Often, subcontractors assume that if a general contractor liens a project that the subcontractor is protected by the general contractor’s lien. However, recent decisions from courts in Utah and in the Utah Federal District do not support this view. In a recent case I was involved with, a general contractor had included the total amount the contractor owed to all of his subs and suppliers for a particular construction project. Even though the lien encompassed these values, the court reduced the amount of the lien to reflect the amount of money actually owed to the general contractor exclusive of any money owed to subcontractors and suppliers, and also allowed the general contractors lien to include any amounts which the general contractor had paid out to subs but had not received from the owner and also the amounts which the general contractor owed to any subcontractors who had filed lawsuits against the general contractor. To the extent that the subcontractors that had not filed lawsuits who had not filed their own liens and started their own foreclosure actions, then the view of the Court was that those amounts were not lienable.
The important lesson in this for subcontractors and supplies is that they cannot rely upon a general contractor’s lien as a tool for their own collection. Instead, they must file their own liens, and pursue their own collection activities against the general contractor and enforce their own liens in order to make sure they are protected. Obviously, when a general contractor has filed a lien and is prosecuting a lawsuit, the general contractor is very supportive of having subcontractors file their own liens and proceed along in the litigation. So the cost can be reduced for subcontractors by working with a general contractor. Nevertheless, the failure of the subcontractor to file a lien and particularly to file any kind of lawsuit against the general contractor would prohibit that subcontractor from being included as part of the overall lien claim process.
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