Payment issues are an all-too-common struggle in the construction industry. At CNS, we hear this sentiment echoed daily, “I finished the job, and I just want to get paid.” Unfortunately, even with a signed contract, payment in the construction industry is far from guaranteed. Contractors often have to deal with short pay, slow pay, and even no pay situations despite the amount originally agreed upon.
This brings up the question, what can contractors, subcontractors, and material suppliers do to ensure they receive fair and timely payment for their work?
In this article, we explore the tools at your disposal to help protect your right to payment. Contact CNS today if you’re experiencing payment issues, or call us at 800-366-5660.
The Power of Preliminary Notices
Sending out a preliminary notice, also known as a “prelim” or “pre-lien,” is not just a formality; it’s a proactive step toward protecting your right to payment. Prelims are often enough to deter short pay and no pay situations because they notify property owners, general contractors, and financial lenders of your involvement in the project.
Preliminary notices are sent via certified mail and state, “EVEN THOUGH YOU HAVE PAID YOUR CONTRACTOR IN FULL, if the person or firm that has given you this notice is not paid in full for labor, service, equipment, or materials provided or to be provided to your construction project, a lien may be placed on your property. Foreclosure of the lien may lead to loss of all or part of your property.”
Upon receiving this notice, property owners are prompted to scrutinize payments made to general contractors. The domino effect is profound — general contractors are instructed to settle outstanding payments to all entities (subcontractors, suppliers, etc.) who have sent preliminary notices, and show proof (lien waivers), before they can receive their final check. The power of prelims cannot be understated, as failing to send one at the start of every project can hinder your ability to later file a mechanics lien.
Mechanics Liens as a Last Resort
Despite the effectiveness of preliminary notices, payment issues can sometimes still occur. But by properly sending a preliminary notice, contractors and subcontractors preserve their rights to file a mechanics lien. This means they can legally record and enforce a mechanics lien if they choose to.
Recording a mechanics lien against a property is one of the most powerful tools for settling payment disputes. The mere presence of a recorded lien often sparks communication between parties, as property owners are immediately prompted to remove the encumbrance. Usually, the solution will be to pay any and all outstanding debts for the services you’ve rendered. Once paid, you would then release the lien.
In some unfortunate cases, property owners or general contractors may still refuse to pay you even after a lien is filed. If this happens, you can choose to enforce the mechanics lien. Based on the state where you provided labor or materials, you’ll have a specified window from the date the mechanics lien was recorded to file suit and ‘perfect’ the mechanics lien in court. Various states, such as California and Nevada, have a 90-day window, while other states, like Arizona, have a 6-month enforcement window. Mechanics liens give you the ability to force the owner to pay you for your services or face the prospect of having the property sold at auction to settle the remaining debts.
Mechanics liens are the most effective way of securing payment you are owed when prepared correctly. As such, it’s crucial to be aware of the exact lien laws, rules, and regulations that apply to you and your state. Mechanics liens are not evergreen, and any mistake could result in you losing your lien rights.
Protect Your Right to Payment With CNS
While you may not be able to control whether a payment dispute arises, you can certainly minimize the risk and protect your rights by leveraging preliminary notices and mechanics liens. However, we understand that it can be both challenging and time-consuming to prepare these documents properly, especially since every state has its own rules and regulations.
At CNS, we specialize in sending preliminary notices and filing mechanics liens for California, Arizona, Nevada, Oregon, Washington, New Mexico, and Florida.
Contact us today to get a preliminary notice started or to file a mechanics lien.
Prefer to call? You can reach us at 800-366-5660.
Disclaimer: CNS is not an attorney, and if you need legal advice, please contact one.
