If you are a subcontractor and the general contractor is sitting on your money because the owner has not paid them, two things decide whether you get paid: one clause in your contract, and one fact about your state. The clause is "pay-if-paid" versus "pay-when-paid." The two sound almost identical and mean completely different things, and in many states the harsher one is not even legal. So before you accept "we can't pay you until we get paid," check both.
Pay-when-paid vs pay-if-paid
- Pay-when-paid is about timing only. It says the GC will pay you within a reasonable time after they get paid. If the owner drags their feet, your payment is delayed, but the GC still owes you. If the owner never pays at all, the GC still has to pay you within a reasonable time. It does not get them off the hook, it just buys them some slack.
- Pay-if-paid is a trapdoor. It says the GC only owes you if the owner pays them, full stop. If the owner goes bust or refuses, the GC never owes you a cent. It shifts the entire risk of the owner not paying off the GC and onto you, the sub who did the work.
That difference is the whole game. Pay-when-paid, you are getting paid, just later. Pay-if-paid, you might not be getting paid at all.
The law usually leans your way
Two things work in your favor.
First, courts do not like pay-if-paid. When the wording is at all unclear, most courts read it as pay-when-paid, so the GC still owes you. To actually shift the risk onto you, the contract has to spell it out in crystal-clear terms, such as calling the owner's payment a "condition precedent." Vague language defaults to timing, not a trapdoor.
Second, and bigger: many states void pay-if-paid clauses entirely, because they let a GC use their own contract to wipe out your right to be paid for work you did. California, New York, North Carolina, and South Carolina are among the states where a pay-if-paid clause is unenforceable, so even if it is sitting right there in your subcontract, it may be worth nothing. Whether your state voids it is exactly the kind of thing to confirm in Working in Your State.
Your lien does not care what your contract says
Here is the part that matters most. That clause governs the GC's promise to you under the contract. Your mechanic's lien is a separate, statutory right against the property itself, and a pay-if-paid clause in your subcontract does not take it away. So even in the worst case, where the clause is valid and enforceable, you still have your lien on the property as leverage. This is exactly why you send your preliminary notices on every job and protect your lien rights early: the contract can try to limit what the GC owes you, but the property is still on the hook. See Mechanic's lien basics.
What to do
- Before you sign: read the subcontract for "pay-if-paid" or "condition precedent" language, and push to strike it or change it to pay-when-paid. Plenty of GCs will.
- When you are not paid: check whether your state voids pay-if-paid, and either way protect and file your mechanic's lien within your deadline.
- For a large amount: a construction attorney can tell you in one call whether the clause even holds in your state, and enforce your lien if it comes to that.
Common questions
Is a pay-if-paid clause legal?
It depends entirely on your state. Several states void pay-if-paid clauses outright, so the clause is worth nothing even sitting in your signed subcontract. California, New York, North Carolina, and South Carolina are among them. In other states it is enforceable, but only if the wording is crystal-clear about shifting the risk to you. Whether your state voids it is exactly the kind of thing to confirm in Working in Your State.
If the owner never pays the GC, do I just never get paid?
Only if a pay-if-paid clause is both valid in your state and written in crystal-clear terms, and even then you still have your lien. Most of the time the clause is either void where you are or too vague to enforce, so the GC still owes you. And your mechanic's lien against the property is a separate right the clause cannot touch. Protect and file it within your state's deadline.
Can a contract take away my lien rights?
A pay-if-paid clause controls what the GC owes you under the contract, not your statutory lien on the property. A clause that tries to make you waive lien rights before you have done any work is void and unenforceable in nearly every state. You can be asked to sign waivers as you get paid, which is normal, but pre-work waivers of lien rights do not hold. Confirm the details in Working in Your State.
How do I get pay-if-paid out of my subcontract?
Read the subcontract before you sign and push to strike the clause or change it to pay-when-paid, and plenty of GCs will agree. Look for "pay-if-paid" or "condition precedent" language tying your payment to the owner paying the GC. If they will not budge, price the added risk in, and make sure your preliminary notice and lien rights are locked down on that job.
The honest bit
- Whether a pay-if-paid clause is enforceable is decided state by state, and the rules shift. Confirm your state before you rely on the clause being void. See Working in Your State.
- This is general guidance, not legal advice. Subcontract disputes with real money in them are worth an attorney's time, especially before you sign.
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