At CNS, we hear this daily, “I finished the job and I just want to get paid.” As you probably know all too well, even with an agreed upon signed contract, payment is never guaranteed in the construction industry. Too many times, contractors are asked to take a discount or a ‘hair-cut’ from the amount originally agreed upon.
One of the best ways of preventing non-payment or short payment situations is to properly send out a preliminary notice to the property owner(s), general contractor, and any financial lender(s) involved. The preliminary notice is sent certified mail, stating “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 material 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.”
Once the owner receives the preliminary notice, they immediately contact the G.C. and let them know that before they get their final check, they must first show proof (lien waivers) that the subs that sent preliminary notices are paid.
Upon receiving the preliminary notice, the general contractor will usually take note to pay that sub, and any sub that sent a preliminary notice, prior to paying anyone who did not send out a preliminary notice.
As mentioned earlier, there are no guarantees in this business. Even if you properly send out a preliminary notice, non-payment can still occur. However, since you properly sent a preliminary notice, you have preserved your right to record and enforce a mechanics lien.
Recording a mechanics lien against the property is the strongest tool in the contractor’s collection toolbox. Typically, once a lien is recorded, the property owner contacts the party who filed the lien and a dialogue is begun to determine the best way to get the lien removed. Usually that is by paying the contractor for the services rendered. Once paid, the contractor then releases the lien.
In some instance, after a lien is filed, the owner/G.C. may continue to refuse to pay the contractor who filed the mechanics lien. If this happens, the contractor has 90 days from the date of recording of the mechanics lien to file suit and ‘perfect’ the mechanics lien in court. A mechanics lien gives the contractor the ability to force the owner to pay the contractor for the services rendered, and in some cases, have his or her property sold at auction to pay the remaining debts.
The first call you make after hearing from the general contractor or the property owner that “money is a little short,” should be to CNS; so that we can record a lien for you and preserve your ability to collect on the money you earned.