Oops, we reduced the series to two parts.
By Ron Pestone
Everyone likes to quote the golden rule in contracting. When it comes to collecting, “you need the resources to complete the entire job without receiving any payment because in the end completing the contract takes all the argument away from not paying”. You had a contract to perform a specific scope of work. You completed the scope of work and it passed all local and state codes and was in accordance with contract documents. The money is rightfully owed. It must be paid.
Sounds great but about one percent of contractors and construction professionals has the resources to make it a reality. In the real world the majority of contractors and construction professionals sign contracts, perform the work and hope to get paid.
If you are performing a service or work for a city, county, state or federal agency, if you perform in accordance with the contract documents and have not delayed the project you have a better than decent chance of collecting your money. Agencies feel it is in their best interest to keep an active list of bidders to perform their work and one of the major ways of doing that is to pay their contractors and construction professionals in a fair and reasonable manner.
In the event you are not able to secure payment, with the exception of Federal work, you can protect your money by placing a lien on the project. This insures the money will be kept safe until the issue is resolved. There are time requirements on placing a lien so make sure you know those requirements in your state.
Then the lawyers step in and if it looks like a win case the attorney will take up to one half of what is collected. Or he or she will bill by the hour and you will watch you legal fee climb until one half of the settlement looks like a good deal.
Sometimes when you lien an agency you can have a quick meet, settle the issue and for a minor discount collect your money. The trick here is to collect your money without the agency blacklisting you. Agencies are populated with people, many whom are decent. Find the right person, make your case, settle, collect and leave as friends.
If it is Federal work you cannot lien the job and if you try to remove any material or equipment that is on site, paid for or not you will be charged with stealing. By contract you are permitted to move under the bond after a specific number of days which you must do. Then it’s in the hands of the lawyers. Once again, if at this point you must make a concession and take less money than is owed to you, do you and your company a favor and take the deal.
If you’re working for a developer, construction manager, owner’s representative or another contractor they are all seasoned and tough. Use the oil can; lien as a last resort. If you are asked, make the necessary concessions and collect your money. These entities are pros and with them it’s all business. Don’t make the mistake of making it personal. Keep it all business and as pleasant as possible; in the end you not only want to collect your money but you would also like to do repeat business. If they have a real issue, settle it and move on. Listen to these adversaries, really listen and make a decent effort to resolve their issues.
In many ways the most difficult to work for and collect from is the home owner. Most are not construction professionals and between weak drawings and their inability to communicate a clear scope of work all kinds of problems surface. Not being professionals they are quick to anger and a small issue can quickly escalate into a full scale war. Most people, when they do not know what to do, start yelling and yelling becomes more yelling with no one listening. If the home owner is a decent and honorable person you need to remember that you are the professional. Handle the homeowner with kid gloves. Walk him/her through the issues and help where you can help. Many times if you are a decent listener you can hear the real problems and with a little effort resolve them.
If the homeowner is unscrupulous and looking for something for nothing you have your hands full. Some people just do not want to pay. Some use the leverage of computer sites that review and grade contractors, threatening to give the contractor a bad review unless they get what they want. These sites are a one way street and can ruin a contractor. They are used many times for less than honorable reasons. At present contractors and construction professionals have almost no defense against an unscrupulous home owner who uses these sites to drive the price into the ground.
Homeowner’s houses and property where work was performed can be liened but again, make sure you know the time constrainsts for your state. The only effect the lien has is that it must be either bonded or cleared before the home can be sold or a mortgage can be obtained. If the homeowner is not looking to sell it can be a very long time before the contractor collects his money and the lien must be renewed periodically. In all situations where you need to retain an attorney you must think about the cost. Attorney fees can add up very fast and like a taxi meter the fees do no stop until you get out of the taxi. In addition there is considerable drain on your time and your organization’s time that legal preparation demands. The best attorneys in the world are useless without all the facts and records properly submitted to them in an understandable sequence so they can properly prepare you and your company. If you have ever been there, and I have, it takes a hell of a chunk out of your wallet and your time.
So, when you go through it all you are left with where you began. Honestly and decently pick your options skillfully. Reputations are made by history if an individual or entity has a reputation as a non-payer stay away from them. If that individual hasn’t paid the last contractor he isn’t going to pay you.
Take the time to seek out the honest, decent agencies, construction managers, owner’s representatives and contract with them.
If you get a bad feeling from a homeowner or developer at your first meeting, stay away.
Let reputation count in whom you choose to do business with. Don’t be taken in by the slick.
There is an old story about a famous celebrity who was interviewing accountants. He asked each accountant he met what two plus two was and with the exception of one person they answered four. The one exception asked, “What do you want it to be”? The celebrity hired him. The celebrity was a good example of who to run away from and not do any work for.
Choosing correctly begins and ends with honesty and decency.
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