Managing subcontractors: insurance, licenses, liens

Managing subcontractors well comes down to three things: collect the right papers before they start (certificate of insurance, license, W-9 and a written scope and price), track when those papers expire, and collect a lien waiver every time you pay them. Add clear schedules and a single point of contact, and most sub problems never happen.

This guide is for small general contractors and remodelers who hire a handful of trades: electricians, plumbers, HVAC, drywall, tile, countertops. It isn't legal advice, and the rules on licensing, insurance and liens differ a lot by state, so check yours.

Why does sub paperwork matter so much?

Because when something goes wrong on a sub's part of the job, it can land on you:

An uninsured sub's worker gets hurt on your project, and your workers' compensation carrier may end up covering them, often discovered at your annual audit.
An unlicensed sub does work that requires a license, and your permit, your inspection or even your own license can be at risk.
You pay the sub, but they don't pay their supplier, and the supplier files a lien on your client's home.

Each of these is preventable with paperwork that takes a few minutes to collect.

What should you collect before a sub starts?

Build a standard onboarding packet and don't let anyone on site without it:

Certificate of insurance (COI) for general liability and, where they have employees, workers' compensation. Many GCs ask to be named as an additional insured on the sub's liability policy. Your insurance agent can tell you what limits and endorsements to require.
License for trades that require one in your state or city, with the number and expiration date.
W-9 so you have their tax ID for year-end reporting. Your accountant can tell you which forms you need to file.
A written subcontract or agreement covering scope, price, schedule, payment terms, cleanup, warranty and insurance requirements.
Contacts: the owner and the lead who'll actually be on your site.

Ask for certificates directly from the sub's insurance agent when you can. A certificate sent by the agent is harder to alter than one forwarded by the sub.

How do you keep track of expirations?

Insurance policies and licenses expire, usually at different times for every sub. A certificate collected in January may be meaningless by fall.

Record the expiration date for each document.
Check before every new project, and before every payment.
Ask for renewals 30 days before expiry, not after.
Don't assign a sub with expired papers until they're updated, or at least make it a deliberate, documented decision.

A simple list sorted by expiration date, reviewed monthly, catches most problems.

How do you get bids and set the scope?

For each project, get a written bid from the sub that states:

Exactly what's included, and what isn't (who pulls the permit, who patches drywall, who hauls debris)
The price, and whether it's fixed or time and materials
When they can start and how long they'll need
How changes will be priced

Comparing bids is much easier when everyone bids the same scope. Send each sub the same written description and drawings. When you accept a bid, confirm it in writing and put the sub on the schedule for their phase.

How should you schedule subs?

Subs juggle several GCs at once. The ones who show up on time tend to work for GCs who are organized:

Give dates early, then confirm a few days before.
Make sure the site is ready. Nothing loses a good sub faster than showing up to a site that isn't ready for them.
Share the right documents: plans, permit, any selections that affect their work.
Name one contact on your side for questions and changes.
Record their days on site in your daily log.

What is a lien waiver, and why collect one?

A lien waiver is a document in which a sub or supplier gives up some or all of their right to file a mechanic's lien for work they've been paid for. Collecting them protects your client's property, and your relationship with your client.

Lien waivers commonly come in a few types:

Conditional: takes effect only once the payment actually clears.
Unconditional: effective when signed, usually used after payment is confirmed.
Progress (partial): covers payments through a certain date.
Final: covers the whole job.

Some states require specific statutory forms and wording, and the rules on notices and deadlines vary widely. Check your state's requirements, and have an attorney review your forms.

A common practice is to collect a conditional waiver with each payment request and an unconditional waiver once the payment has cleared, then a final waiver at the end. For larger jobs, some GCs also ask for waivers from the sub's major suppliers.

How should you track sub bills and payments?

Keep each sub's bills and payments with the project:

Record each bill against the project, ideally against the phase it covers.
Record each payment with the date, method and amount.
Attach the lien waiver to the payment it covers.
Don't pay more than what's been billed and approved.

This also feeds job costing. Sub bills are often the largest single cost on a remodel, so they need to show up in the project's budget versus actual. Our guide to job costing covers the basics.

A subcontractor checklist

COI, license, W-9 and written agreement on file before day one
Expiration dates recorded and checked before each project and payment
Written bid with clear inclusions and exclusions
Dates given early, confirmed, site ready
One contact on your side
Bills and payments recorded per project
Lien waiver collected with every payment

FAQ

Should I require subs to carry workers' comp? Talk to your insurance agent. Requirements depend on your state, the sub's business structure and your own policy. Many GCs require it or a valid exemption.

What if a sub's insurance expires mid-project? Ask for the renewal right away. Many GCs hold payments until an updated certificate arrives, which should be in your subcontract.

Do I need a lien waiver for every payment? It's a widely recommended practice. The forms and rules depend on your state.

How do I share plans with subs without sharing client details? Share only what they need, like plans, permits and their phase dates. Pricing and client contact information can stay with you.

How ServFlo helps

In ServFlo projects (Grow and Pro plans), a subcontractor is a vendor marked as a sub, with their trade, contacts and papers (insurance, license, W-9) with expiration dates. Assigning a sub with expired or missing insurance, or an expired license, shows a warning, and papers expiring within 30 days are flagged. You can record bids (accepting one puts the sub on that phase), bills and payments, and attach a lien waiver to each payment. ServFlo records sub payments but doesn't send them. A view-only link lets a sub see their phases and shared files, never prices or your client's details. See pricing.

Managing subcontractors: insurance, licenses and lien waivers