Who Is Responsible for Paying for Unpaid Materials on a Construction Job?

Full Question:

The Owner pays the contractor. The contractor pays the sub contractor, Gets a wavier from the sub. The sub contractor does not pay the material man who has a NTO. The Material man files a lien, who has to pay this lien off? The owner or the contractor who has paid the the Subcontractor in full?
07/30/2011   |   Category: Contractors ยป Construction...   |   State: Florida   |   #25256

Answer:

If the contractor is entitled to receive his final payment, the contractor must give the owner a Contractor's AFFIDAVIT before any lien can be effective. A Contractor's Affidavit must state that all subcontractors, sub-subcontractors, and material suppliers have been paid. If all subcontractors have not been paid, the Contractor's Affidavit must list those who remain unpaid and the amounts due. If the final payment is due, the contractor has no lien rights until the Contractor's Affidavit is given to the owner.
If the direct contract for the entire job between the owner and the contractor is less than $2,500, subcontractors and suppliers who do not have a direct contract with the owner have no lien rights on the job. Only the contractor (the person with a direct contract with the owner) can file a lien on jobs of less than $2,500. Design professionals may file liens, and lien rights may exist even when the design was not used.

Please see the following FL statutes to determine applicability:

713.14 Application of money to materials account.—(1) Any owner, contractor, subcontractor, or sub-subcontractor, in making any payment under, or properly applicable to, any contract to one with whom she or he has a running account, or with whom she or he has more than one contract, or to whom she or he is otherwise indebted, shall designate the contract under which the payment is made or the items of account to which it is to be applied. If she or he shall fail to do so or shall make a false designation, she or he shall be liable to anyone suffering a loss in consequence for the amount of the loss.
(2) When a payment for materials is made to a subcontractor, sub-subcontractor, or materialman, the subcontractor, sub-subcontractor, or materialman shall demand of the person making the payment a designation of the account and the items of account to which the payment is to apply. In any case in which a lien is claimed for materials furnished by a subcontractor, sub-subcontractor, or materialman, it is a defense to the claim, to the extent of the payment made, to prove that a payment made by the owner to the contractor for the materials has been paid over to the subcontractor, sub-subcontractor, or materialman, and to prove also that when such payment was received by such subcontractor, sub-subcontractor, or materialman she or he did not demand a designation of the account and of the items of account to which the payment was to be applied or, receiving a designation of its application to the account for the materials, she or he failed to apply the payment in accordance therewith. This subsection is cumulative to any other defenses available to the person paying the materialman, subcontractor, or sub-subcontractor.

713.346 Payment on construction contracts.—(1) Any person who receives a payment for constructing or altering permanent improvements to real property shall pay, in accordance with the contract terms, the undisputed contract obligations for labor, services, or materials provided on account of such improvements.
(2) The failure to pay any undisputed obligations for such labor, services, or materials within 30 days after the date the labor, services, or materials were furnished and payment for such labor, services, or materials became due, or within 30 days after the date payment for such labor, services, or materials is received, whichever last occurs, shall entitle any person providing such labor, services, or materials to the procedures specified in subsection (3) and the remedies provided in subsection (4).
(3) Any person providing labor, services, or materials for improvements to real property may file a verified complaint alleging:
(a) The existence of a contract, as defined in s. 713.01, to improve real property.
(b) A description of the labor, services, or materials provided and alleging that the labor, services, or materials were provided in accordance with the contract.
(c) The amount of the contract price.
(d) The amount, if any, paid pursuant to the contract.
(e) The amount that remains unpaid pursuant to the contract, and the amount thereof that is undisputed.
(f) That the undisputed amount has remained due and payable pursuant to the contract for more than 30 days after the date the labor or services were accepted or the materials were received.
(g) That the person against whom the complaint was filed has received payment on account of the labor, services, or materials described in the complaint more than 30 days prior to the date the complaint was filed.
(4) After service of the complaint, the court shall conduct an evidentiary hearing on the complaint, upon not less than 15 days’ written notice. The person providing labor, services, or materials is entitled to the following remedies to the extent of the undisputed amount due for labor or services performed or materials supplied, and upon proof of each allegation in the complaint:
(a) An accounting of the use of any such payment from the person who received such payment.
(b) A temporary injunction against the person who received the payment, subject to the bond requirements specified in the Florida Rules of Civil Procedure.
(c) Prejudgment attachment against the person who received the payment, in accordance with each of the requirements of chapter 76.
(d) Such other legal or equitable remedies as may be appropriate in accordance with the requirements of the law.
(5) The remedies specified in subsection (4) must be granted without regard to any other remedy at law and without regard to whether or not irreparable damage has occurred or will occur.
(6) The remedies specified in subsection (4) do not apply:
(a) To the extent of a bona fide dispute regarding any portion of the contract price.
(b) In the event the plaintiff has committed a material breach of the contract which would relieve the defendant from the obligations under the contract.
(7) The prevailing party in any proceeding under this section is entitled to recover costs, including a reasonable attorney’s fee, at trial and on appeal.

 713.17Materials not attachable for debts of purchaser.—Whenever materials have been furnished to improve real property and payment therefor has not been made or waived, such materials shall not be subject to attachment, execution, or other legal process to enforce any debt due by the purchaser of such materials, except a debt due for the purchase price thereof, so long as in good faith the same are about to be applied to improve the real property; but if the owner has made payment for materials furnished and the materialman has not received payment therefor, such materials shall not be subject to attachment, execution, or other legal process to enforce the debt due for the purchase price.