The end of the year is upon us! December really came out of nowhere, like an unexpected snowball. With the holidays around the corner, now is the time to get organized! Read on for tips on how to reduce unpaid and outstanding invoices (and get paid) before the end of the year.
Send a Notice of Intent
Haven’t been paid on a project? The first step is to send a notice of intent to lien (we sometimes call these “NOIs”). A notice of intent to lien is a document that is sent when payment is past due. The purpose is to inform the receiving party that a lien will be placed on the project property if payment is not received within a certain time frame. Because NOIs are sent prior to the filing of a lien, they are a type of preliminary notice.
Nine states require notices of intent as a prerequisite to filing a lien. However, sending a notice of intent in a state that doesn’t have a NOI requirement can make a big difference in how quickly you get paid. Notices of intent harness the power of the mechanics lien to induce payment more effectively than general requests for payment like traditional demand letters.
Sending a notice of intent motivates the receiving party to make payment in order to avoid having a lien filed on the project property. Click here to download free NOI forms for all 50 states.
File a Lien
Sending a notice of intent didn’t work? The next option is to file a mechanics lien. The mechanics lien is an extremely powerful tool that construction industry parties can use to ensure payment when working on private projects. Filing a mechanics lien gives the unpaid party a security interest in the property upon which they performed work.
Lien rights expire after a certain amount of time so it is important to file liens in a timely manner. All states have mandatory deadlines for filing a mechanics lien, so make sure to check out our deadline map or download one of our deadline charts to ensure that you don’t hang back until it’s too late. (Yet another reason to set a personal deadline of sorting out unpaid invoices by the end of the year!)
[zlien id=”30762″]
File a Bond Claim
Bond claims work much like mechanics liens, except that they are used for public projects. If you have performed work on a state or federal project and have not been paid, bond claims exist to help you.
On public projects, the bond claim is filed against the payment bond (whereas mechanics liens are filed against the property itself. But this can’t happen on public projects.) Like mechanics liens, bond claims are inexpensive to file and very effective. Filing a bond claim puts substantial pressure on the prime contractor’s relationship with their surety, which motivates GCs to make sure parties that improved labor and/or materials are paid promptly.
Enforce the Lien
You sent a notice of intent and filed a mechanics lien and you still haven’t been paid?? The next step is enforcing the lien. In most states, mechanics liens are enforced by filing a lawsuit to foreclose on the property upon which the lien has been filed. To follow through with enforcing a lien, it is a good idea to consult an attorney, particularly an attorney that specializes in construction law.
Fortunately, when all the pre-lien steps are followed (filing preliminary notices and notice of intent), liens rarely need to be filed and even more rarely need to be enforced.
Now you know how to reduce unpaid invoices and prevent accounts receivables from spiraling out of control. By following these steps in the next few days and weeks, you can clean up your books by the end of the year.
Leave a Reply