Contractors – are you encountering payment issues?
I’ve noticed recently that the number of construction industry clients coming to me with issues of being paid has increased. I hope adding the following tools to your toolbox will be helpful:
- Contracts are surfacing more frequently with terms that require you to waive mechanic’s lien rights or in which you are asked to agree to terms such as “pay when paid” or “pay if paid”. Let’s review and discuss those before you sign!
- On all payments to suppliers or subcontractors, specify what invoice is being paid. When you have an open account with a supplier, if you do not earmark payments to a particular project, the payments may be applied to other open invoices on other projects. Imagine a bond claim for a project you thought was paid but your payments on that project had been applied to other projects.
- If you find payment slowing or stalled out during a project, you might consider a disburser’s notice to the lender or owner paying the contract disbursements.
- It is easy for you to get bogged down with contractual dispute resolution procedures, discussions, and negotiations only to find that the deadline to take action by a mechanic’s lien or the claims process passed.
- Keep sound time records, as a mechanic’s lien right and rights to claims in public projects may spring from the date of last work.
- Track the timelines for a mechanic’s lien. In Colorado, for most, the drop dead date to record a mechanic’s lien is 4 months after last date of work. In order to draft the lien, complete the notice process, and allow the required opportunity to pay after notice, contact me about a lien at least a month before that absolute deadline. Please note that the timelines for labor by the day or piece are much shorter
- Tracking timelines is equally important on government projects to claim on the project and to make a bond claim.
- The deadlines to bring suit to foreclose a mechanic’s lien or to pursue a government project claim or bond claim are short as well.
- It is a misconception that your recorded mechanic’s lien stays in the chain of title until released. In Colorado it expires if a foreclosure action is not filed, generally within 6 months of the date of last work. If you have not been paid within a month after your lien is recorded, we should consider preparing a suit to foreclose the lien.
- Priorities exist for liens and claims so it is best to be on the front end of a bad situation.
My clients have been quite successful in obtaining payment using the mechanic’s lien and claims processes above, After we determine the appropriate direction to take, I prepare the notices, liens and claims for a reasonable flat fee.