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Collections for Contractors

Contractors and construction companies rely on cash flow. When a client does not pay on time or is refusing to pay for work performed or planned, you need to take quick action to collect what you are owed or else the nonpayment can affect other projects.

The construction lawyers at the Katz Law Group have nearly four decades of experience helping Massachusetts general contractors and subcontractors collect what they are owed for work they have done.

The Demand Letter

If you have invoiced a client and reminded them to pay the amount owed but they are not responding or are actively refusing to pay it, the first step is typically the demand letter. This is more than just the reminder or past-due notice that you will have already been sending to the delinquent account. Instead, it:

  1. States the amount owed,
  2. What project the amount owed is for,
  3. The payment deadline that had passed,
  4. Any late payment penalties that have accrued,
  5. A new payment deadline in the near future, and
  6. What you will do if payment is not received by the new deadline.

The demand letter should be professional, simple, and straightforward. It is not the place for accusing the delinquent client of wrongdoing, which can make them even more intent on not paying what they owe.

You also have to be prepared to follow through with the repercussions that you are threatening to take if you are not paid. Typically, this is to file a mechanic's lien on the property, though it can also be a lawsuit or to compel arbitration or mediation.

Depending on the situation, the demand letter should be sent within a couple of weeks after the invoice due date. This is to ensure you comply with the tight timeline for filing a mechanic's lien.

The Mechanic's Lien

If the deadline in the demand letter passes and you have not gotten paid, yet, the next step is typically to file and perfect a mechanic's lien on the property.

Read more about filing a mechanic's lien here.

Bond Claims

On public projects where you are working for the government, as well as some private projects, a mechanic's lien may not be an option. Instead, you would file a claim against the project's payment bond, which is similar to an insurance policy to ensure payment for suppliers and subcontractors. The bonding company will generally ask for supporting documentation about the debt.

Filing a Legal Claim for Payment

Alternatively, or if the bonding company denies your bond claim, you could file a lawsuit in court or in small claims court to recover what you are owed. This is less common than pursuing a mechanic's lien, first, but it may be your only option in some cases where a lien is not possible or is no longer available.

Many contractors choose to mediate or arbitrate their case to cut down on the costs of litigation. In some cases, their construction contract requires them to go to mediation or arbitration first.

Massachusetts Construction Lawyers at the Katz Law Group

If you need to collect payment for a construction project in central Massachusetts, the construction lawyers at the Katz Law Group can help. Contact them online or call their law office at (508) 480-8202 to get the legal advice you need to pursue the amount that you deserve.

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We focus on preventative counseling, objective advice and guiding our clients toward strategies for mitigating risk while efficiently and effectively conducting business. Please call us today.

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