Liens and Third-Party Subs

Q:

I own a construction company in South Dakota. We just completed the biggest project I have ever done and had one snag.

I wanted to hire a subcontractor to take care of supplying, hanging and taping the drywall. When I hired a company run by a man named Shawn, I was able to concentrate on other things. Shawn hired Dave as a sub to tape the drywall. Before I paid Shawn, I had him sign a lien waver for the entire sum of money. Dave had received a partial payment but had not collected his final yet. Shawn and Dave were in a disagreement, so Dave filed a lien against my project because he has not been paid by Shawn. He did get the lien filed in his 120-day window, but I already paid Shawn for the job. Am I in trouble?

 

Doug Smeltz

Doug Smeltz Construction Company

 
A:
Let me guess, you don’t have an attorney who handles your construction business legal issues. If you did, you would have already called him and would know exactly what to do. First, is Dave’s lien legal and enforceable in South Dakota as a third-party subcontractor? If so, did he file proper notice or documentation to perfect his lien rights? If you feel he does not have legal rights to lien your job, you can bond around the lien to ensure lien free title. Let me guess again, you don’t have a bonding company. What is the limit Dave has to file a lawsuit to perfect his lien? If he doesn’t file within the proper timeframe, his lien becomes moot. What does your attorney say about that? As a last resort, you can file a lawsuit against Shawn for not providing you a lien free project after you paid him. He is the one who is at fault. Let me know how the lawsuit works out if you go to court.


Construction Business Owner, August 2009