Wolf, Baldwin & Associates, P.C. , on problems non-payment creates and lack of remedies
“Anyone who has ever done any amount of work as a construction contractor or subcontractor or represented them in collections cases has learned from hard experience that it can be all but impossible to get paid for one’s work. If an owner disputes any details of the work, the contractor may go months or more without any source of revenue to cover the contractor’s outlays for labor and materials. Further down the food chain, if a contractor is using its revenue from one job to pay bills on another, as is often the case, a sub who has helped the contractor complete a job may suddenly find that the money has disappeared while the contractor has moved on to bigger and better jobs. For a contractor or sub without significant cash reserves, not being paid on a large job can lead to paying bills on one job out of advances from the next. Going unpaid on a second or third job then can stretch resources to the breaking point, resulting in a contractor’s undoing.
Historically, unpaid contractors and subs have found some recourse in ….. Mechanics’ Lien Law, which allows for a quick pre-judgment lien to prevent the improved property from being sold out from under the unpaid party. However, even if the contractor or sub is able to meet the short deadlines of the Mechanics’ Lien Law, most developers now require contractors and subs to sign mechanic’s lien waivers before they are permitted to start work. As a result, the mechanics’ lien is an increasingly unavailable remedy.”