Retain a local construction law attorney, now. You need competent legal advice from an attorney in your jurisdiction.

I agree, retain a attorney NOW! When we built our house we made the contractor/or sub give us paid in full receipts for all material brought on the property. We also had lien release documents they had to sign. We photocopied the receipts and gave back the original. Nothing came on the property unless it had proof of payment in full.

I think you should have a conversation with the GC.

Explain your concern and say that you would like to pay the sub directly. You should also ask about getting lien waivers from all the other subs.

If you have a calm and well thought out conversation about this know with the GC maybe you can come to a satisfactory way to pay the subs directly, keep the job on schedule and help the contractor keep his financial footing.( Just as long as it does not hurt you financially).

If he responds in an honest and upfront way you may be better off than the having him walk off the job or have to go to court.

"Explain your concern and say that you would like to pay the sub directly."

Not without a lawyers advice. Blindly paying subs directly when you have a GC is not a good idea. You have no way of knowing what liabilities you may be taking on, or what liabilities or responsibilities you may be relieving the GC of.

Thanks for the input.

We retained excellent counsel a few months ago (we should have done this much earlier in the process). He recommends escalating. However, my concern is that the whole project will be delayed even more if we "lawyer up." I am a litigation attorney and very comfortable dropping the hammer, in fact, given our relationship with the GC, I would love to do so. However, from experience, I also recognize that a party can win a battle and lose the war.

I want the house delivered and property free and clear of liens. Quite frankly, the debt owed by the GC to the excavator sub is beyond the scope of my relationship with the GC; there is no privity of contract (as far as I can tell) b/c no notices of lien were filed by the sub. I'm concerned about payment to the excavator, but I'm much more concerned about having this GC genius deliver my house.

Also, we haven't mentioned to our GC that we know he is behind. Not sure how to broach this, or whether it's important for him to know that we know if we decide to proceed w/o holdbacks etc.

(He's probably reading this right now . . .).

Thanks!

That is why, I suggested a coverstaion first.

I am in the industry and many GC's are trading water. We actually are getting a lot of work from those defaulting on their bids.

Some times working with the GC in a way that keeps the job running is the best solution for the homeowner. It can't hurt to take that step before escalating the legal fees.

ditto what jmagill said......does the GC KNOW you are a lawyer?

I sure feel for you...what an awful situation. I know every state is different, but in Florida a sub can put a lien against a home despite the fact the GC was supposed to have paid them with funds given by the homeowner. At any rate, this particular builder is not trustworthy nor ethical, and if it were me that relationship would end in a hurry.

I'm betting you can find good subs on your own by asking around. We have found excellent people to help with building our new house (we tested them out on our barn). After our last experience hiring a builder, we will NOT be hiring one again...ever. However, we know how the home building process is supposed to proceed from building a home on our own several years ago and have no reservations doing so. Ours is self financed as well.

Good luck. I hope this works out for you with a minimal amount of fuss. I really feel sorry for that poor sub. He most likely has a family to feed and needs his money.

Thanks again for the input.

We spoke with the GC. He said the check for partial payment is in the mail to the sub (he literally said that). He said that subs often try to contact owners for payment and that this sub has not finished excavating, so essentially he's holding back payment.

Basically, he said not to worry about it and let him deal with the subs. Sounds fairly ridiculous to me, but if we get in a fight, I have a feeling construction will stop.

I think we're going to pay this draw and regroup. He knows I am an attorney.

Sounds like you are giving yourself some time to carefully think things over, which is the right thing to do. My gut is telling me this contractor is not on the up and up and shouldn't be trusted. When phone calls aren't being returned to someone, well, something isn't right. I sure wouldn't trust him enough to "let him worry about the subs". Even if you do end up in a fight, your house will still get built, by someone.

Have you physically checked out the excavating job?

check in the mail...LOL!
also check to make sure than materials are paid for
so that building supply doesn't place a lien against your
home.
best of luck.

The Three Great Lies

Number one "Of course I'll respect you in the morning."

Number two "The check is in the mail."

My favorite of the three big lies was "I'm from the government, and I'm here to help you."

We got this same type of cr-- from our builder before we finally wound up firing him and taking over the build ourselves. There were numerous instances of unpaid subs who filed or threatened to file liens against our property. We also learned that several prior clients of our builder had gotten hit with some pretty substantial liens after closing with the builder. In every case, the previous clients decided it would be cheaper to pay off the liens themselves rather than take the builder to court. So, the lesson the builder apparently took away was "I can get away with not paying subs as long as the amount isn't too much and I can keep the homeowner from learning about it until after I close with him."

As an attorney you probably already know that in most jurisdictions anyone who provides materials or labor for the improvement of real property can file a lien against that property if they are not paid. No privity of contract with the owner of the property is necesssary. The biggest differences among jurisdictions tends to be the time limits that apply regarding when the M&M liens can be filed and what proofs, if any, the lienholder has to provide regarding the alleged debt.

If your builder's payment to the excavation sub is only a couple of weeks overdue, I rather doubt the time limits to file a lien will have run out in any jurisdiction. The shortest time limits I've ever heard of are something like 30 days. Most are 60 to 90 days and some jurisdictions allow subs up to a year after their bills are due (which could easily be 60 days after the work is actually done). So, even if the sub has not yet filed a lien against your property, he may yet do so. Then, if your builder doesn't pay him, you could get stuck with the bill.
Without lien waivers from every sub and materialman, you have no protection. And, unless you are on site every day taking careful note of who is working on your house and what suppliers are delivering materials to your job site, you can't ever really know that you have lien releases from everyone.

Still, your builder should only be paid for work that has been completed and for which he has provided you with valid lien releases from the subcontractors.

Our problem was that our builder turned out to be totally dishonest and, when we demanded lien releases, he began giving us bogus ones (i.e., documents he had signed himself or had one of his non-English speaking day laborers sign!) so even tho we tried to follow the rules to protect ourselves, we got burned anyway.

If you feel your builder is basically honest but just doesn't have the money to pay the subs until he gets a draw from you, consider insisting that he agree to a modification of your agreement with him whereby you effectively become his "money manager" in so far as your build is concerned.

Instead of writing checks to your builder and then trusting him to pay the subs who worked on your house, modify your agreement so that your checks are made out to both the builder AND whichever sub/supplier needs to be paid so that both parties have to sign the check in order for it to be cashed. If you were financing thru a bank you would first have to get your bank to agree to an unlimited number of draws - but since you are self-financing, the number of checks you have to write shouldn't matter. You could also agree that you will then make out a check for an additional 5% to 10% to your builder to pay him a share of his profit as he goes along. I wouldn't agree to more than 10% even if your builder claims his profit margin is more than that. In fact, I wouldn't agree to pay more than about half of whatever percentage I thought his profit margin was supposed to be. At the end of the build, when the house is done and every body else is paid, whatever amount is left on the contract will be paid to the builder so he'll get the full share of his profit at that time.

In the meantime, you will know that subs and materialmen on your project are being paid.

There is a possiblity that your builder will balk at agreeing to such a modification because he would rather have all your money in his pocket so he can pay off older debts to subs who built the last house he finished... and he has high hopes that before the subs working on your house actually file any liens, he'll have another house in the works and can use money from that owner to pay off the subs who worked on your house. Classic case of robbing Peter to pay Paul. Problem is, in this economy, your builder may not be able to find his next Peter and if you're the last one in line, you will wind up holding the bag.

Frankly, you may be a lot better off having your contractor walk off the job and leave you with a partially finished house - but with that part paid for and no pending liens - than having him finish your house, collect his full contract amount and then find out that unpaid subs and materialmen are filing liens against your house that may easily total 50% or more of your original contract price!