Background. In most states, a company that supplies building materials for a construction project can claim a “materialman’s lien” against the property in the event it is not paid. If the property owner pays a general contractor for the materials, and the general contractor fails to pay the supplier, then the owner must pay the supplier in order to avoid the sale of its property to enforce the lien. In other words, the property owner ends up paying twice for the same materials. Of course the owner can sue the general contractor, but in some cases this person cannot be found or is insolvent.
A recent case. A company provided materials for a church construction project. Before delivering the materials the company wrote the church a letter warning it that if the general contractor failed to pay for the materials, the company could claim a lien against the church’s property. When the company failed to receive payment from the general contractor, it sued to enforce its lien. The company sought not only payment in full for the materials it had supplied, but also finance charges and attorney fees. A court ruled that a materialman’s lien only allows a supplier to collect the full price of materials that were supplied. The supplier is not entitled to an additional amount, whether for finance charges or attorney fees, unless the contract between the parties specifically provides for it.
Relevance to church treasurers. It is important for church treasurers to be familiar with the concept of materialman’s liens. Whenever your church hires a contractor to perform a construction or remodeling job, the last thing you want to do is pay twice for the same materials. This not only can create a substantial financial hardship, but it also can be embarrassing. There are a various ways to avoid such a situation. Here are some recommendations: (1) Only deal with reputable contractors who have been in business in your community for several years and who have an excellent reputation. Many churches use a contractor who is a member of their congregation. (2) Require the contractor to provide you with “lien waivers” from all suppliers and workers before making payments for the job. (3) Hold back a portion of the contract price until you are assured that all suppliers and workers have been paid. (4) Ask the contractor to submit bills from suppliers and workers directly to the church, and inform the contractor that the church will pay these bills directly. (5) If you sign a contract, you may want to address some of these options in the contract. The services of an attorney are essential. Sherman v. Greater Mt. Olive Baptist Church, 678 So.2d 156 (Ala. App. 1996).
This article originally appeared in Church Treasurer Alert, January 1998.