Explaining Liens vs. Lawsuits for Non-Payment by General Contractor

Integrators who sign a contract with a general contractor and not directly with the client cannot sue the homeowner if you are not paid, but you may be able to file a mechanics lien against the property.

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Most integrators work diligently to sign direct agreements with the end user customers, but sometimes they only have a contract with the general contractor or homebuilder. That’s fine but if you are not paid, that arrangement precludes you from going after the end user client for the money you are due.

According to legal expert Ken Kirschenbaum of Kirschenbaum & Kirschenbaum and columnist for CE Pro’s sister publication Security Sales & Integration, a custom integrator who is brought on as a subcontractor to install a system by a GC has a finite amount of time to seek a legal remedy, whether that be suing the GC or filing a lien against the property.

Unless the integrator has a direct written agreement with the end user client, he cannot sue them for the unpaid money.

“Getting paid is too common a problem for subcontractors,” says Kirschenbaum. “Because your agreement is with the general contractor you are compelled to look to the general contractor for payment. Your agreement with the general contractor will address payment. Watch out for the ‘paid when paid’ clause, which means you don’t get paid unless the general contractor is paid.”

Kirschenbaum notes that a “paid when paid” clause is not enforceable in certain states, such as New York.

“General contractors receive money from the owner/subscriber as trust funds and you can avail yourself of Lien Law remedies against the general contractor, demanding an accounting of the money received by the owner on the job. The statute of limitation for that remedy is short, so make sure you know what it is in your jurisdiction. In New York it’s one year. Another issue you should keep in mind is that often your general contractor’s agreement with the owner is limited to installation of the system,” he says.

So what can you do? You may be able to file what is called a mechanic’s lien against the property.

“In New York, a mechanic’s lien can be filed for the value, or agreed upon value, of the work done. The lien can be placed on the subscriber’s title or interest in the property where you performed the work,” he says.

There is a finite window for filing such a lien. For single-family dwellings, it is only four months.

“A mechanic’s lien may not be available unless the installation is considered an improvement to the real property, which is usually not the case with alarm equipment,” adds Kirschenbaum.

He also notes that it is important to make sure your contract with the GC protects you from liability in his contract with the end user client.

About the Author

Jason Knott
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Jason Knott:

Jason Knott is Chief Content Officer for Emerald's Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California.

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