Joint checks are issued in compliance with a Joint Check Agreement. They are designed to protect a general contractor and property owner from lien and bond claims. If you’re a party to a joint check agreement and responsible for writing or depositing a joint check, make sure you pay attention to the details.
For owners, issuing joint checks can be a protection against claims on non-payment and resulting mechanics liens by subcontractors. However, it is wise to make sure there is an appropriate clause in the agreement with the general contractor or a separate agreement that allows joint checks and specifies how much money will be written, to which parties, and how the deposits will be handled. Owners or general contractors may also want to make sure they collect lien waivers from each subcontractor when payment is issued.
Writing a Joint Check
Refer to the joint check agreement for details about how the check should be written. If it needs to be written to two or more companies, be sure to write out the word “and.” You may also want to write the words “jointly” or “as joint payees” to ensure that bankers notice that the check goes to two parties instead of just one. Remember, banks are processing huge volumes of checks every day, so help them make it easier to spot an issue.
If you are responsible for writing lots of joint checks, you may want to get checks that are marked as joint checks with language stating that it is a joint check and the endorsements of all payees are required.
You also want to make sure that the check identifies the specific project it applies to so that those receiving payment can credit it correctly. In addition, the canceled check goes into your records to show that payment was issued appropriately.
Once you’ve written the joint check, think about the best way to deliver it. If there are tension between the parties to the check, it may make sense for you to go with the check to get it endorsed by both parties or letting a contractor make arrangements for obtaining a subcontractor’s endorsement. You may want to require the recipients to execute a lien waiver to help further protect against mechanics liens and bond claims.
Depositing a Joint Check
For a subcontractor, if you’re a party to a joint check agreement, pay attention to the details contained in the agreement covering how you’ll get paid. Often, if the check was written to the general contractor as well as your company, you will drop by the general contractor’s office, endorse the check, and then collect a check in the correct amount. However the details are handled, the endorsements of all parties listed on the check are required to deposit it, which incentives everyone to work together.
If you’re a party to a joint check agreement, or think you’re on a project where one might be a good idea, reach out to the attorneys at National Lien & Bond. We can help you understand the advantages and risks of such agreements and help you put one in place that works for you.
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Frequently Asked Questions
What is a joint check in construction?
A joint check is a payment instrument made payable to TWO OR MORE parties — for example, "GC ABC Construction AND Supplier XYZ Materials." Both payees must endorse the check before it can be deposited. Owners and prime contractors use joint checks to ensure unpaid sub-tier claimants (subcontractors, suppliers, equipment lessors) get paid directly from the upstream funds, preventing the sub-tier claimant from later filing a mechanics lien for non-payment. Joint checks are most common when the GC is financially weak, when the supplier has demanded payment protection, or when the owner is concerned about double-payment exposure under the state's mechanics lien doctrine.
Why do unpaid contractors request joint checks?
Sub-tier contractors and suppliers request joint checks when they are concerned the GC or upstream contractor may take the money and not pay them. With a joint check, the funds cannot reach the GC's account without the sub-tier party's endorsement — eliminating the risk of the GC pocketing the money. This is especially valuable when: (1) the GC has a history of slow or non-payment; (2) the GC is financially distressed; (3) the project is large enough that non-payment would be devastating; or (4) the supplier extends credit and wants payment security beyond just lien rights. Owners often agree because joint checks reduce their own double-payment exposure.
What is a joint check agreement?
A joint check agreement is a written contract among the owner (or upstream payor), the GC, and the sub-tier claimant memorializing that all payments for the sub-tier claimant's work will be issued as joint checks. The agreement typically specifies: (1) which payments will be jointly issued; (2) the endorsement procedure; (3) what happens if the GC refuses to endorse (default and acceleration); (4) lien waiver coordination; (5) any payment-direct language allowing the sub-tier claimant to demand payment if the GC defaults. Joint check agreements should be in writing — oral promises to issue joint checks are unenforceable and routinely broken under financial pressure.
What is the joint check rule and does it waive lien rights?
The "joint check rule" is the doctrine in some states that issuance of a joint check satisfies the owner's payment obligation as to the sub-tier claimant, even if the GC takes more than the sub-tier claimant's share when the check is split. Under the joint check rule, an unpaid sub-tier claimant who endorsed a joint check may lose lien rights for the amount of the joint check even if the actual cash received was less. The rule varies dramatically by state — California follows a modified joint check rule under Cal. Civ. Code § 8134, Florida applies it strictly, and other states reject it. Endorsing joint checks without understanding state law can waive lien rights.
What should I do if the GC refuses to endorse a joint check?
If the GC refuses to endorse a joint check the owner has issued, the sub-tier claimant has powerful remedies. First, demand endorsement in writing — the GC's refusal is typically a contract breach. Second, file a payment direct demand with the owner if the joint check agreement allows it. Third, file a mechanics lien against the property to preserve the security interest while the joint check dispute is resolved. Fourth, consult counsel about a stop notice (in stop-notice states like California) or a bond claim (on public works). The GC's refusal to endorse is strong evidence of payment misappropriation and supports both lien foreclosure and direct civil claims against the GC.
Can the owner avoid double-payment exposure by issuing joint checks?
In many states, properly-issued joint checks under a written joint check agreement protect the owner from double-payment exposure to sub-tier claimants. This is one of the key reasons owners agree to joint check arrangements — they reduce or eliminate the risk that a sub-tier claimant will later file a mechanics lien for unpaid amounts the owner has already paid to the GC. However, the protection requires strict compliance: the joint check must actually be issued in the names of both parties, both parties must endorse, and any joint check agreement language must be carefully drafted. NLB advises both unpaid contractors and structuring counsel on joint check agreements.
How does National Lien & Bond help unpaid contractors with joint check disputes?
National Lien & Bond negotiates joint check agreements for unpaid contractors and suppliers BEFORE the payment dispute arises, and pursues recovery when joint check arrangements are violated. For Illinois-based engagements, Hal Emalfarb's firm at Emalfarb Swan and Bain handles the strategic negotiation and litigation. For 50-state coverage, NLB's network attorneys file mechanics liens, payment bond claims, and direct civil claims against GCs who misappropriated joint check funds. Many sub-tier contractors lose joint check funds because the underlying agreement was oral or poorly-drafted — NLB's pre-payment review prevents these losses. Contact NLB for a free initial consultation.