Using joint checks to protect from mechanic's liens

[Inquiring-Mind]

Jurisdiction

California

I'm rebuilding my home after the LA fires. I've read that using joint checks is an added layer for protection against mechanic's liens. So, when my contractor wants to pay a supplier, subcontractor, or worker, I'm wondering why do I even need to have to pay to the order of my contractor? Why couldn't I just write the check out to the 3rd party that needs to be paid, then just give the check to my contractor? I'm guessing that maybe this legally keeps me contractually out of the transaction between my contractor and the 3rd party for liability reasons?

 

[army judge]

when my contractor wants to pay a supplier, subcontractor, or worker, I'm wondering why do I even need to have to pay to the order of my contractor?

If your contract is a legally binding one, payment details are usually revealed in the body of the contract.

You might take out the written, signed contract and fully familiarize yourself with important details. Once you've done that, things might suddenly become as clear as crystal.

 

[Inquiring-Mind]

There is nothing in the contract that talks about payment details.

 

[army judge]

There is nothing in the contract that talks about payment details.

Houston, we might have a problem.

If I were in your fix, I'd be consulting with my home insurance carrier and/or agent, perhaps adjuster assisting me with my claim.

 

[Inquiring-Mind]

Houston, we might have a problem.

If I were in your fix, I'd be consulting with my home insurance carrier and/or agent, perhaps adjuster assisting me with my claim.

I don't get it. What does my insurer have to do with my contract with my contractor and them paying various entities (workers, suppliers, subcontractors)? More information: I've instructed my contractor to get lien waivers. Doing joint checks is an added layer of protection.

 

[adjusterjack]

Ask your contractor if you can pay his subs instead of him.

Good luck with that.

 

[Inquiring-Mind]

Ask your contractor if you can pay his subs instead of him.

Good luck with that.

What is wrong with me sending the check to my contractor, he signs it, then sends it to his vendor to sign/cash?

 

[Tax Counsel]

What is wrong with me sending the check to my contractor, he signs it, then sends it to his vendor to sign/cash?

What exactly are you worried about that this is meant to solve? Your contract is with the contractor you hired, not the subs the contractor hires to complete parts of the work. If, as is likely, the contract obligates you to pay the contractor then doing what you propose may violate the contract and put you in breach. I suggest you either get written consent from the contractor you hired or consult a local attorney to review the contract and tell you if paying the subcontractor this way may cause you legal problems if the contractor gets upset with it,

 

[adjusterjack]

What is wrong with me sending the check to my contractor, he signs it, then sends it to his vendor to sign/cash?

Because that's not what he does. Nor does any contractor do. He deposits it in his own account. Then pays his vendors, likely more than one, and pays his employees or subcontractors, while retaining his overhead and profit.

 

[zddoodah]

I'm wondering why do I even need to have to pay to the order of my contractor?

I'm not sure I understand the question here (if it's a question at all). Obviously, you have to pay your contractor in accordance with the terms of your contract.

Why couldn't I just write the check out to the 3rd party that needs to be paid, then just give the check to my contractor?

You'd have to tell us.

I'm guessing that maybe this legally keeps me contractually out of the transaction between my contractor and the 3rd party for liability reasons?

I have no idea what this sentence (which isn't a question despite the use of a question mark) means.

Ideally, your contract with your contractor should require that, when the contractor submits periodic payment applications, those applications should include copies of invoices for indebtedness to subcontractors and suppliers AND conditional progress releases pursuant to Civil Code section 8132) for all subs and suppliers who have served preliminary notices. You would then give your contractor joint checks for each sub and supplier who is owed money and pay any balance to your subcontractor. Obviously, no one who hasn't read your contract with your contractor can opine intelligently about whether this sort of arrangement is permissible.

What exactly are you worried about that this is meant to solve?

It's meant to solve (or address) the ubiquitous problem of contractors being paid by project owners, the contractors failing to pay their subs and suppliers, and the subs and suppliers then putting liens on the property. The use of the joint check procedure is quite common in the construction industry (at least in California), although it's fairly uncommon for residential construction and remodeling. Unfortunately, it seems that the OP didn't think about this until after a contract was already made.

 

[army judge]

I'm guessing that maybe this legally keeps me contractually out of the transaction between my contractor and the 3rd party for liability reasons?

Joint check agreement explained:

What Is A Joint Check Agreement?

Get a clear definition of what joint check agreements, including tips, best practices, and a free form download that you can use on your projects and jobs.

www.levelset.com

 

[EeeeekitsaMouse]

You're making this more complicated than it has to be. You are supposed to pay your contractor. Let him worry about paying the subs. You didn't hire them. Your contractor did. Do you have a problem with your contractor?

 

[Inquiring-Mind]

You're making this more complicated than it has to be. You are supposed to pay your contractor. Let him worry about paying the subs. You didn't hire them. Your contractor did. Do you have a problem with your contractor?

It's an added layer of protection against liens. When it comes right down to it, I don't trust ANYBODY when large sums of money are involved.

 

[EeeeekitsaMouse]

Jeez. What kind of shady contractor did you hire? Hope it's one who knows how to build fireproof homes. Haha. Did you run a background check on your contractor and check that he has a valid contractor's license? Where I live, you can also run a free check for criminal, civil and domestic cases. That information is always helpful.

 

[zddoodah]

You're making this more complicated than it has to be. You are supposed to pay your contractor. Let him worry about paying the subs. You didn't hire them. Your contractor did.

This is great advice if you want to end up with liens on your property. A contractor doesn't have to be "shady" to fail to pay or late pay a sub or supplier. It happens all the time, and the OP's precautions are prudent (and, unfortunately, highly unusual for folks in the OP's position).

I do agree that the contractor's licensure and bonding should be verified, and that can be done here.