Before you can file a claim of lien (in order to lien real estate on which the work is completed) there must be a contract for the work in question and the owner of the real estate (or real property interest) on which the work is being done must consent to the contract for the work in question. No contract, no consent, no lien!
The Contract: Although the topic of an effective contract in a construction setting will be covered in a later segment of this blog; bottom line, what is needed is an enforceable contract. To have an enforceable contract you need 1) An offer (an adequate description of work or materials): 2) An acceptance (payment for the work): 3) Competent parties who have the legal capacity to contract (of legal age and legally competent); 4) Lawful subject matter (you can’t enter into a contract to do something illegal); 5) Mutuality of obligation (work or materials for money); and 6) Consideration (money).
What if you don’t have a contract directly with the property owner? As a subcontractor, you may not have a contract directly with the owner (of the property). However, as long as there is a contract with the owner (through the general contractor) you can lien the property even if you aren’t a party to that contract.
Does this mean I don’t need a contract if I’m a sub? No, you still need a contract with the general contractor. To be able to file a lien on the property, as the subcontractor or general contractor, you must be able to show “substantial compliance” with your contract.
How can Substantial Compliance affect me? If you haven’t substantially complied with your contract, you can’t file a lien. If your contract requires that a certificate of completion be obtained before final payment, no lien can be filed until the certificate of completion has been obtained on the job. This requirement can be waived by the owner, if the owner makes final payment without requiring the certificate of completion.
What if I substantially complied with my contract but the general contractor did not? While the general contractor’s failure to substantially comply will not prohibit your lien, it may affect the amount of your claim. If your work is rendered faulty because of defective work by the general contractor, the amount of your lien is the reasonable value of your work to the owner in light of the overall conditions.