Paying Subs & Handling Problems

Paying subs

• Pay on the agreed terms; collect a lien waiver with each payment (protects you and the owner from liens).
• Hold retainage as agreed, released at completion.
• Understand "pay-when-paid" clauses — and their legal limits in your state.

When a sub has problems

• Address performance issues early and in writing.
• Know your subcontract remedies — cure periods, backcharges, and, as a last resort, termination and replacement (have your contract and attorney guide this).

Most problems are prevented by qualifying subs well and communicating early.

Going Deeper (Intermediate)

Pay subs fairly and on time — your reputation with good subs is a competitive advantage — but pay with proper backup: approved/completed work and signed lien waivers with each payment. And address non-performance early, before it sinks the schedule.

Advanced / Pro-Level

Protecting yourself while paying subs:

• Lien waivers (conditional/unconditional, partial/final) with every payment; never release the final until the work and paperwork are complete.
• Joint checks to the sub and their supplier prevent a paid sub's unpaid supplier from lien­ing your project.
• Retainage and pay-when-paid alignment manage your cash and risk.
• For problems, follow the ladder: document deficiencies → written cure notice → backcharge → default/termination per the subcontract.
• Backcharges for a sub's damage or cleanup come out of their pay — but only cleanly if it's documented and in the contract.

Practice Challenge

You pay a sub in full, then his supplier files a lien on your project for unpaid materials. How could you have prevented it? (Answer: require lien waivers from the sub and their suppliers, and/or issue a joint check to the sub and supplier — so a paid sub can't leave their supplier unpaid and lien your job; paying without waivers leaves you exposed twice.)

In Practice

A GC pays a sub without a lien waiver; the sub doesn't pay their supplier, who liens the owner's property. Lien waivers with every payment prevent that nightmare.

Common Mistakes to Avoid

• Paying without lien waivers
• Not addressing performance issues early
• Having no contract remedy for a failing sub

Takeaway: Pay on terms with lien waivers and agreed retainage, address problems early in writing, and know your contract's remedies if a sub fails.

Educational content — follow tool manufacturer instructions and have subcontracts reviewed by an attorney.