While it’s always best to consult with an attorney for any specific legal advice, when unpaid on a construction job, there are special tools available to industry participants that are designed to help prompt payment from a delinquent customer. Generally, the final step (or last resort) for a contractor or supplier with an unresponsive, non-paying customer is to file a mechanics lien or a bond claim.

However, there are a few things that a construction company with a payment problem on a project should do before going through with that final step. To find out more, please read on.

What to do When Unpaid on a Project:

Check the State’s Requirements Before Filing a Document

Lien laws, including deadlines and notice requirements vary from state-to-state. What this means is that filing a lien or a bond claim is not always automatically available since there may be requirements that must be met in order for a company to maintain lien rights.

In some states, sending preliminary notice or a notice of intent might be required before filing a lien or bond claim. If you’re in one of these states, neglecting to send a required notice can kill a company’s lien rights, nullifying the ability to file a valid mechanics lien or bond claim. In other states, there are strict deadlines that must be met in order to maintain the right to file a lien.

Since these requirements change drastically from state-to-state, it’s fairly easy to mess it up. And if a contractor loses their lien rights, that means they can no longer file a lien on that job.


Essential Reading

What Do I Do If I Miss a Mechanics Lien Deadline?

What Do I Do If I Miss a Preliminary Notice Deadline?


Try to Resolve the Payment Issue

There are many reasons why customers pay late, and many more reasons why they sometimes don’t pay at all. But in a lot of cases, slow payments are the result of a customer’s disorganization causing a delay or even causing the invoice to be lost. This is still inexcusable, however, in this situation the customer isn’t operating out of bad faith – they just don’t have it together enough to pay their bills on time.

That’s why the first thing a construction company with a late payment issue on a project should do is attempt to pro-actively communicate with the delinquent customer. Regardless of whether the preliminary notice deadline has passed (see above), in the interest of communication, it’s still probably a good idea to go ahead and send a preliminary notice. This good faith gesture will hopefully get the customer’s attention and remind them that their payment is late.

If the preliminary notice doesn’t work, next try sending a Notice of Intent to Lien. That document is often enough to prompt payment without having to resort to filing a lien.

Finally, even after initiating a claim, a tool like the Lien Resolution Center through zlien can help bring disputing parties together to work out a project payment issue prior to being forced to foreclose on the lien.


Further Reading

Why Customers Don’t Pay And What to Do When It Happens | by zlien CEO Scott Wolfe


Never Let It Happen Again

So, what if you’re in the process of getting burned by a customer right this very moment – even as you are reading this very article? While we’ve outlined a few things you can do to help remedy your current payment issue, you should use this unpleasant experience as a hard-earned lesson and make sure that you never allow it to happen to your company again. It’s just like that old saying, “Fool me once, shame on you. Fool me twice, shame on me.” Not getting paid what you’ve earned is one of the worst experiences in business, but there are tools available to protect your payments, especially for participants in the construction industry.

Consider what can happen on future jobs if there’s nothing in place to help reduce risk rights and clean up overdue accounts. One missed payment can lose crucial revenue and set the company back instead of growing revenue and improving existing and new relationships. Many contractors are now utilizing notices as a best practice on every job in order to put their payment as a priority and secure unpaid work.


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Summary
What to Do When Unpaid on a Construction Job
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What to Do When Unpaid on a Construction Job
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Construction companies have options if unpaid on a job | A few tips on some smart things to do before filing a mechanics lien or a bond claim
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zlien
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