Demand letters can be a powerful tool for contractors who have been snubbed by an owner who refuses to pay for completed work. When you partner with an Asheville contractor attorney from Cotney Construction Law to draft a strongly worded demand letter on your behalf, you are essentially warning the owner that they can either pay you or risk facing aggressive litigation in a court of law.
In this article, an Asheville contractor lawyer will tell you everything you need to know about demand letters. By the time you are finished reading this article, you may feel like you have everything you need to write an efficacious demand letter, but it’s important to keep in mind that part of a demand letter’s power comes from the person writing it. A demand letter penned on legal letterhead by an experienced and knowledgeable legal professional will have a stronger effect on the owner’s decision whether or not to pay you.
What is a Demand Letter?
A demand letter, also referred to as a letter of demand (LOD) or collection letter, is a request for payment or action from one party to another. Generally, the purpose of a demand letter is to reach a resolution outside of court. In most construction disputes, this involves one party attempting to procure payment from another. The demand letter will state that the request for payment can either be appeased or the claimant will pursue litigation. Both parties can save money on legal fees if a demand letter is successful in its mission.
Demand letters can be used:
- To request payment of a past-due debt
- To request some action be taken (e.g., requesting a contractor to redo work)
- To obtain a settlement from an insurance company
- To acquire payment after receiving a check that bounces
- To finish securing payment from a debtor who has fallen behind on their payments
What is Included in a Demand Letter?
Demand letters typically feature a succinct description of the reasoning for the demand as well as a short summary of how both parties reached the point where a demand letter became necessary. You should clearly state the value of the payment due, as well as the date you wish to be paid by. Additionally, a demand letter should contain copies of any relevant documents needed to prove that the demand is valid. Here are two examples of demand letters used by contractors.
- Debt Owed: requests that the owner pay the amount of money that is due to the claimant. This includes the date the original payment was due as well as an updated time frame for providing overdue funds. This type of demand letter can also be used to propose an alternative settlement.
- Action Required: requests that another party complete a task or provide a service that was previously agreed upon. This type of demand letter should include a clear description of the requested action. Contractors may utilize this type of demand letter against a subcontractor who owes additional work after being paid.
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.