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How can I ensure that the contractors will pay the subcontractors to avoid construction liens?

How can I ensure that the contractors will pay the subcontractors to avoid construction liens?

Q: What are the exclusions in a GL policy?

General liability (GL) policies typically exclude coverage for intentional acts, contractual liabilities, professional errors, and damages from certain types of work, such as construction defects. Each policy can vary, so it’s crucial to review the specific exclusions listed in your policy to understand what is not covered.

Q: Does general contractor insurance cover subcontractors?

General contractor insurance does not automatically cover subcontractors. Each subcontractor should have their own insurance to protect against risks associated with their work. It's important for contractors to verify that subcontractors have adequate coverage to avoid potential liability issues.

Full question:

I signed a contract with general contractor to do repairs on my house for the amount that the insurance company pays. I'm dealing with all different subcontractors. I'm told that I'll get a detailed written invoice at the end of construction. How do I know that if they dont pay their contractors that they won't put a lien on my house. I dont have a contract that protects me and dont know what I need.

Category: Contractors
Subcategory: Construction Liens
Date: 04/07/2025
State: Texas

Answer:

In Texas, any person who furnishes labor or materials for the construction of improvements on real property shall, if requested and as a condition of payment for such labor or materials, provide to the requesting party, or the party's agent, an affidavit stating that the person has paid each of the person's subcontractors, laborers, or materialmen in full for all labor and materials provided to the person for the construction. In the event, however, that the person has not paid each of the person's subcontractors, laborers, or materialmen in full, the person shall state in the affidavit the amount owed and the name and, if known, the address and telephone number of each subcontractor, laborer, or materialman to whom the payment is owed.

One way for an owner to protect against liens in to file an affidavit of completion. This will start the clock running on the timeline for liens to be filed. An owner may file with the county clerk of the county in which the property is located an affidavit of completion. The affidavit must contain:

(1) the name and address of the owner;

(2) the name and address of the original contractor;

(3) a description, legally sufficient for identification, of the real property on which the improvements are located;

(4) a description of the improvements furnished under the original contract;

(5) a statement that the improvements under the original contract have been completed and the date of completion; and

(6) a conspicuous statement that a claimant may not have a lien on retained funds unless the claimant files the affidavit claiming a lien not later than the 30th day after the date of completion.

It is recommended to have the terms of the contract in writing to avoid future disputes. A lien waiver may also be requested as a condition of partial or full payment. A lien waiver protects against mechanics' liens being filed against the property.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

Who pays for mistakes in a cost plus contract?

In a cost plus contract, the homeowner typically pays for the actual costs of materials and labor, plus an agreed-upon fee for the contractor's overhead and profit. If mistakes occur, the contractor may be responsible for correcting them at their own expense, depending on the contract terms. It's essential to have clear terms in the contract regarding responsibilities for errors to avoid disputes.

Does contractor insurance cover subcontractors?

Contractor insurance generally covers the contractor and their employees. However, it may not automatically cover subcontractors unless specifically stated in the policy. Subcontractors should carry their own insurance to ensure they are protected while working on a project. Always check the insurance policy details for coverage specifics.

What are the exclusions in a GL policy?

What voids a contractor contract?

A contractor contract can be voided for several reasons, including fraud, misrepresentation, lack of capacity, or if the contract is for an illegal purpose. Additionally, if either party fails to meet the terms of the contract, it may be considered voidable. Always consult a legal professional if you suspect a contract may be void.

Does general contractor insurance cover subcontractors?

What is the contractor and subcontractor payment act?

The Contractor and Subcontractor Payment Act is a law that ensures timely payments to contractors and subcontractors for work performed. It establishes procedures for making payments, including the requirement for written notices of payment and the right to file a lien if payments are not made. Specific provisions can vary by state, so it's important to consult local laws for details.