How commercial property owners can prevent liens after projects

On Behalf of | Oct 5, 2023 | Construction Law

Owning commercial property often means making major investments. Not only is the price per square foot for commercial real estate often higher than the price per square foot for residential real estate, but maintenance requirements and risks can be higher as well.

Particularly if someone wants to modernize a space or customize it for commercial tenants, keeping the facility in good condition may require the help of construction professionals. Expansions, remodeling projects and build-to-suit efforts all require the help of construction professionals. Under a variety of circumstances, those professionals and the contractors they hire could seek a consequential construction lien against the property after the project. How can owners protect against that risk?

Choosing reputable companies

Often, commercial property owners make the mistake of focusing too much on price for construction project bids. The price for the project is obviously a top consideration, but it should not be the only factor that influences what company manages the construction project.

There are construction companies that will fail to pay their subcontractors and suppliers, and the property owner may ultimately be liable for that failure. Delays in payments can lead to those outside parties seeking a construction lien against the property. Even though the property owner did not directly hire them or contract for the materials, they still have an obligation to ensure they receive payment.

Careful contract inclusions can limit a property owner’s risk. Some owners even use special accounts and require proof that a company has paid subcontractors and suppliers before releasing the final payment for a project. The choice to work with reputable companies and invest in specific contracts can go a long way toward protecting commercial property owners from construction liens.

Ensuring that construction companies properly reimburse suppliers and subcontractors can help reduce the risk of a title blemish for a commercial property owner.