Everyone who works in the construction industry has worked on a project and frustratingly not been paid for their work. We frequently receive calls from contractors, subcontractors, architects and engineers who have not been paid for work on a job and want to sue right away to collect. Not so fast! Here are 7 factors to consider to determine the best path to payment. And it might be just writing off the receivable.
- What does your contract say? Look at your contract. Have you complied with all of the payment provisions? If the job is ongoing, can you terminate the agreement? Are you required to give any type of notice that would permit the other party the right to cure? Have you given that notice? You need to refresh yourself about your contract and make sure that you have complied with its provisions.
- What efforts have you made to get paid? I am surprised by the number of people who call our office looking for an attorney because they want to file a lien or bring a lawsuit right now, but who have made little to modest efforts to actually get paid. Construction professionals often avoid talking about the money they are owed because they feel uncomfortable and they don’t like confrontation. Writing letters demanding payment and making phone calls is so much easier than being involved in any type of legal action. Before you pick up the phone to call an attorney, ask yourself: “have I done everything I can to try to get paid?”
- Can you file a mechanic’s lien? Is there still time to do so under the applicable mechanic’s lien statute based upon your last work on the project? Are you properly licensed in the jurisdiction and allowed to file a lien? Is the project a public project and not subject to liens? For more information about mechanic’s liens in South Carolina, check out our white paper on mechanic’s liens here.
- Have you complied with the contract? Have you met all of your contractual obligations? If not, you will certainly hear about every deficiency if you file any type of action. Be honest about your potential exposure.
- Is there going to be a claim against you? Has anyone indicated that there is any type of claim – delay, deficient work, poor performance – against you? Remember that the best defense is a good offense. If you assert a claim, you will draw a counterclaim for any defect in your performance or work. What starts out as a small collection action, often turns into a multi-party lawsuit.
- What is your deductible? If you are a design professional, what is the deductible under your professional liability policy? If a counterclaim is asserted against you, how much are you going to have to pay out of your account for defense costs? Is it going to be worth it?
- How much are you owed? If you are owed only a small amount, you may not need to hire an attorney and avoid those legal costs. The current jurisdictional limit in South Carolina Magistrate’s Court is $7,500.00. Perhaps you can bring the claim yourself and avoid paying attorney’s fees or, alternatively, do most of the work yourself and pay an attorney for some basic advice.
Hopefully this list will help you consider whether filing a mechanic’s lien or bringing a lawsuit is your best course of action when you have not been paid.
If you have any questions about mechanic’s liens or collection, please let us know. The attorneys of Gibbes Burton are passionate about helping professionals and businesses to minimize risk and build success.