Pool Manufacturer Shuts Down, Leaving Homeowners With Empty Pits And Liens On Their Homes

The Aqua Pool & Spa company in California had been building pools for over 20 years and had built up a good reputation, but after a bank went under and called in a $3 million loan, the company abruptly laid off everyone last week and shut its doors. Now everyone who was in the process of getting a pool built is stuck with torn up yards and half-finished pools. What’s worse, subcontractors are now dunning those customers for payment for services or supplies, even when the homeowners already paid (through Aqua Pool & Spa) months earlier.

“My yard looks like it was blown up with dynamite. It’s a nightmare, an absolute nightmare,” Wood said.

Then he received a notice from a concrete supplier, warning that a $4,000 lien could be recorded against his home if Aqua doesn’t pay for the 19 yards of cement used a few weeks ago for Wood’s concrete decking.

[…]

[Another couple] said a concrete company sent them a notice of a pending $6,000 lien. And Friday, they got another from a pool cover company saying they owe $5,500 — despite having paid Aqua for the cover months ago. And Aqua never finished the deck or landscaping, they said in an e-mail.

Our tipster Alex asks, “What, if anything, can homeowners do to protect themselves against situations like this (general contractor goes broke without paying subcontractors first) before starting a major remodeling project?” Any suggestions?

“Aqua Pool customers threatened with liens” [Modesto Bee] (Thanks to Alex!)

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  1. BuyerOfGoods3 says:

    Wow. Remember people – we are all connected somehow. If you think AIG bailout wasn’t going to effect you – here’s your proof that it is, and it Will.

    Coming to a town near you!

    • ARP says:

      Well, yes, if you want to use chaos theory as your basis, then yes, every financial decision made for the last 40 years could have impacted this. We could have just as well said it was the low interest rates, the tax cuts for the rich, deregulation, Fannie/Freddie, skeevy subprime lenders, etc.

      Also, this isn’t helpful in thinking about how address this particular issue.

      • failurate says:

        Well, if you kill a butterfly in China, Ashton Kutcher will be forced to stab himself in the hand as a child so he won’t get raped in prison as a fresh meat 20 something.

    • domcolosi says:

      I don’t want to ruin a good conspiracy theory here, but what does the bailout have to do with this?

      A bank failed, and recalled a loan. The company couldn’t afford to pay it back so quickly, so was forced to close its doors. The closed company could not pay contractors. Contractors are attempting to go after homeowners for the money they are owed.

      This is a terrible situation all around, but I don’t see any connection to AIG. I really think that you are an idiot.

  2. Consumeristing says:

    I think Modesto should be properly be called ‘Central Valley’ rather than Northern California. For the moment there, I thought this was about weed. And the link is to the Modesto Bee, not Sacramento Bee.

    • Stickdude says:

      Aqua did a lot of work in the Bay Area as well, so that’s probably why the geographic location was expanded to “Northern California”. That, and everyone may not be familiar with the Central Valley specifically.

  3. AI says:

    Well, the lien is on the pool, not the house itself, and since the pool isn’t finished it’s worthless. Demolish the pool and build another one. Offer the subcontractor the rubble to cover the lien. No lien for you!

    • GearheadGeek says:

      I think the lien would be against the real property to which the pool is an improvement. So technically it’s on your lot, not on your house, but the effect would be the same unless your house has wheels.

      • Pax says:

        Exactly.

        Legally, the pool is a “Fixture” (a non-movable, non-building feature). For some examples: a detached patio; a dock on a river or lake shore; that sort of thing. And yes, a permanent, in-ground pool is certainly on that list.

        So, the Lien would be on the Real Property – which would mean “the land, and any buildings or fixtures associated with it”. That’s because, finished or not … you can’t just come, pick up the pool, and take it away!

    • CTXSi says:

      I don’t think that’s how it works. The lien is on the entire property (land, house, pool, and anything else permanently affixed to the land).

    • Nigerian prince looking for business partner says:

      Wow, that’s not how it works at all.

    • nova3930 says:

      No mechanics liens are on the entirety of the property.

      We were in a similar situation with the appliances in our new home. The builder was in the process of going belly up as he was finishing our house and didn’t pay for the appliances so the supplier threatened a lien against our home.

      I did a little digging and realized that yes in fact they could place a lien but in the strictest legal sense they’d have a hard time collecting on the lien since the names on the deed (namely me and my wife) were not the same people who’d agreed to pay them. I wrote them a curt response informing them of this and that if they wanted their money, they should get in line at the bankruptcy court with the rest of the unsecured creditors.

      They apparently didn’t like my response because they promptly sued us for the cost of the appliances. Thank god my real estate agent had insisted we get the top of the line “platinum plated” title insurance because if we’d have had anything less it wouldn’t have taken care of the cost.

      • dragonvpm says:

        So basically, telling them to get in line at the bankruptcy court didn’t work and you did have to pay the sub-contractor what they hadn’t been paid but you got lucky because you’d bought title INSURANCE that took care of the cost because they had missed the lien when they did their search. If they had found it then it would have had to be resolved before you could close on the house because your bank wouldn’t have approved the deal with an outstanding lien on it.

    • DariusC says:

      Agreed, I am a contracts specialist and this is NOT IN ANY WAY, SHAPE OR FORM the persons fault. When a general contractor goes bust, it is too bad and so sad for the sub. They can sue the general contractor.

      • dragonvpm says:

        You are not a very good contract specialist.

        In the construction industry a sub can put a mechanic’s lien on real property and then it becomes the owner’s problem. At the very least the lien can prevent a sale from happening until the sub-contractor releases the lien (generally upon being paid) and then it’s up to the owner to sue the general contractor who didn’t pay their bills. I’ve had to do this myself in the past and I’ve pretty good fights with lawyers and other folks who were upset but in the end had to pay me what was owed in order to have the lien released. It’s not a great system and I’ve lost money when someone didn’t have any plans to sell their house, but for new construction it tends to work reasonably well to limit a sub-contractor’s exposure on larger projects (e.g. sub-divisions).

    • DariusC says:

      You guys are completely wrong. The sub is out of luck. They cannot legally reclaim the money from the individuals since they are not contracted through them. It’s a too bad, so sad story. They can, however, reclaim any supplies from the worksite. Also, the individuals cannot get any money back (unfortunately). Everyone takes a loss. Get insurance next time.

      I am a contracts specialist, so I know exactly what I am talking about.

      • common_sense84 says:

        Agreed. They cannot place liens on homes. They can definitely try though, so be sure to contact a lawyer and get them to write you a letter you can send to the scammy subcontractors.

    • dash says:

      You all have it wrong. I’m a sub. As long as I follow the proper timeline, I can place a lien on your home. It is your responsibility as a homeowner to make sure I am paid, period. I always recommend people to issue a check with the Prime and Sub listed as joint payees and to always request a lien release when making payment. This will always protect you from problems with primes not paying their subs. Here’s how it works if you do not in California.

      1. Within 20 days I must send you a prelien notification informing you of your rights as a homeowner. The document is recorded with the county.

      2..Within 90 days of the prelien, I must file a lien against your property. This document is recorded as well.

      3. Within 90 days of the lien, I must perfect the lien in court by filing a foreclosure motion against your property. This will happen if you have any equity in your home.

      4. If I don not perfect the lien, it expires and can be removed from your property by you.

      Most homes in California have no or very little equity. Most subs will not go to the foreclosure stage because there is nothing for them to recover. But, if you do have equity in your home, I would not ignore the notices. Most subs are more than willing to work something our for pennies on the dollar. If you do have an unfinished project, they would probably help you finish it as well. Remember, this is for California. I do not know how other states treat the process. Good Luck.

      • MrEvil says:

        In Texas you won’t be able to foreclose on that property if it’s covered under Homestead exemption. You can file the lien sure, but you’ll only be able to collect when it comes time for that property to change hands either via sale or through probate. The only way a homestead can be seized is for default on a loan used to purchase or improve the property or for unpaid property taxes (HOA fines and dues too thanks to some illiterate judge).

    • dragonvpm says:

      That’s a really stupid answer.

      The exact details will vary by state, but in general if a sub-contractor places a mechanic’s lien on your property then you won’t be able to sell your property until that lien is resolved. I’ve worked in the construction industry for quite a few years and I’ve done this myself to get paid when a deadbeat GC doesn’t pay up. If you were to try to sell your property the lien would come up during the title search and no bank would let you close on the property until it went away (usually by paying it). Of course if someone pays cash they don’t need a title search so that could get around the lien but then the person who bought the property would be stuck if/when they decided to sell and the buyer needed to get financing through a bank.

      If a homeowner wants to be sure that they won’t be hit by liens down the road they need to insist on getting a release of lien from EVERY single sub-contractor that their general contractor hires to work on the project and they need to make sure that their GC is contractually obligated to notify them of all the subs working on their project. Alternately they can just focus on getting those from the big players (e.g. concrete, pool equipment supplier etc…) and figure that the smaller subs can be paid individually if necessary.

  4. PanCake BuTT says:

    Wooohooo… pools to power skate in. ! .

  5. c!tizen says:

    You would think a company that’s been in the pool building business for 20+ years would be required to have insurance to protect against something like this. If the homeowners already paid then I would lawyer up, what else can you really do?

    • fatediesel says:

      I suppose builder’s risk insurance could cover that, but builder’s risk is done on a job-by-job basis and most people would decline it since it would raise the cost, especially for a business with a 20+ year history. It’s also unlikely a pool company would offer this insurance, although the homeowner could independently get the insurance. Regardless, very few companies would have this insurance for jobs of that size.

      • jason1 says:

        Builders risk is an inland marine coverage and is for damage or theft of building materials/tools/etc. They need contractual liability coverage, which is excluded on most general liability policies.

    • mythago says:

      You’d think, but a lot of companies don’t bother or are underinsured because “we won’t ever need it, it’s expensive” or they just don’t care.

  6. Dapper Dan says:

    Because the homeowner does not have a direct agreement with the concrete company how can they collect? This does not seem legit.

    • AI says:

      Unfortunately, liens from subcontractors are legit. I’m dealing with one at work right now even though we have no contract with this company. I think it’s a bit bullshit, and I’m not sure how to fight it. One good thing though is we’re a big company that isn’t going anywhere, and a lien only comes into play if we ever try to sell our property. Since we’re not going to sell the property for at least the next 50 years, the lien doesn’t mean much.

      • mythago says:

        Do you have a legal dept?

      • Difdi says:

        Except that if a lien is in place, they could then sue again to seize and dispose of property until the value of the lien is met. You may not intend to sell for 50+ years, but the Sheriff might be stopping in a few months to seize a few computers to sell at auction to pay off the lien. Exactly what timetable is involved varies from state to state.

    • Commenter24 says:

      My guess is it’s under a theory of unjust enrichment. The subs did work for the homeowner, the homeowner received a benefit from the work and the subs now insist that the homeowner will be unjustly enriched if he doesn’t have to pay the sub for the work that was performed. It’s a common cause of action when there isn’t an actual contract between two parties.

      • Pax says:

        Interesting theory. I (though not an attorney) would counter with the argument that the Homeowners have already made a payment to the general contractor, thus any enrichment they enjoy is not “unjust”.

        OTOH, the general contractor is currently being “unjustly enriched” by receiving the homeowner’s payment, and then FAILING to pay the subcontractor.

        If I were the homeowner, I would inform every one of those subcontractors that I would happily go to bat for them and provide any and all assistance I could, if they direct their suits and liens against their PROPER target: the general contractor.

      • jason1 says:

        The subs did the work for Aqua. The homeowners paid Aqua. How were the homeowners unjustly enriched?

      • mythago says:

        I don’t think you can get a lien in CA based on unjust enrichment under this theory. The subs are not the homeowner’s problem.

      • common_sense84 says:

        It’s not unjust enrichment. The home owners paid in full for the materials and work. They are entitled to keep everything that was already done and take a hit on the work not yet completed.

        The subs get to stop work and not do any more until paid. But they did the work before being paid, that was their choice. Their beef is with the company that failed to pay them.

  7. FatLynn says:

    Will the sub-contractors really be able to get a judgment against the homeowners? They may threaten with a lien, but it’s not so simple to get one.

    • KennyS says:

      To get a lien in Westchester county, NY all you have to do is fill out a form. No proof of debt required. Several years ago a contractor removed my roof in the rain. In two rooms ceilings collapsed and walls and floors were ruined. He did a crappy job repairing the ceilings and refused to repair any of the other damage. When I refused to pay the remaining $2,800 he put a lien on my house just by filling out a paper and said that I owed him money. I sued and got a $3,000 judgement.

      • Alexk says:

        The same is true in Ohio. People who imagine they’re safe from a subcontractor’s lien because the contractor guaranteed them differently are living in a fantasy world. I was hit with one, back in the ’80s, and the contractor had vanished, changing his company name. I found out where his maildrop was, however, and, bringing along a book, squatted there. Finally, the secretary promised me that if I left, she’d make him call me. And he did.

        • common_sense84 says:

          Fight the lien in court. Step one for this case is pay a few hundred bucks for a lawyer to send cease and desist letters to all the sub contractors. Let them know you will fight them and sue for wasted time if they place bogus liens on your home. These people paid for the work and didn’t get everything they paid for.

          The sub contractors fucked up by not getting paid up front. The home owner paid before the work was started. The home owner paid first, the sub contractors are idiots for not getting paid up front.

          No judge will let a subcontractor place a lien against the home of a person that paid the bill in full already. The sub contractor needs to place liens on property owned by the main contractor.

    • ShruggingGalt says:

      It’s easy in CA to get a subcontractor’s lien. And I think they can foreclose on it as well.

  8. smo0 says:

    I never understood subcontracting….

    Ever see the movie Money Pit? Aside from the “hollywood happy ending”… yeah.. that is something I would totally avoid.

    • shaleoil24 says:

      I hear you on subcontracting, but the reality is most everything you buy has a subcontracted element. Your running shoes, your dishwasher, your car, I mean, all these things had a brand that probably hired numerous subcontractors to make parts of them.

  9. GearheadGeek says:

    I am not a lawyer, so take this with a grain of salt, but I think that for the homeowners who can prove they have paid Aqua Pool for the work a sub has done or the products supplied (the pool cover) the subs can be forced to get in line in Aqua Pool’s bankruptcy proceedings. This doesn’t prevent the subcontractors from seeking to have the lien placed, but should allow the homeowners to block the lien or have it removed.

    It’s much murkier if you can’t show that you’ve paid for a particular thing. If the contract with Aqua Pools is amorphous, “$50,000 for a pool and associated landscaping and hardscaping” for example, and you’ve paid $25k before the completion of the project, how can you prove that what you’ve paid is specifically for the work that was done for which the subcontractors are seeking to place the lien? Messy, messy.

    • Bob says:

      I would lawyer up. A good lawyer could get you out of this mess with less than they are demanding.

    • dragonvpm says:

      Unfortunately it doesn’t work that way.

      You’d have to show that the sub-contractor was paid what they were owed. It doesn’t matter what you claim you paid someone else if you can’t prove that the sub-contractor was paid.

      This is why larger projects require that all subs sign a release of lien every time they get paid so that they can prove that the sub has given up their right to place a lien on the property (usually based on how much of the work has been completed/paid for 0-100%)

  10. Bob says:

    Time to get a lawyer and lawyer up. They are supposed to go to the bankruptcy court for payment, no matter how laughable the amount will be, pennies on the dollar and they know that. They figured threatening the customers will make a percentage of them pay. Don’t give in to them, fight it out.

    • Commenter24 says:

      That’s not entirely true. The “Creditors” (the subs) must go to the bankruptcy court to try and collect from the debtor (the pool co.). Nothing in the bankruptcy law prevents the sub from going after non-bankrupt parties who it believes are liable for the same debt.

      • dragonvpm says:

        You’re wrong. Look up mechanic’s liens.

        Basically a sub can put a lien on the property and that lien can then either be acted upon (i.e. sue the owner) or it’ll come up once the owner tries to sell the property and no bank will finance a property that has liens on it. Unfortunately it is then up to the owner to pursue repayment from the general contractor.

        The most common way to protect yourself from this is to insist that all the general contractor provide you with a release of lien from all their subs before you pay them (or more commonly on larger jobs you insist on getting them to cover the previous payment so you’re never exposed for the full amount paid to date)

    • UltimateOutsider says:

      Many states (including mine) have it built into their laws that subcontractors can pursue liens against customers if they don’t receive payment. It is explicitly legislated. It’s pretty much a no-win for consumers, since a legitimate contractor won’t do the work unless you sign the papers stating that you understand these circumstances. If you want the work done, the only way to keep yourself from being liable in this manner is to do the work yourself.

  11. hmburgers says:

    We absolutely need a law again this… it seems like it IS legal in many areas for a sub-contractor to put a lien against a homeowner when that sub is not paid by the main contractor who was hired by the homeowner, but it’s complete bullsh*t.

    If the homeowner can verify payment to the main contractor through a canceled check, or some other legally recognized form, then there is absolutely no reason that the sub-contractor should be able to seek anything from the homeowner… it’s all on the main contractor.

    I was on another msg board going over this same subject, it’s called a LIEN WAIVER … and I guess that’s what needs to be done in all situations these days to protect your ass?

    What you would need to do is make payment to the main contractor, then before any materials are delivered or installed you need to demand a lien waiver from that contractor… sure you might still get screwed out of the money by the main contractor, but at least it prevents a double dip situation like this where you paid for materials once, and now may have to pay again.

    I really feel for anyone who gets into the situation and is attempting to sell a house–example might be someone who has siding or a roof done in prep to put the house on the market only to wind up with delays getting the job completed followed by a lien against their home…

    • hmburgers says:

      Alternatively, you DO NOT pay your main contractor until they provide you with a lien waiver…

      The way from my main post will allow you to pre-pay for materials w/o risk of a lien…

      The way I’m posting here will allow you have your contractor pre-pay… Many contractors don’t like this because it means they have to float the money for materials on a job… but I suppose if the difference is between this and no job, maybe more main contractors will take?

      I suppose the other option would be that the contractor requires a bond/insurance policy that covers the difference between their material and subcontractor obligations and what they’ve accepted in payments… so that if they shut down that bond/insurance will cover all their material and sub contractor obligations.

    • jsl4980 says:

      You need to be careful what you wish for. If the sub contractors couldn’t recoup money from the homeowner then the main contractors will be screwed. In the case where a homeowner doesn’t pay anyone (subs/general contractors) then no one would have a means of recouping the money.

      There should be a way for homeowners to protect themselves – if they paid once then they shouldn’t be able to be charged again. But you need a way for the businesses to recoup costs from the customer instead of suing the general contractor.

      • mythago says:

        The main contractor could assign rights to collect to the subs.

      • BBBB says:

        I’ve worked with a small friendly contractor who let me pay all the expenses directly. I also saved a bit of money because I picked up the supplies myself and didn’t have to pay for delivery. I saved more by moving the supplies in to the work location reducing the labor cost.

        No sub contractor mechanic liens because all subs and suppliers were paid directly.
        [very few contractors want to work this way – most don’t want to lose the mark-up
        on the subs and materials.]

  12. Skankingmike says:

    my advice? Get a lawyer.

    Why is this not the first thing that comes to your head? Unless you are a lawyer that specializes in this field get one.

    Despite what television has taught you many of them are honest hard working people.

    • tsukiotoshi says:

      You just made my day!

      And yes, property and lien theory law is exceptionally confusing (the only course I really struggled with in law school) and even bar admitted attorneys who don’t specialize in it are easily confused. Get a good attorney who will get you through it and it will be worth the time and money.

      • Skankingmike says:

        Land use seems to make my wife want to murder people. Not sure why her firm keeps dumping it on her when her specialty is Employment :P

      • MrEvil says:

        I do not begrudge attorneys for the work they do at all. Knowing the ins and outs of the law is more than one person can manage by themselves. Even the personal injury layers aren’t as bad as they’re made out to be. My dad had to get one in order to be reimbursed for his medical expenses in a car accident. I think lawyers are second only to doctors in terms of initial education requirements and continuing ed requirements.

  13. Hoss says:

    It’s interesting that a homeowner spending $50,000 or so on a pool in the worst of economic times would be so quick to call business owners “scum sucking pigs” for seeking to keep their payroll paid. She obviously cares nothing about her community

    • MuffinSangria says:

      SFW if they are spending $50 or $50,000 on something. If they have the money that is their business. In reality, it’s actually better in long run for the economy for them to be spending. The economy will never recover unless the people with money spend it.

      • Hoss says:

        The SWF is she’s clearly doing well but uses hate language to business owners who are trying to pay truck drivers and masons. Who is going to finish the job now?

    • tungstencoil says:

      Whatwhat? So, let me get this straight:

      You hire company to do something.
      You give them money.
      They do (something) with the money – maybe pay their employees.
      They buy supplies or labor for your ‘something’ on credit from a subcontractor.
      They don’t pay the sub.
      They go bankrupt.
      Subcontractor says “you owe use the money for the supplies/labor used on your property”, for which you paid the primary. You don’t even really know if the sub was paid or not, or what they actually delivered/produced (as compared, say, to another sub or for another project).

      You say, “Oh, OK, gee, I guess the primary did something ‘good for the community’ with the money, so I’ll just go ahead and pay you again what the primary didn’t.”

      To be sure – that’s how you think it should pan out? What is to say that the primary didn’t abscond with the funds (that doesn’t sound like the case here, but that is a more frequent occurrence). This story is interesting mostly because the primary had an excellent history and reputation.

      • Hoss says:

        You hire a lawyer. Not that difficult and not that costly. The community includes laborers. Their wives would call the boss a scum sucking pig if he didn’t do what the insurance company advised — aggressively seek payment. Sorry she’s inconvenienced, but she has no evidence that the pool company did anything but seek renewal on their line of credit

        • Kishi says:

          From the context, I thought the “scum sucking pigs” comment was referring to the people at Aqua Pool.

          I can’t be certain she didn’t refer to anyone else as a son of a motherless goat, though.

    • Starrion says:

      If you read that, I believe that she is referring to the pool company that took their money and that the subs would do work that would not be paid for.

      And frankly, the customer paid the contractor. Why should they double-pay?

    • IThinkThereforeIAm says:

      I would call ANYBODY a number of names if they wanted to extort money from me for soemthing I already paid. Regardless of whether they want to give the money for charity, or spend it at the local strip-club.
      It is just not right.

  14. Loias supports harsher punishments against corporations says:

    Shouldn’t contractors have some form of insurance that prevents subcontractors from going after the end-user (homeowner). Isn’t that what “licensed, bonded, and insured) means?

    • jefeloco says:

      They probably do, or they will go to the bankruptcy court and file claims against Aqua as a creditor/debtor/whatever. The subs are probably trying to cover their butts and recover some of the money they never saw.

      It really wouldn’t surprise me though if some have already been paid and are using this as an opportunity to collect a little more.

  15. full.tang.halo says:

    Working for a General Contractor(CGC), my father, and working towards a Certified Building Contractor(CBC) myself, this is a legit problem that the home owner can find themselves in if the GC doesn’t pay it’s bills. If you pay the draw to us for the concrete portion of the job we get you a lien release from the people that put the concrete in and the material supplier.

    Just because you higher a CGC, CBC, or RBC to do a project, you as the home owner still have to follow up on the project in all of it’s stages and make sure you’re protecting yourself from these things happening.

    Going all “WAAAAAAAAAAA I didn’t know” won’t get you out of breaking the law or getting screwed by a shady GC or even a long standing respectable one going under.

    Life’s tought, get a helmet and protect yourselves

    • sjb says:

      The property owner is ultimately responsible. Just because you hire a General Contractor, you are still the one in charge.
      Your responsible in to make sure your GC is capable
      Your responsible to make sure the GC is preforming correctly.
      Your responsible to make sure the GC is hiring the correct subcontractors.
      Your responsible to make sure the Sub’s are getting paid.

      If the GC fails – your responsible.

      You can moan about it but it does not change that fact.

      • partofme says:

        As in my comment below, a homeowner doesn’t often have access to the information necessary to force a lot of things, much less the expertise to know exactly what needs to be done. Part of the GC’s cut is for filling in those two things. If they’re providing that service, it needs to be spelled out, and they need to be on the hook for it. If they’re not providing that service, it needs to be spelled out, and you will be on the hook for it. You should also then pay the GC less.

      • DH405 says:

        First, how can I be responsible for a contract that I’m not a signer for? The homeowner didn’t hire the sub, so the homeowner doesn’t owe the sub. Period. The first question in contract law : Is there a contract?

        Also..

        Your : Posessive. Example “Your grammar sucks.”
        You’re : Contraction for “You are.” Example : You’re failing English class.

        • DH405 says:

          Typo : “Posessive” was meant to be “Possessive.”

        • full.tang.halo says:

          WRONG

          FL 713.06
          “A materialman or laborer, either of whom is not in privity with the owner, or a subcontractor or sub-subcontractor who complies with the provisions of this part and is subject to the limitations thereof, has a lien on the real property improved for any money that is owed to him or her for labor, services, or materials furnished in accordance with his or her contract and with the direct contract and for any unpaid finance charges due under the lienor’s contract. A materialman or laborer, either of whom is not in privity with the owner, or a subcontractor or sub-subcontractor who complies with the provisions of this part and is subject to the limitations thereof, also has a lien on the owner’s real property for labor, services, or materials furnished to improve public property if the improvement of the public property is furnished in accordance with his or her contract and with the direct contract. The total amount of all liens allowed under this part for furnishing labor, services, or material covered by any certain direct contract must not exceed the amount of the contract price fixed by the direct contract except as provided in subsection (3). No person may have a lien under this section except those lienors specified in it, as their designations are defined in s. 713.01.”

          aka this “Notice to owner” is normally sent from who furnishes of material.

          WARNING! FLORIDA’S CONSTRUCTION LIEN LAW ALLOWS SOME UNPAID CONTRACTORS, SUBCONTRACTORS, AND MATERIAL SUPPLIERS TO FILE LIENS AGAINST YOUR PROPERTY EVEN IF YOU HAVE MADE PAYMENT IN FULL.

          UNDER FLORIDA LAW, YOUR FAILURE TO MAKE SURE THAT WE ARE PAID MAY RESULT IN A LIEN AGAINST YOUR PROPERTY AND YOUR PAYING TWICE.

          TO AVOID A LIEN AND PAYING TWICE, YOU MUST OBTAIN A WRITTEN RELEASE FROM US EVERY TIME YOU PAY YOUR CONTRACTOR.

          How are you “responsible for a contract that I’m not a signer for” cause you’re the homeowner.

          • partofme says:

            Ok, so you go to your GC, and you’re going to make a payment, so you ask for proof or releases or whatever from the sub-contractors. He gives you a few papers that look right… and they are… but they’re not ALL of them. Say he gives you three papers, but actually sub-contracted with five others. Oh, and they sub-sub-contracted with two other guys. How can a homeowner know that he’s open to four potential claims? And why doesn’t this work with other things? Say I contracted with Dell for a room full of computers in an office building. I pay them, they give me computers. Then Dell goes under, without paying off their obligations to Intel. Can Intel come after my computers? Why that’d be absurd, you’d say.

          • DH405 says:

            You just quoted Florida law to me on a California case.

            Let me revise my prior statement, then. First question in contract law : “Where am I?”

      • common_sense84 says:

        You aren’t understanding what is going on here. They hired a pool company to put in a pull. The pool company contracts work out.

        The home owner has nothing to do with the sub contractors and would have no way of knowing they are even subcontractors.

        And that is fine. The subcontractors work for the pool company, not the home owner. The subcontractors cannot put a lien against the home owner, they have to put one against assets of the pool company.

        • full.tang.halo says:

          It may not be common sense, but the law doesn’t have to make sense it just has to be the law. Many states have laws similar to FL 713.06 I posted further down this reply tree.

          You’re the homeowner and you’re ultimately responsible, the lien goes against you.

          • mythago says:

            Many states don’t have this idiotic law. Please stop offering bad legal advice.

            • full.tang.halo says:

              How is copying, directly from the Florida DPBR, my local lien law that would apply to this situation, giving any sort of legal advice.

              Ohhhh, “Protect yourself” I’m going crazy over the top in giving advice…

    • Verucalise (Est.February2008) says:

      Is there any way that you could hire a GC to take care of the job, hire the sub contractors, but you YOURSELF pay? Instead of handing over $25,000, say, the GC tells you the cement has been laid, and here is the bill for the subcontractors/supplies for $15,000- and you write that check yourself TO the subs? I know a GC handles the project, but couldn’t the homeowner insist on taking care of the financial end?

      Whenever I hire a contractor, I want a written estimate of supplies and labor and when they buy the supplies I want the bill to show that it was what I paid. If I hand over $500 and the bill says $475, I either want the $25 back OR I want a receipt from the GC saying they accepted the $25 as advance labor payment for the project at hand. I will even buy the supplies myself- Now, I know my projects aren’t nearly as huge as a pool install but still, the fact remains that I want receipts and proof over and over.

  16. Stickdude says:

    Obviously the people stuck in this particular situation should already have lawyers by now, given the amounts of money involved – and I wouldn’t be surprised if most of them already do.

    My question had to do more with what can be done up front before starting a major project to limit your risk so you don’t have to get lawyers involved after-the-fact. If you had told anyone a week ago that Aqua would be out of business by the end of the week, nobody would have believed you. So, if it can happen to them, it can happen to any general contractor you hire for a project.

    • rho says:

      In Canada, at least, the way you protect yourself from a general contractor who screws his sub-contractor(s) is to negotiate a “holdback” provision in your contract, which allows you to holdback a percentage of the total fee for a period of time *after* the work has been completed. So, for example, you might contract someone for $10k of work, and your holdback might be $1k for 45 days after the work has been completed (i.e., the GC will only have received $9k by the completion of the work, and the last $1k 45 days later). The right to delay payment of the last 10% of your reno for 45 days after the job is done is protected by statute in most provinces. This probably wouldn’t have helped in such an extreme example as this, but less extreme examples of this kind of thing happen all the time.

      • Blackadar says:

        The correct term in the USA is called “retainage” and it wouldn’t have helped much in this case. It’s used more to get finish work, punch list and smaller things corrected on a job site. It’s not going to help when the GC bails and doesn’t pay the subs. At most a homeowner would have a couple of thousand extra bucks in his pocket, which isn’t going to pay for $15k in liens.

        • rho says:

          I agree that it wouldn’t have helped much (or at all) in this particular case (and said as much in my comment). Less extreme examples of sub-contractors putting liens on properties due to non-payment by the general contractor happen all the time, though, and I thought people might be interested in knowing one way of partially protecting themselves. And as far as the purpose of holdbacks, the statutory intent in Canada is not to use them to compel completion of the project (although many people rely on them that way). The statutes are there specifically to ensure that there are no liens after the project completion.

  17. Platypi {Redacted} says:

    When we put an addition on our house and did a remodel, we set it up with our contractor that we would pay the sub-contractors directly, and only pay him for the work he and his team did directly and the cost of materials they purchased. Of course, our GC was independent, and not a huge failing company, but this might be the way to avoid getting thoroughly screwed. Don’t front the money to your GC for the money that will be paid to the subs. This helps with the transparency of costs, but adds to your involvement time in the project. YMMV.

  18. chemmy says:

    Maybe I missed in the articles but can someone answer my question? The homeowner had a contract with the pool company. The pool company then had contracts with the subs to do the work.

    Is there some trickle-down effect where if the pool company doesn’t pay the subs, the homeowner is liable? The homeowner contracted only with the pool company…..

    • ShruggingGalt says:

      Happens all the time.

      Heck it can happen when you buy a new house – if the builder didn’t pay the subs, the subs can file a lien against the house.

      Subcontractor/mechanic’s liens have been around for a very long time.

  19. justsomeguy says:

    Lien waivers. Make the main contractor sign an agreement listing all of the sub sonctractors he will use on the project. Pay for the project based on percentage of completion. Pay for X% up front and when that part is done, make the main contractor provide lien waivers from all of the subs before you pay any more. At the end of the project, withhold X% until you get final lien waivers from all of the subs and the main contractor. There is still some exposure, but it is only a portion of the total project and not the full amount.

  20. NumberSix says:

    ALWAYS pay your sub-contractors directly.

    • Blackadar says:

      GC’s don’t usually agree to this. The sub bids $3k for their part and the GC marks it up to $4k – part of that is profit and part of that is project management cost. That’s what you’re paying the GC for – that expertise to run the project. They’re not going to share with you the profit that’s built into your job. If you insist on seeing the sub invoices, then they’ll produce ones that are doctored up.

      If you’re going to pay your subs directly, then you’re acting as the GC. Good luck with that if you don’t have the expertise.

      • partofme says:

        This is exactly what makes the whole thing not make sense to me. You’re paying the GC to manage the project. sjb just said above that responsibility all comes back to you. You’re responsible for making sure the GC is doing his job. A homeowner has neither the expertise nor the access to information necessary to fulfill that supposed responsibility. It needs to be one way or the other, and this should be spelled out in the contract with the GC. Then, it should be legally enforceable. If you’re paying them to truly manage everything involving sub payments, then they should be the ONLY one one the hook for failure to do so. If you’re not doing so, you must have access to the right information, have written responsibility for paying the subs, and then you’re on the hook if it doesn’t get done. GC’s might then make these jobs more expensive to make up a little on their cut, but it needs to be defined one way or the other. Right now, the homeowner is getting screwed both ways.

      • GeekChicCanuck says:

        My father has built one home and remodeled two. In both cases he paid the subs directly while hiring a general contractor. He’s never had a general contractor have a problem with this – and neither have I. Since it is the home owner’s responsibility to ensure the subs are paid, then I will pay them.

        The general contractor manages the site, supervises the subs, gives me advice and runs the day-to-day operations. I control the purse strings. Subs love working with me and my father because they know that they are going to get paid.

    • common_sense84 says:

      It’s a pool company. They had no idea subcontractors were even involved. They paid the pool company, guys show up, pool is made, and job is done.

      No where do you know subcontractors are doing the work.

    • peebozi says:

      We allow some of our customers to do this. Then we work for a flat fee.

      we also have clients who we supply every sub/vendor/material invoice with our bill and add a percentage to the total cost of the job.

      they get to see what they’re actually spending and we make money. of course, neither of these are bid jobs…on those we take the risk so we get the reward…and they don’t get any of this options previously mentioned

  21. operator207 says:

    This is what I did when I had an addition built onto my house.

    I had a contractor, with subs of course.

    I paid the contractor, and required a sheet of billing for each item. we agreed upon payments as the work was completed. If he needed 24 2×4’s for something he put on paper 24 2×4 = $x and so on and had a total. If he was paying for electrical, he gave me a sheet with the work being done. I can go back and show I paid my contractor on this date, for this item or service.

    If I were to have an issue like this, I could prove I had paid my contractor for the services. It’s not very much, but it would help immensely towards a court hearing if I had to prove I had paid for a sub’s work.

    The only reason I did this, was I had not worked with this contractor before, and wanted to make sure I was not just forking out money randomly.

    • dragonvpm says:

      Unfortunately in many states it doesn’t matter if you paid your general contractor, what you need to do is prove that the sub-contractor was paid and gave up their right to place a lien on your property (i.e. a “release of lien” or “lien waiver”). So ideally you’d trade a check for signed lien waivers from all the subs involved in your project (or at the very least the bigger ones like the ones supplying materials etc…). It’s not a foolproof system and a random sub that you didn’t know about could pop up but it’s better than being completely exposed to liability for the work done.

  22. Bog says:

    Hasn’t anyone heard of a surety bond or performance bond? Nothing major gets started without one from the contractor.

  23. Bog says:

    I wonder how the GC was paid? Cash, check, credit card? If a CC was used could you do a chargeback, or use its insurance? Will your homeowners insurance cover this?

  24. the_Jenkins says:

    I’ve heard California has passed a law, or is in the process of passing, where a sub-contractor can go after people when the contractor hasn’t paid them. It’s unfortunate, but blame the lawmakers. If my company pays a contractor we should be eliminated from any further responsibilities. At my job, I’ve been tasked with setting up our checks so that joint checks are issued when a sub-contactor is to be paid, clearing us 100% with any b.s. law out there.

  25. JuanHunt says:

    The subs can put a lien on the house which will have to be satisfied if the property changes ownership and is being financed. The lien is valid as the sub is owed for their time and materials for the improvements to the property. The sub can try to sue the homeowner, and the proof of the paynments to the GC would be valuable evidence, but I dont know what a judge would rule.

  26. elex says:

    Is it possible to use an escrow to mitigate these risks?

  27. ram0029 says:

    I deal with a lot of contractors. My experience saved me about $15,000 when our pool contractor disappeared 1/3 of the way through and was later tried and convicted for home repair fraud.

    1. Never pay out, at any stage, more than what it would take to hire someone to finish the job.

    Contractor will say this, this, and this, is 50% completion and you owe them half the money. If you agree to partial pays, make sure the contract is line item by specific activity with a price for that activity. I recommend against partial pays for progress on a job that is going to take 30-60 days or less.

    If you do partial pays, remember, it will cost more to hire someone to finish someone else’s work more often than not.

    2. If sub’s are going to be used, require lien releases and prepayment for materials, or onsite payment. If a company allows a contractor to operate a line of credit, and the contractor defaults, that should be that company’s problem, not the homeowner. Laws vary by state though, so you are perfectly within your rights to ask for immediate lien releases, prepayment, or onsite payment to all sub’s(you hand a check to the driver who brings the cement), especially if the contractor asks for the money upfront to cover “his” cost. Ask how much it will be, make a check out to that cement company for that amount.

    3. Overhead/Profit should only be paid upon substantial completion. If $3,000 worth of pool kit is delivered, you pay $3,000. Not $3500 to cover overhead and/or profit. Profit is what is left over after the job is completed. Never prepay it. Seems like common sense, but you would be surprised.

    4. Detailed work write-up and estimate. Require them to identify where sub’s will be used.

    5. Require bonding! I am not talking about the “Licensed and Bonded” printed on the door of the roofer who just made off with your downpayment. An adjudication or performance bond specific to your job with you named on it. It will cost additional 1-1.5% typically, but if the contractor disappears or goes insolvent, you can call the bond for payment.

    If the contractor refuses, it should be a red flag. It may mean he cannot get a bond. Food for thought, ANY public contract over certain amounts require bid, performance and often maintenance bonds. Large companies routinely require them. You can require it to. It will cost more, but for large jobs, can easily be worth it. If they provide a general bond certificate with say $1 million limit, call the bonding company and make sure it applies to the work being performed.

    6. Most important. Follow your instincts. A company that has been around 300 years or 3 days can disappear overnight due to a number of reasons, but it usually happens after a long period of mounting debt, late payments etc. If work is consistantly late, if contractor starts bugging you for more upfront money, if subs are not showing up… all of these things are flags. Pay attention, ask questions.

    Do not be afraid to talk to subs briefly while they are working. How many jobs have you done for PoolMan Inc? How long have you worked for them? A glass of ice water and a smile will often get you more informaition than you can imagine.

    • Stickdude says:

      Thank you!

      That’s exactly the kind of answer I was looking for.

    • mythago says:

      Excellent advice.

      Also, many courts also allow you to do a free search of their records online – so it’s very easy to see if a contractor is on the receiving ends of a lot of lawsuits for unfinished/bad work.

  28. Not Given says:

    http://www.free-legal-document.com/lien-waiver.html

    Lien Waiver and Lien Release Forms

    A contractor must supply you with a lien waiver upon payment – be sure to ask for it with every payment issued!

    lien waiver
    A problem may arise when a contractor does not pay his subcontractors, workers and suppliers, even though the homeowner has paid the contractor.

    The other parties may than file a claim or lien against your property which can result in:

    * Your having to pay for the work again.

    * A cloud on the title of your property which can restrict your ability to refinance or sell your property.

    * The forced sale of your property to effect payment, if you can not afford to do so.

    Note: Where a lien was recorded as security for a Promissory Note or Installment sale, a Lien Release may be used.

    The homeowner can protect himself by:

    * Thoroughly investigating the contractor before entering into an agreement e.g. whether the contractor and subcontractors are licensed, payment history to suppliers, previous claims filed and by having a written General Contractor Agreement in place as well as Contractor Insurance.

    * Demanding a construction lien waiver from all parties involved with every payment and by refusing any further payments until receipt of a lien waiver.

    * Knowing which subcontractors and suppliers are involved and the payments due to them. Any party who does not have a primary contract with you must provide you with a Preliminary Notice, stating that they did or will in future supply you with goods or services and could file a mechanics lien if not paid. It is most important for the homeowner to keep track of these notices and to get a lien release upon payment. It is a good idea to specify in your agreement that preliminary notices must be issued, even if it is not required in your state or country. This way the homeowner will know to whom monies may be owed.

    * Issuing joint checks to both contractor and third party or by paying the third party directly.

    Lien Waivers can be issued in the following way:

    A Lien Release upon Progress Payments:- For every payment issued for a complete phase, materials supplied or work completed by a subcontractor, the homeowner should insist on an unconditional lien waiver.

    A Waiver of Lien upon Final Payment:- But for possible disputed claims for extra work done or retention monies outstanding (which must be specifically stated on the form) the contractor or any third party will waive all further rights against the homeowner.

    Note: A conditional lien waiver can be issued for either progress or final payment. The heading must state CONDITIONAL LIEN WAIVER and must specify: This document shall become effective once the check has been properly endorsed and cleared through the bank or proof of any other form of payment has been provided.

    Time Limits:

    The onus is on the contractor, subcontractor or supplier to record a lien within 90 days of completion of the work or when the owner starts “using” the work.

    If the owner files a Notice of Completion with the County Recorder, the time allowed to record a lien by the contractor is reduced to 60 days and for a subcontractor or supplier it is reduced to 30 days.

    The homeowner must keep all lien waivers safely. In the event of a lien being filed they will be used to gain a lien release. The laws may vary in different states or countries and the forms supplied here are to be used as sample documents only. Consult with legal counsel to ensure you are adequately protected.

    Please refer to our General Contractor page for more information and free legal forms.

    It is very important for the homeowner to be aware of the possibility of a lien and to get lien waivers to protect his property from claims.

  29. mythago says:

    If I were the homeowner, I’d be doing a little research about the status of those subcontractors. I believe that they may not be able to assert a lien if they are unlicensed and, in any case, will have their hands full with all kinds of bigger problems if they turn out to be unlicensed and the homeowners report them. Given the state of California’s economy, the government here has gotten very interested in enforcing licensing laws (and fees).

  30. rorschachex says:

    The pool contractor wasn’t bonded? Is that common? Usually if you get significant work done on something (large plumbing project, roofing, etc), you should get a bonded contractor so they can’t just skip out on the job, even in this type of circumstance.

  31. PLATTWORX says:

    I would think that since the homeowner did not purchase any concrete (Aqua Pool & Spa did) that putting a lien on the homeowner would not be possible. They did not enter into any agreement with the concrete company nor request delivery of product.

  32. Ebriosa says:

    I’m pretty sure all you can do in this sort of situation is call Mike Holmes.

    Except his new show doesn’t seem to do the whole “come in and take over where contractors scammed out/f-ed up” deal anymore.

  33. H3ion says:

    Md. Code, Real Property Article, says
    (a) Buildings.- Every building erected and every building repaired, rebuilt, or improved to the extent of 15 percent of its value is subject to establishment of a lien in accordance with this subtitle for the payment of all debts, without regard to the amount, contracted for work done for or about the building and for materials furnished for or about the building, including the drilling and installation of wells to supply water, the construction or installation of any swimming pool or fencing, the sodding, seeding or planting in or about the premises of any shrubs, trees, plants, flowers or nursery products, the grading, filling, landscaping, and paving of the premises, the provision of building or landscape architectural services, engineering services, land surveying services, or interior design services that pertain to interior construction and are provided by a certified interior designer, and the leasing of equipment, with or without an operator, for use for or about the building or premises.

    As long as you hit the 15% mark, a lien is available for a subcontractor but he has to give notice within 120 days.

    About the only way I’ve ever found to avoid mechanic’s liens with any certainty is to require that every draw for funds be accompanied by lien releases from both the general contractor and all subcontractors. That’s probably not practical on a single home but it works on a large commercial construction project.

  34. buckeyegoose says:

    Speaking a independent/subcontractor for DirecTV i feel bad for those consumers who had leans made against their houses by the subs. Believe me, its is the last resort for people like us. Often times, the contractor, in this case Aqua Pool, has stiffed us, either by not paying the sub, or bouncing the check, then dodging the phone calls, and our only other option, since you as the consumer hired Aqua Pool to provide the services of pool installation, and they chose to contract that to us the sub, then in the end you are responsible for paying for the job. Often times the threat of this action being taken, or sending the contractor the filled out forms, but they haven’t been filed yet, is enough of a kick in the ass, to get them to get us our money. If not, and small claims get us no where, even if we get a default judgement, they still have to pay it, action like the above is taken, and while messed up, having the homeowner being a raging pitbull at the company sometimes helps.

    You have to keep in mind, the subs have fronted the labor and materials on the job, and until full payment is made, they have full ownership of said items, be happy they are not there digging up the pool, as I had to remove a dish from a customers house one time in order for the contractor to get the message to pay me.

  35. Red Cat Linux says:

    Erm.. don’t toss anything at me… but I make my own general contractors at home.

    Well, to tell it right, I started off my own GC for a renovation project. I went to a number of GC’s shopping the job around and not a one of them made me feel comfortable trusting the job, my house and my money to them.

    I wound up doing the footwork and coordination myself. It’s only later that learned that what I was doing was in fact what a GC would have done, and that they only sub it out. I paid each of the people I hired for one thing or another myself, the job was done on time and I saved 6-10K off the price estimates I’d gotten from the GC’s I had gone to first.

    That’s not to say that I would have tried it for a pool install, but I do the same for just about everything else.

    And another thing – never once (and I’ve done this for 3 or 4 projects on my home) have I had to pay anyone in full up front. For materials, yes, but not labor. Not until it was done did I complete payments. I’m a little boggled that home owners paid in full prior to the job getting done.

  36. UnicornMaster says:

    I’m not sure how a failing bank calls in a $3 Million loan, or why a company would pay on a $3 Million loan to a a failing bank. Also seems like the company could have gone to another bank and re-opened the same credit line somewhere else. Sounds like someone is asleep at the wheel.

  37. Cryptos says:

    This question has a simple, if not-exactly-cheap, answer: Demand that any contractor you hire for a big job purchase a “construction bond” and provide you with a copy the certificate before work commences. The bond is a kind of insurance that pays to complete or re-do work if a contractor goes under or does shoddy work. There is a cost for this kind of protection, which the homeowner will have to pay. For smaller jobs this may not be practical, but for anything over, say, $10-15k, it is absolutely indispensable. Reputable builders will welcome the idea, because every job they complete without the insurers having to pay a claim against the bond reduces both their own insurance risk profile and the potential costs to their future customers. Disreputable builders, by contrast, will probably balk, knowing that their history, or lack thereof, will make it expensive or impossible to get a bond.

  38. JiminyChristmas says:

    One iron-clad way for a homeowner to be certain a contractor performs according to the contract is to have them purchase a performance (a.k.a.: surety) bond specifically for your project. Plenty of contractors are already bonded but if their company has a spectacular flameout like the one in this story the coverage amount of their bond likely won’t cover their liabilities.

    Say that a contractor is bonded to the tune of $500,000. That may sound like a lot but if they have 25 swimming pool jobs in the works and fail to perform, it’s you and 24 other people making claims against the bond.

    If a contractor is already bonded, unless you have a large project, they will likely resist buying an additional, separate bond for your work. If you were to insist on it, the contractor would be justified in including the cost of the bond in their price. But, if you want that guarantee you should be willing to pay for it.