A Co-op Lawyer Discusses Subcontractors Legal Responsibilities and Obligations

 Most boards of co-ops and condominiums spend a lot of time negotiating the terms  of their contracts with general contractors; however, it is often  subcontractors who do most of the work. Sometimes the Boards are not even aware  of how much work they are doing. Despite this fact, their contracts, if they  even have one, are the least thought out and the terms of their work are often  very unclear. However, the legal issues that can arise from work by  subcontractors can be profound for buildings and general contractors who have  not been well-briefed by knowledgeable legal counsel.  

 When a co-op or condominium building hires a general contractor to renovate  property, that company is legally responsible to the owner for completing all  of that work. The contractor may go out and hire different subcontractors to  help execute that work, but the prime contractor still remains liable for the  entire project and the subcontractors are in turn liable to the general  contractor, not to the client. They have what is called “privity of contract” with the general contractor. The general contractor also has privity of  contract with the client.  

 Know Who’s at the Worksite

 However, a subcontractor who has done work, with the knowledge and consent of  the client, may file a mechanic’s lien, the same way that a general contractor can. The subcontractors presence on the work site is not generally a secret. In fact,  owners should make it their business to be aware of the names and contact  information of the subcontractors have been hired to perform some of the work.  I usually make disclosure of this a provision in the contract between the  general contractor and the building.  

 The general contractor is obligated to pay the subcontractor, even though the  owner has been slow or late in paying him. Many a general contractor has tried  to claim that he is not liable for paying subcontractors until he has been paid  by the client, but that is not a legally correct position. In fact, a clause in  a contract between a general contractor and a subcontractor in which the  general contractor seeks to absolve himself of liability for payment until the  client has paid him, is void as against public policy. There are also  situations in which the general contractor has been paid by the owner, but for  some reason has not paid the subcontractor. The best insurance for an owner  that subcontractors have been paid is insisting on partial waivers of lien  throughout the project and final waivers at the end.  

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