in a mining claim, file for record with the county clerk of the county in which such property or some part thereof is situated, a claim containing a statement of his demands, after deducting all just credits and offsets. The claim shall state the name of the owner or reputed owner, if known, and also the name of the person by whom he was employed, or to whom he furnished the materials, and shall include a statement of the terms, time given and the conditions of the contract, and also a description of the property to be charged with the lien, sufficient for identification. The claim must be verified by the oath of himself or of some other person.


Please see the information at the following links:

http://definitions.uslegal.com/m/mechanics-lien/
http://definitions.uslegal.com/p/priority/
http://lawdigest.uslegal.com/contractors/construction-liens/3844/

Please see the forms at the following links:

http://www.uslegalforms.com/us/US-01740.htm
http://www.uslegalforms.com/us/US-00468-A.htm
http://www.uslegalforms.com/constructionliens/new-mexico-mechanic-lien-forms.htm

04/01/2009 - Category: Construction Liens - State: NM #15834

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