What Happens If a General Contractor Doesn’t Pay Subcontractors?

Even when you find a contractor to do a remodel on your home, you still sit with the question: Could something go wrong, even after I pay them? It’s not a question you want to have answered when someone puts a lien on your home. Unfortunately, if a general contractor doesn’t pay their subcontractors, the subs can go after you.

The good news is that there are ways you can protect yourself.

Shugarman's Bath has completed more than 6,500 tub and shower remodels. With the number of remodels we’ve done, many members of our team have seen and spoken to homeowners who had a lien placed on their home even after every invoice was paid. This happens more than you might expect. After many years in this industry, we've seen firsthand what can happen when a general contractor doesn't pay a subcontractor.

This article shows you how an unpaid subcontractor can end up with a legal claim on your property, and what you can do to prevent it.

Table of Contents:

• What Happens If a General Contractor Doesn't Pay Subcontractors?
• Why Do Some General Contractors Fail to Pay Their Subs?
• How Can Homeowners Protect Themselves Before Signing a Contract?
• What Should You Do If You Suspect a Subcontractor Won't Be Paid?

What Happens If a General Contractor Doesn’t Pay Subcontractors?

A subcontractor who doesn’t get paid by a general contractor can place a lien on your home, even if you paid your GC in full.

Specifically, they could place a mechanics lien against your property, which is a legal claim recorded with the county recorder’s office. This type of lien can be filed by any contractor, subcontractor, laborer, or material supplier who didn’t get paid for the work or materials on your property. If that debt never gets paid, the subcontractor or supplier can sue to force the sale of your home to collect what they're owed.

Say your general contractor hires a subcontractor to do the plumbing in your walls. The subcontractor still needs to be paid for both their materials and employee labor costs after finishing their portion of the project. If they’re never paid by the general contractor, they might have a few options left. They could take the general contractor to court, but placing a lien on your home is often the faster way to strongarm payment.

A lien can sit on a property for years, even decades, without you ever knowing. Many homeowners don’t know they have a lien until they try to sell the home or pull equity from it.

If, heaven forbid, the company that placed the lien closed down years ago, you obviously can’t call them and ask for a release. Instead, you have to go through the Contractors State License Board to get the lien resolved.

Why Do Some General Contractors Fail to Pay Their Subs?

Most general contractors run more than one project at a time. Money coming in is often used to cover costs on another job.

The contractor might use the funds you provided to pay for materials on different jobs. Sometimes a homeowner hasn't released the next payment after work is already done. That, or a contractor is having a slow month, causing payment to subcontractors to be delayed longer than it should be.

While it might sound harsh, some general contractors operate poorly and are negligent in paying the people they hired.

Regardless of the reason, the subcontractor needs to get paid. At some point, they feel like they have no choice but to go straight to you, putting a lien on your home to do so.

How Can Homeowners Protect Themselves Before Signing a Contract?

It’s important to protect yourself before ever signing a contract. Here are some options for you to protect yourself:

1. Ask for a list of the subcontractors your contractor plans to use, along with their names, phone numbers, and license numbers. There’s no reason a legitimate contractor would refuse to provide you this information. If they refuse, don’t bother hiring that general contractor.

2. Check the licensing and insurance info of general contractors and their subcontractors through the Contractors State License Board. You can see whether their licenses and insurance are active, along with any violation codes. A violation code showing up in red usually means the contractor failed to pay a material supplier, a subcontractor, or an employee on a past job.

3. Ask your contractor directly whether a lien will ever be placed on your home, and get their answer in writing. Getting the answer in writing won't stop a lien from being filed. What it does is give you proof your contractor made a false promise. If a lien shows up anyway, you can file a complaint against the contractor's license with the CSLB, or take them to small claims court.

A verbal promise on its own means nothing. If a contractor brushes off the question or claims “a lien will never happen," look at those responses as a red flag. Those responses show that the contractor isn’t willing to put themselves on record or take responsibility if something goes wrong.

4. Make sure your contract has a mechanics lien warning. Every home improvement contract in California is required by law to include a mechanics lien warning. This section explains that a subcontractor or supplier can file a preliminary notice up to 20 days after they start work or deliver materials. This is their way of protecting their right to file a lien later if they aren't paid.

It also outlines how a lien could end up on your property.

5. Get your contractor to agree in writing that they will provide a lien release once the project is finished and every balance is paid. This applies to your general contractor and any subcontractors who worked on the job.

What Should You Do If You Suspect a Subcontractor Won’t Be Paid?

If, at any point in your project, you suspect subcontractors won’t be paid, get it in writing from your contractor that a lien release will be provided.

Don't wait for confirmation that a problem exists. You don’t want to deal with the issue by having a lien show up on your home.

A Few Questions Can Save You Years of Trouble

Don’t automatically assume everything will be fine. You can avoid being surprised by a lien on your home years down the road. A little diligence before signing a contract protects you far better than trying to untangle a lien after the fact.

If you're currently looking for a contractor, read our article on how to vet a contractor. While the article covers tub and shower remodeling, the vetting steps work for any contractor you bring into your home.

Not sure what else to ask before signing a contract? Download the free Buyer's Guide with 16 questions to ask any contractor before your project begins.

The opinions expressed in the referenced materials are those of the authors only, not necessarily of Shugarman’s Bath. While these referenced materials are useful in answering generalized questions, each bathroom is unique. For a particular question about your tub or shower remodeling project, contact your Shugarman’s Bath consultant.