Hi, Amber,

Contractor laws vary from state to state. You'll be well served to consult an attorney licensed to practice in your state who has real estate/construction law as part of his/her practice.

I plan to. Unfortunately, all this mess raised its ugly head yesterday afternoon and my call to the attorney has not been returned yet. And now I have to wait till Monday. I thought I would reach out were I can learn more before I meet with the attorney.

A CONSTRUCTION attorney - NOT REAL ESTATE. - is what you need. And fast. There are red flags all over. From what I have seen - Texas is lax on oversight of the building industry, but there should be SOME protections you can have.

Also - scour your state's attorney general site for general help and information.

When the builder realizes he isn't getting any more money until he provides the waivers, he'll produce them in short order. You aren't asking for anything extraordinary or unusual. If you want to lose money for sure, get a lawyer involved.

I am in Massachusetts. If I can show that I paid the contractor, that proof may be a defense to a mechanic’s lien the sub has placed on your house. You need, of course, a Texas attorney.

Have you asked him why he is refusing to provide proof of payment and releases of liens? He may be behind on the paperwork. He may be waiting on a bill. It doesn't hurt to ask.

Not an attorney, try to get along first. Tell him that you have been approached by XYZ supplier asking for payment. Has he paid them? If no, tell him that it is freaking you out. You need XYZ paid off asap. Make certain that you have given him money for this outstanding bill. Ask him to pay the contractor or supplier on Monday.

When I built my custom home, my GC provided me with a monthly stack of bills that had come in and had been paid. He also warned me of outstanding bills that were coming or when he was ordering something that would exceed the amount of working capital that I had provided. It was usually a large item like the framing package or windows. Otherwise I wrote him a check at the end of the month. There should be lots of small receipts for screws and bolts. Nothing is too small for a bill. They all cost money.

Right now you don't have a lot of recourse. It will all depend on the contract that you signed with your GC. You should have an construction attorney as part of your team. If you don't, get one before you go much further.

Call the billing office of the supplier involved and talk to them. Does this guy owe them for other projects? Has he got a good reputation? Is the GC easy to work with? Is this the first time they have dealt with him?

Most GC's use the same sub-contractors. They establish relationships. Quietly ask the people working on the job how many houses they have helped the GC complete? How long have they known him. That will be a tell as to his stability. In my case, most subs had worked for my GC in excess of 10 years. There were exceptions, but very few.

Get that attorney on your team. You can do that quietly. Try to get to the bottom of the issue first before you go ballistic. It's stressful, but a little patience may pay off in the long run.

lien waivers from all. Joint checks from here out if you continue.

@homechef59 - I have asked him why he won't provide proof of payment and he tells me because he provided me a subcontractor/supplier list and I that I should call them each directly. When I call them, they will not discuss "the builder's" finances with me, even though it is my house. For this reason I requested he/THE BUILDER obtain lien releases from all suppliers and subs because they will not talk to me. Apparently, they only talk to you when they are ready to start the lien process, then they don't care that you are not the builder.

Surprisingly, a sub can attach a mechanics’ lien on the owner’s property, even though owner has had no interaction with the sub. The “justification” is that the owner will put pressure on the contractor to pay up. Doesn’t seem fair to the homeowner, but, if one were the sub and needed the money, any legal option available would have to be implemented.

Just an IMO: your contractor is a rat. He has put you in jeopardy and stiffed a worker. Nasty man.

Not surprised that the supplier's won't talk to you unless a lien is filed. They still want additional business from the contractor. Filing a lien is really easy and some supplier's do it as a matter of doing business. They are covering their business by doing so. It's not meant personally.

I fully understand your angst over this. I had something similar happen when I did a remodel. My GC, a not so good one it turned out, used a concrete finisher who was late with paying the concrete supplier. This was back in 2008 when contractors were reneging on debt left and right holding suppliers with the bag. I got the notice lien in the mail on a Friday and had to stew all weekend long. I got it straightened out, but it took two days. It turned out to be the only issue. But, you can be certain I watched this guy carefully and asked his subs if they were getting paid.

Tell your GC to get it straightened out on Monday morning. It's the first fire for him to put out before he gets his first cup of coffee. Suppliers are open early. If he has to take the check over himself, he needs to get it done. You don't want to hear an excuse. Also, you want to see a signed release of lien from the supplier on Tuesday. If he can't provide one, he needs to call the supplier and authorized them to talk to you. Hand him your phone to make the call. This way you can assess the status of the payment.

Get yourself a construction attorney. You may need to renegotiate your contract. Your weapon is not paying another dime until you get a release of lien from the supplier. Remain professional at all times. No cussing, no threats, no drama.

What kind of contract do you have?

If it’s a fixed price, you have no standing to see any subcontractor info or bills. You are a third party. All you need to see and verify are the lien releases. Which is usually when a bank will release the next disbursement. This is why having a bank finance a build, even when you have the money, is a very good thing.

If you are doing a cost plus, those billings create the basis for the Plus portion of the contract. You should be seeing them all along. Nothing should have changed at all.

@User We have a fixed price contract. We are paying cash as we go. The builder refuses to provide lien releases to me. Texas Property Code does requires him to provide a valid and updated list of subcontractors and suppliers. I’m still researching and I’m waiting to hear back from the attorney but per the Texas Property Code it does appear he can also be required to provide lien waiver. Do you know anything about retainage?

@A.M. Texas

I am going to caution you against taking too much of the advice here, which I guess includes mine. Construction is governed by state laws and those laws may be vastly different from state to state. There are no statewide contractor licenses in Texas and so as Janni mentioned above supervision of home construction is a bit lax in Texas. Conversely, Texas has some of the strictest laws in the country on how contractors must handle payments regardless of what type of contract they are in. Texas is one of the few states that can and regularly does send contractors to prison for not paying subs.

Because of these two things Texas construction law is a real mess and that means all advice here, again including mine, should be taken with a grain of salt. Some general thoughts though.

Mechanic's liens are one of the few legal proceedings where there is a presumption of guilt. Therefore, there are strict guidelines for perfecting a mechanic's lien. In my home state, a subcontractor can get a mechanic's lien largely just by filing it, but must appear in court within a certain time period to perfect it or the lien will be dismissed with prejudice. In my state, regardless of the type of contract, a (sub)contractor can only file a lien for materials provided and services performed in a 3 month period before the lien filing. They also must communicate with the homeowner 15 business days before the filing.

If you were in my area I would have the attorney draft a letter to the subs putting them on notice that their refusal to provide information on payment status is a forfeit of their right to file a mechanic's lien. I suspect a form letter sent to all subcontractors will be sufficient to grease those wheels.

As for retainage, I can't think of any reason that a shortage in retainage can't be made up in later payments. However, you should check with your attorney before you do that and should think whether or not it will achieve the desired result. Unless your contract has a force majeure clause which your contractor has activated, there is a good chance that your contractor is already upside down on a fixed price contract. Suddenly withholding a large portion of a progress payment to make up for retainage may do more harm than good.

Lots of contractors are undercapitalized and robbing Peter to pay Paul is not rare in the industry. Your goal isn't to fix that, your goal is to not be Peter.

Good luck

The thing about a contract is that there are two parties to it. Your contractor has the right to not have it changed in mid stream. You have the right to protect yourself, by asking for a change. That will be contentious.

Start planning the Option B, where you can’t come to an agreement. You’ll have to buy your way out of the current contract, and take on being the GC yourself. Do you have the time and knowledge to do that?

@User The thing about a contract is that there are two parties to it. Your contractor has the right to not have it changed in mid stream. You have the right to protect yourself, by asking for a change. That will be contentious.

The other thing about a contract is that they have to follow all applicable state laws.

So far as I know there is no exception for fixed price contracts in the Texas Construction Trust Fund Act, nor is there an exception in the Texas Prompt Payment Act. Again, it is my understanding that there is no mechanism for contractors in Texas to legally keep their subcontractor fees hidden. If you know of one, please post it here and let me know.

I know that we like to repeat the whole "subcontractor payments are none of your business in a fixed price contract," mantra, but in Texas the statute quite literally says that, for contracts over $5,000 the contractor must place construction funds into an operating account and provide the homeowner an accounting of all transactions.

So how is the OP's demand that the contractor comply with the law a change of the contract?

@bry911 can you assist me in locating the part where it talks about the owner an accounting of the transactions from the construction or trust account

can you assist me in locating the part where it talks about the owner an accounting of the transactions from the construction or trust account

That is what trust funds do/are.

Section 162.003 establishes a property owner as a beneficiary of the trust fund.

Section 162.007 describes the management of the account.

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Again, you should speak to an experienced attorney and see what they have to say. There is sometimes a wide gulf between what the law dictates and actual enforcement of the law. I would not start citing statutes at your contractor unless your attorney tells you to. In the end, a letter to the subcontractors from an attorney is probably your better option.