It’s an essential principle of business that we all want to be paid for the work we do. As a rule of thumb, we also prefer being paid in a timely fashion. Particularly in the roofing industry, where a steady cash flow is crucial to funding new projects, financing your day-to-day operations, and procuring materials, the importance of timely payment cannot be underestimated. Not getting paid on time could mean paralyzing your upcoming projects and jeopardizing your business.
As a contractor, you’re solely responsible for putting the necessary measures in place to ensure you receive prompt payment for work performed or materials provided. However, this doesn’t mean you have to go it alone. A roofing attorney in Tennessee with Cotney Construction Law can help you execute a number of procedures to see that you receive payment in a timely manner without the need for litigation.
Establish Clear Payment Terms in Your Contract
With every construction contract comes the risk of the project owner failing to compensate you for the work you performed. Payment loopholes within your contract are one of the most common ways in which parties find a way not to abide by strict requirements within the contract. Common loopholes include an undefined payment plan that doesn’t clearly breakdown payments, no defined dates that outline when specific tasks are or when changes can be requested by, and no penalties for when parties fail to meet the terms and conditions of the contract.
To avoid these types of loopholes and potentially entangling yourself in a lengthy construction dispute, it’s important to specify clear terms for when payments should be received as well as penalties that will be incurred for late payments in your contract. For example, there are two contingent payment clauses enforceable under Tennessee law that can shift the financial risk away from the contractor:
- Pay-When-Paid Clause: A “pay-when-paid” clause is a contingent payment clause that acts as a timing mechanism with regard to payment. Essentially, it obligates contractors to pay their subcontractors with a set period of time following payment from an owner.
- Pay-If-Paid Clause: A “pay-if-paid” clause, on the other hand, makes it mandatory for the contractor to have received payment from the owner prior to having to pay subcontractors. If the owner is unable to pay, the contractor is not obligated to pay subcontractors.
For a highly-experienced roofing lawyer who will provide you with strong legal counsel in drafting and reviewing your upcoming contracts, consult one of the roofing lawyers at Cotney Construction Law.
Send a Preliminary Notice
Tennessee is a “notice state” when it comes to enforcing your mechanics lien rights, which means you’ll need to provide a Notice of Non-Payment to the owner within 90 days of the last day of the month labor or materials were provided. For example, if you provided labor or materials on October 14, then your Notice of Non-Payment must be provided 90 days from October 31. It’s important to note that separate notices are required for each month in which these unpaid labor or materials are provided.
If you don’t submit your preliminary notice within this timeframe, you may be jeopardizing your right to enforce a mechanic’s lien. However, even in states where a preliminary notice isn’t required by law, sending a preliminary notice is a great idea to make the site owner aware that you are on the project and bring visibility to your invoice. No site owner wants to receive a mechanics lien, especially from a contractor that they didn’t know was a part of the project, so your invoice will quickly become a priority. If you need any assistance sending a preliminary notice to secure your lien rights, contact a roofing lawyer in Tennessee.
File a Mechanics Lien
Finally, you can file a mechanics lien — one of the most powerful tools for many contractors, subcontractors, laborers, and material suppliers looking to secure payment in the Volunteer State. The deadline to file a Tennessee mechanics lien varies depending on whether you are a general contractor, subcontractor, or supplier and whether you are working on residential or commercial property. For example, for a general contractor working on a commercial property, you have to file your lien and respond to the Notice of Completion (if simultaneously recorded and served) within 30 days of the date on which the Notice of Completion was filed.
As the rules and regulations related to mechanics lien deadlines and filing requirements can be incredibly complex, it’s not uncommon for contractors to fall prey to easy mistakes, such as sending the wrong form, filing an incorrect notice, and attempting to file a mechanics lien against an owner without legal help. To protect your lien rights, secure payment, and avoid placing your business in a risky situation, partner with one of the highly-experienced roofing attorneys at Cotney Construction Law.
If you would like to speak with an experienced roofing attorney in Tennessee, please contact us today.