When an owner fails to pay a contractor on time, it creates a domino effect impacting all of the construction professionals that performed work on the project. For a contractor and their business, working capital and cash flow can quickly vanish when an owner refuses to pay. Although a contractor can file a mechanics lien to seek payment, there are other risk-free alternatives that can help a contractor receive payment quickly. In this brief article, a Nashville mechanics lien law attorney will discuss a contractor’s three best options when they need to be paid quickly for their completed work.
1) Speak With the Owner
As every nonpayment scenario is different, the first step is to speak with the owner and hopefully resolve the issue without any type of legal action, especially when the hope is to continue working with this owner on future projects. This can be an informal conversation between both parties, or a construction attorney can coordinate an alternate dispute resolution (ADR) process, such as mediation. In many cases, a dispute can be resolved once both parties hear the other side out. Regardless of the route you want to take when you speak to an owner, consult a Nashville construction lien lawyer for advice before you do so.
2) Send a Demand Letter
Not all payment disputes can be resolved with a conversation. In fact, some owners will simply dodge any and all attempts a contractor makes to contact them. In these cases, a construction attorney can draft a demand letter on behalf of their client outlining their client’s legal argument and demanding payment in a professional tone. It’s extremely important to remember that the best demand letters are penned by a construction attorney that understands construction law. When an owner receives a demand letter from an attorney, they will know that the contractor has gone the extra mile to hire a legal professional to represent them. This alone will motivate many owners to quickly resolve a payment issue.
3) Send a Notice of Intent to Lien
A Notice of Intent to Lien is another inexpensive, risk-free way to seek payment. This notice is pretty much a hybrid that is similar to a demand letter and the last step before filing a lien. The purpose of a Notice of Intent to Lien is to inform the owner of a looming deadline to pay the contractor. Although this notice is required in many states like Arkansas or Louisiana, a general contractor doesn’t have to send a Notice of Intent to Lien in Tennessee before filing a lien; however, subcontractors must send a notice of nonpayment every month they aren’t compensated.
Pre-lien documents are unique in Tennessee. For example, although contractors are not required to send a Notice of Intent to Lien, they are generally required to file a Notice to Owner before commencing work. To ensure you are complying with preliminary notice requirements, consult a construction attorney.
Although the three options above can be great alternatives to seeking payment before filing a lien, filing a mechanics lien is in many cases the only surefire way to obtain due payment. If you are involved in a payment dispute, consult a knowledgeable attorney at Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.