What Can I Do if my Contractor Doesn't pay the Subcontractors?

Full Question:

We bougt a house in Gainsville GA, while living in FL. We hired a General Contractor to do the work, totalling approx. $70,000. Our realtor recomended him and we saw his work in 2 hmes, includig our realtors.The work was to be completed Sept. 10,2010. When we arrived the work was not done. We found out that the Gen.Contractor had used out monies to complete another job. The work is done now, except the hardwood floors have to be replaced at a cost of approx. $5000 (+ or -) and we are owed approx another $4000 for work that was completed and not paid by the Gen Cont.- mainly wages of 2 of the subs. There is also a lien on our home by the cement contractor that wasn't paid. Most of the sub- contractors that worked on our home were not paid- ie the kitchen cabinets. The only contracot paid was the flooring that has to be redone because of poor workmanship. The Gen. Cont. says he will pay, but is so far behind on all payments that it will be too long- if ever until he pays. He has caused us extreme hardship because of the situation. I had serious spinal surgery before I arrived in GA. Is small claims court the way to go after the monies owed?
02/06/2011   |   Category: Contractors ยป Construction...   |   State: Georgia   |   #24161

Answer:

Where to file will depend on where the accident occurred, where the defendant resides or conducts business, and the dollar amount of the claim. Venue is typically proper where the defendant resides, conducts business, where a contract is formed, where an accident occurs, or where the contract provides for the case to be brought. Typically, a defendant needs to have minimum contacts with the forum to pass due process requirements for being served with a complaint. Due process requires it to be reasonably foreseeable that a person would be called to defend in that court. Yes, it is possible you may have a breach of contract claim against the contractor. We suggest you contact the clerk of courts at the local small claims court to inquire what the monetary limit of their jurisdiction is.

A claim for lien may not exceed the contract price of the improvements made or services performed. A lien is the right to retain the lawful possession of the property of another until the owner fulfills a legal duty to the person holding the property, such as the payment of lawful charges for work done on the property. The right of lien generally arises by operation of law, but in some cases it is created by express contract. Liens that arise in construction situations include construction liens, contractor liens, mechanic liens, attorney liens, architect liens and other liens applicable in your state. By virtue of express statutes in most states, mechanics and material men or persons who furnish materials for the erection of houses or other buildings, are entitled to a lien or preference in the payment of debts out of the houses and buildings so erected and to the land, to a greater or lessor extent, on which they are erected. It is used to enforce payment in order to clear the title to the property, because property with a lien on it cannot be easily sold until the lien is satisfied (paid off). In some states, a claim must be filed in the office of the clerk of the court or a suit brought within a limited time. On the sale of the building these liens are to be paid pro rata. In some states no lien is created unless the work done or the goods furnished amount to a certain specified sum, while in others there is no limit to the amount.

In Georgia, the lien must be filed within three (3) months of the last time the person or entity claiming the lien worked on the property or within three (3) months of the last time materials were delivered to or installed upon the property. OCGA Section 44-14-361.1(a)(2).

Near the end of the project, the general contractor may be required to give the owner a special affidavit which states that all subcontractors and suppliers have been paid. The owner is entitled to rely on this document. If there is a statement that all such persons have been paid, then you might be precluded from recording your mechanic’s lien because the owner had a right to rely on that statement. However, if you have sent out your Preliminary Notice of Lien, this alerts the owner to your presence, and it would have to make sure that you were paid before relying upon in that general contractor’s affidavit. If the owner or general properly files a Notice of Commencement, sub-subcontractors and suppliers to subcontractors are required to give a Notice to Contractor.

The owner can cut off potential lien rights by getting the general contractor to fill out a sworn statement by affidavit that all labor, services, and material have been paid for and there are no outstanding claims. However, if you have filed either your mechanic’s lien or preliminary notice, you are protected (especially if such an affidavit is incorrect). That is one of the reasons for filing the Preliminary Notice of Lien Rights.

Please see the contact information at the following link:

http://sos.georgia.gov/plb/contractors/default.htm