Liens Are Just One Way To Collect Debt – Other Best Collection Practices

I love a great article about collection practices. Not only is a topic I’ve written about in the past (see posts from the Construction Lien Blog here, and from the this blog here), but it’s one of the more important topics for those in the construction industry.

Consider the “bad debt calculator” on Construction Indemnity Group’s website. I love this calculator, because it puts the tragedy of bad debt in your face. Take a modest amount of bad debt ($25,000), and a candid profit margin (5%), and you’ll see that it takes $500,000 of revenue to recover the lost income. Amazing.

Last week, Melissa Brumback’s Construction Law in North Carolina blog posted a blog post with “8 Best Collection Practices.” The article does a great job of hitting on the things you can do to minimize your bad debt – and things, that we’ve even said over and over: Be careful when extending credit, have a written contract, and don’t let too much time pass before implementing your collection procedures.

These, of course, are just a few tips. The post does a great job of enumerating each tip and discussing their importance, so there is not need for me to regurgitate it here…just take a look at Melissa’s post for more.

Why You Should Lien First (and Ask Questions Later) in Virginia

Christopher Hill is a LEED AP and construction lawyer in Richmond, VA.  He is a member of Virginia’s Legal Elite in Construction Law and authors the Construction Law Musings blog.  You can also follow him on Twitter at  @constructionlaw.

First of all, thanks to Scott for allowing me the forum to guest post here at the Construction Law Monitor.  When I was thinking of a topic, I realized that mechanic’s liens in Virginia are extremely powerful.  Their power is particularly helpful when, like now, the construction economy is not exactly booming.

Why do I say that a lien in Virginia is so powerful?  Two reasons, 1. the lien (with one exception) takes priority over even a first mortgage or deed of trust, and 2. a lien in Virginia (assuming it is filed correctly) is perfected and enforceable as soon as it is recorded.  This one two punch creates a situation in which a construction subcontractor can suddenly move from a position of vulnerability to one of strength.  Once the lien hits the courthouse, and notice goes to the Owner, things generally start to happen:

1.  The bank gets nervous; 2.  The Owner begins to fret and squeeze the General Contractor to see why the sub has not been paid; 3.  The subcontractor’s construction attorney hopefully gets a call; and, importantly 4.  Money starts to flow (or at the very least the General Contractor is forced to file a bond with the Court to assure that the sub will be paid).  In short, until you, a construction professional who is owed money, are presented with the “fish or cut bait” scenario of having to file a suit to enforce the lien or stick with a breach of contract action, you are in the driver’s seat.  Of course, this assumes that you and your attorney have properly met the picky requirements of a Virginia mechanic’s lien.

The second point is equally important.  The fact that a commercial subcontractor or supplier does not need to perform any additional steps, aside from recording the lien, in order to perfect it means that your lien not only survives bankruptcy if filed prior to the Owner’s bankruptcy filing, it means it can be a secured lien even after bankruptcy of the Owner.  All that the bankruptcy does regarding your lien is to stop the clock on the 6 month filing deadline for the length of the stay.  I have seen more than one instance where having this secured position in a bankruptcy is the difference between pennies on the dollar and almost full recovery out of the bankruptcy.

In short, don’t wait to file your lien in hopes that you will get paid.  While I always prefer that construction professionals work things out short of litigation and enjoy representing construction pros in and around Richmond because they generally do so, now is not the time to let your lien rights lapse.  Any General Contractor or Owner that balks at your exercising your lien rights is not likely to pay in any event.  Those Owners and General Contractors that see your actions as “just business” are more likely to be folks for whom you will want to work in the future.

In sum, a mechanic’s lien, filed in a timely and proper fashion, can be, and generally is, a cost effective and powerful collection tool for Virginia contractors.  Construction professionals in Virginia should not see such liens as a last resort, but as one of the arrows in their collection quiver to be used when an Owner or General Contractor (with or without fault) fails to pay them in a timely fashion.

Did You Know…You Can Insure Against Non-Payment

Construction Indemnity offers a real revolutionary product for the construction industry: payment insurance. Yes, you’re reading this correctly. You can now purchase an insurance policy to protect your organization against non-paying projects.

Here’s the pitch: Getting paid is one of the biggest challenges to those in the construction industry. Construction Indemnity Group insures that your company is paid the money you’ve earned. When you’re not paid, you make a claim against your policy. Construction Indemnity spreads the risk across multiple contractors, and you assign them your lien and collection rights and let them do the hard (and expensive) work of collecting amounts due.

Their website sums up the policy’s offering and cost with this:

For around $1000 annually (plus cost and fees) with only $150 down and guaranteed payment plans, CIG can provide you $25,000 worth of coverage annually against non-payment by your customer.

This is a real neat product. And I think it fills a real serious need for those contractors and suppliers who perform work or provide materials on construction projects but only have a few thousand (or up to $25k) of outstanding debt on any single project.

As an attorney, I have potential clients approach me to help collect these types of debts all the time. The trouble is that the cost of collection and risk of non-collection is too high. These companies frequently walk away from the account and lose the money. Here at the construction law monitor, we have an entire section devoted to Collections laws and techniques, and we frequently discuss this practical burden to successfully collecting on a marginally small debt.

But just because the number is small when compared to the cost of collecting doesn’t mean its small to you or your company. To the contrary, they mean everything.

Construction Indemnity has a neat calculator on its website titled “See How Much Bad Debt is Costing You.” It’s eye-opening. Put in the amount of bad debt you have per year and your typical profit margin, and the site calculates the sales you need to replace your bad debt. Let’s take something small ($25k of bad debt), and a typical profit margin (5%), and get a dose of reality: You need $500,000 in sales to replace this bad debt.

Construction Indemnity lets you insure it for approximately $1,000.00 a year.

This is not to mention that policyholders are eligible for savings on certain industry services. Express Lien is proud to have a marketing relationship with Construction Indemnity Group, providing its policyholders a discount of at least 20% on all of our products and services. Policyholders also get a discount to Lien Law Online, which is a real neat online service providing folks with legal information about construction lien laws nationwide.

Get more information about Construction Indemnity Group here, or click here to submit an application.

This article was originally posted on Express Lien’s topic-specific Construction Lien Blog.

Louisiana Demand Letter Templates

When an account is unpaid and overdue, you do not want to rush into filing a lawsuit. Litigation is an expensive, and oftentimes unnecessary remedy (but, don’t let your claims prescribe). A well-drafted demand letter should be sent to non-paying parties before proceeding forward with legal action.

Although it may be recommended to send a demand letter, it is not a requirement under Louisiana law to establish a commercial debt action (it is in some states). It’s logical, however, that if the debtor may pay within 10 – 30 days of demand, there is little benefit to spending the time and money on initiating a lawsuit.

This post provides a few sample demand letter templates.

In reviewing these templates, it’s important to remember that different situations call for different measures, and specifically that one demand letter may apply more correctly than another.

Furthermore, in certain circumstances (when a check is returned NSF, when an account is an open account, etc.), there are statutory requirements for sending a demand letter in order to qualify for statutory penalties.

The counsel of a qualified attorney is recommended when taking a past-due account to the next level, however, there is some benefit ($$) to sending a demand letter in-house before handing off the reigns to your attorney.

Once you hire an attorney, he or she will likely begin the representation with a new demand letter, but your original letter will not be in vein. The in-house demand letter, when prepared and sent correctly, may qualify you for collection of interests and penalties from the time of its sending, and as mentioned above, may even result in payment. The attorney letter will ensure that the statutory requirements are met, and they are generally more threatening than in-house letters.

Finally, regardless of the correspondence you are prone to send, there are some essential considerations you should have when sending a demand letter.

Be sure to enclose information about the debt with your letter, which may include invoices, estimates, contracts, photographs, etc.

This not only gives creditability to the recipient of your demand letter, showing you are able to prove your debt, but it gives the recipient less of an excuse for non-payment. While not bulletproof, if the matter goes to court and you have a well-written demand letter with documentation proving the debt, you’ll have a better position to argue that the debtor was wrong for not making payment.

From a practical standpoint, there are other things you want to keep in mind. Most importantly, sending a demand letter is of little use unless you can prove it was sent and received.

Send the letter Certified Mail with Return Receipt Requested, and keep track of the Certified Mail Number. Follow-up to ensure the letter is delivered, and if needed, even make an effort to have the letter hand delivered by courier (who should sign an affidavit of delivery).

Not only should you keep proof of the sending of the document, but you want a good and reliable copy of what was sent. If you have a letter and enclosures, mention the enclosures within the letter so you can prove that they were in fact enclosed. Scan a copy of all the documents together with the certified mail number, bates stamp the documents or put page numbers at the bottom of each page (1 of 6, 2 of 6, etc.).

General Collection Letter Template

Contractors seeking to collect amounts owed to it from a property owner should send a basic collections letter. Here is a basic collections letter in Microsoft Word format.

Demand letter on An Open Account Template

If you have an “open account” with the debtor, you will want to send a demand letter substantially similar to the template below. Open Accounts are provided special treatment under Louisiana law, with the benefit to creditors being that they are able to collect interest and attorneys fees as a matter of law.

The critical questions when collecting an open account are: (1) Is the debt an open account?; and (2) Has the creditor taken the correct steps to collect on it, preserving its rights to obtain attorneys fees and interest?

In general, contractors are infrequently able to capitalize on the open account laws in Louisiana, which are more ordinarily preserved to other professions and types of accounts. However, construction material suppliers are frequently able to use the open account laws, and there is clearly some grey area on the issue pursuant to recent Louisiana Supreme Court decisions.

Regarding the second question, the Louisiana Open Account law requires that you send a demand letter before qualifying to collect attorneys’ fees and interest. The demand letter must give the debtor information regarding the debt (invoices, contracts, estimates, photographs, etc.), and it must provide them with a certain amount of time to make payment on the account (30 days).

A demand letter in substantially similar form to the form provided by this post should suffice to start the clock for your company under Open Account laws. Be sure, however, to enclose evidence of the debt with the letter, and to keep documentation to prove that it was sent and to prove exactly what was sent.

Demand on Open Account in Microsoft Word format.

Demand letter on NSF / Dishonored Check

The penalties for writing an NSF check can be severe. If your company seeks re-payment of the NSF check in accordance with Louisiana statutes, it will be positioned to take advantage of these penalties, applying great pressure to the party who wrote the NSF check to make payment.

The following is a sample template letter that may be sent after receipt of a NSF check.

Demand on NSF Check in Microsoft Word format.

Demand Letter Against Contractor Who Misapplied Funds

When a contractor misapplies funds as above discussed, you may send this template letter to put that contractor on notice of its default and to demand payment under the statute.

Demand Against Contractor Who Misapplied Funds in Microsoft Word format.

This article was originally posted on Wolfe Law Group’s topic-specific Louisiana Construction Law Blog.

Common Contract Provisions to Avoid and Prepare for Collections

Preparing and signing a comprehensive construction contract is your construction company’s best way to take a proactive approach to collections.

A good contract can help your company avoid collection scenarios by:

• Clarifying the scope of work and its costs, to avoid disputes;
• Stipulating that one party can recover attorneys fees from the other in the case of non-payment, to give your company some leverage against the non-paying party (as above-discussed, the general rule in America is that attorney fees are not collectible);
• Providing for monetary penalties in the case of non-payment to give non-paying parties an incentive to pay on time;
• Providing for the recovery of interest on overdue accounts, to avoid losing interest on money owed to you and to offer non-paying parties an incentive to pay on time;
• Providing for Alternative Dispute Resolution to ensure that disputes over payment are resolved as quickly and inexpensively as possible.

There are many “form” construction contracts out in the market, with the most common form contracts being the contract documents periodically updated by the American Institute of Architects. The Association of General Contractors and ConsensusDocs produce other form contracts.

These sets of contract documents are equal in quality.

They are prepared by and for their respective trades with input from members of the industry and construction attorneys.  In general, the documents are comprehensive and completely adequate to meet the goals discussed in this section.

The parties can also alter the contract documents to include extra language establishing an

agreement on issues such as non-payment penalties and alternative dispute resolution mechanisms.

While the industry-standard form contracts are good in many cases, the documents are also long, complex and expensive, and it’s quite clear that they do not meet the needs of every project. The documents might not be affordable to some generals or subcontractors, and the scope of the documents may be too complex for smaller projects. In these situations, contractors, generals and material suppliers will turn to less complex and more custom documents.

The following contract provisions may be incorporated into a construction contract in attempt to avoid collection situations.  Contract provisions are indented.

Attorneys Fees Provisions

Recovery of Attorneys Fees
The Parties hereby agree and stipulate that in the event of a dispute, and regardless of whether or not the dispute matures into formal litigation or any alternative dispute procedure, and further regardless of whether or not a judgment is rendered or the matter is settled, the non-prevailing party will pay the attorneys fees and legal costs of the prevailing party.

As previously mentioned, the general rule in America is that each party in a legal dispute is to bear the burden of its own attorney’s fees. In other words, whether you win or not, and whether you’re completely right or not, you’ll likely have to pay your own way through litigation unless you either fall into a small category of cases where attorneys fees are recoverable by law or you stipulate in your contract that attorneys fees are recoverable.

When added to your contract the above provision will do the latter. It’s language aims to accomplish two things: First, to contractually stipulate that attorneys fees are recoverable in the event of a dispute; and Second, to allow recovery of attorneys fees regardless of whether your dispute matures to a lawsuit.

In certain situations, a court may find that attorneys’ fees are not recoverable because the matter did not mature into a lawsuit, or because it was settled instead of fully litigated. This provision makes it clear that the parties intend to pay the other’s attorneys fees regardless of whether or not the matter escalates to any particular level. In other words, you’ll have the legal right to collect attorneys’ fees from your adversary even when you only hire an attorney to send a single collections letter.

Attorneys fees can add up very quickly, and without a provision like this, it will be hard to justify employing an attorney to collect a $5,000 – $10,000.00 account.  However, with the ability to recoup some of these costs, the proceeding might be worth it.

Another common dispute over attorneys’ fees concerns the cost of the attorney employed. Did you agree to a $400 per hour attorney, or a $150 per hour attorney? Did you agree to pay an attorney working on a contingency, whereby he or she would receive 33% or more of the debt?

The courts normally resolve this type of dispute by awarding a “reasonable” attorneys fee to the other party.    The judge or jury arbitrarily decides what is “reasonable”.

You can seek to limit this uncertainly through contract as well, and perhaps add the following language to your “Attorneys Fees Provision:”

The amount of attorneys fees shall be equal to the amount actually paid or to be  paid  to  the  attorney(s)  employed  by  the  prevailing  party,  and  shall specifically  include  compensating  that  attorney(s)  under  an  hourly  fee agreement, a fixed fee agreement, a contingency fee agreement, and/or any mixture of these agreements.

Do remember, of course, that these types of provisions can backfire. If you’re not the prevailing party, for example, you will foot the hefty bill.

Penalties For Non-Payment & Interest

Unlike the Attorneys Fees Provisions, this is a component of the contract that will not likely backfire on you. This provision will only apply to the party who has the duty of making payments to the other party.

These types of provisions can work wonders for your collection practices if employed correctly.

Many construction companies will include them in their contracts, and offer non-paying customers a “last chance” opportunity to pay the bill without the penalties to entice prompt payment. If the non-paying party continues its failure to pay, it increases the amount owed giving your company more reasons to continue its attempts to collect.

One caution in using these types of provisions is that courts will strike them down if they find the provision to be “unjust,” or above a certain legal threshold. For example, if you have a $10,000.00 contract, you cannot make a $1,000,000.00 non-payment penalty. You also cannot charge an absurd amount of interest on an account (such as 50%). There are federal laws that restrict the amount of interest you may charge on an overdue account, and drafting a contract charging more than this amount will be stricken down and read out of the contract by a court.

The following suggested language might be used in your construction contract to provide for a “penalty” for non-payment of an invoice:

The Parties agree that if the [Owner | Contractor | Subcontractor | etc.] fails to make any payments when due, a late payment penalty of ___% of  the  unpaid  amount  will  be  immediately accessed  against  the  non-paying  party.  Furthermore,  the  Parties  agree  that  interest  will  be charged on the unpaid amount in the amount of ___% per annum or the maximum  rate  allowed  under  state  and  federal  law,  whichever  is greater.

Alternative Dispute Resolution Provisions

Perhaps more than any other industry, the construction industry can benefit greatly from the use of Alternative Dispute Resolution programs. Construction projects both big and small are very prone to dispute, and they are usually complex in nature.

The traditional litigation of these claims is lengthy, costly, and heard before a judge or jury with little to no technical knowledge to aid them in understanding the merits of the case.

Accordingly, an ADR option – although still at an expense – will result in a resolution procedure that is faster, less expensive and tried before someone who has construction experience and/or
knowledge.

For these reasons, it’s normally quite beneficial to you to enter into a contract electing to resolve disputes through ADR.

Making this election is quite simple. Generally speaking, to subject the parties to ADR you can simply add a one-line sentence at the end of your contract that provides “the parties will resolve any disputes through arbitration.”  The provision, of course, can also get more detailed. It can go into the type of arbitration, the number of arbitrators, the rules governing evidence and discovery, the  location of the arbitration, the name of the arbitrator, etc., etc.

One simple, yet complete arbitration provision is as follows:

The Parties hereby agree to resolve all claims and disputes through binding arbitration. The arbitration shall be governed by the Construction Industry Rules of the American Arbitration Association. The parties agree to hold the arbitration in the city where the project job-site is located.

It is also common to require mediation (an informal process whereby the parties attempt to reconcile their differences without the threat of a binding judgment) prior to arbitration (a more formal proceeding that ends in a binding judgment). This is usually more beneficial to those involved in a larger construction project than those in a smaller project, as the extra procedure would come at extra expense. Nevertheless, you would simply add the following sentence before your arbitration provision:

The Parties hereby agree that as a condition precedent to arbitration, they will mediate   all   claims   and   disputes   through   the   American   Arbitration Association.

Note that you can choose any arbitration provider, but that for the purposes of this Toolkit we have used the AAA, a popular national outfit.

Conclusion

One of your most successful collection practices – smart contracting – requires work before the construction project even begins, and doesn’t seem at all like a “collection practice.”

In reality, however, strong construction provisions can properly position you against your adversaries in the event of a dispute over payment. The better your position, the more leverage you have, and the more leverage you have the easier it is to find success recovering on non-paying accounts.

This article originally published in the Louisiana Contractor’s Collections Toolkit.

How to Collect on a NSF Check in Oregon

Two weeks ago, we posted an article on How To Collect on a NSF Check in Washington.  Today, we address the same issue under the laws of Oregon.

In the construction business, NSF checks are a fact of life.   And sometimes, the NSF checks may cause big problems because they’re written in amounts that exceed $10,000, $50,000 or $100,000.

In Oregon, like in Washington, those who draft NSF checks have a specific window of time to make payment on the check amount, or be subjected to statutory penalties and their adversaries litigation costs.

I just published a Legal Guide on Avvo that gives step by step instructions to folks on how to collect against a NSF check.   Unlike many states, like Washington and Louisiana, that requires the use of particular forms and language, the Oregon statutes are very bland in their requirements.   To charge interest, penalties and legal expenses on a party who writes a hot check in Oregon, the recieving party need only send a written notice of the NSF check.   There’s no requirements as to the form of the notice, or how the notice should be sent.

Although, of course, we have our recommendations.

In sending the notice, you should send it through some service that allows your company to track its mailing and delivery.   In writing the notice, be certain that you identify the check in question, and indicate that if the check isn’t paid within 30 days, you’ll seek interest, penalties, attorneys fees and other costs allowed by the Oregon statutes.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.

How To Collect NSF Checks in Washington, Oregon and Louisiana

In today’s economy, NSF checks are becoming a fact of life for those in the construction industry.   When it comes to your company’s collections problems, however, receipt of NSF checks may not be all that bad.

That’s because nearly every state imposes stiff penalties against those who pass hot checks.   What type of penalties you ask?   If you’re forced to collect on an NSF check, you’ll likely be entitled to attorneys fees, legal costs and interest, and that’s in addition to statutory liquidated damages that can be as stiff as double the amount of the check.

In all the states where I practice (Oregon, Washington & Louisiana), there exists powerful statutes designed to deter bad checks.  If you receive a NSF check, it’s important you follow the procedures of these statutes to ensure you will qualify for the penalties.

Over the past few days, I’ve been contacted by folks about NSF check collections a bit more than usual, and so I spent some time over the weekend drafting short and understandable step-by-step guides on how to collect on a NSF check in these three states.

We published them as Legal Guides over at Avvo.com.   Take a look at them here:

How to Collect on NSF Check in Louisiana

How to Collect on NSF Check in Washington

How To Collect A NSF Check in Washington State

NSF Checks are a fact of life for those in the construction business.   They are especially so when working in turbulent economic clients.

Getting paid with a NSF Check is actually not a terrible situation.  In fact, in certain scenarios it can help your position against the non-paying party.  While each side may have arguments about the quality of work or completeness of items before payment is made, once a check is written and it goes NSF, the old arguments disappear and you can focus on a very simple legal issue:  (i) a check was written to you; (ii) it wasn’t honored; (iii) the money is now due.

In addition to simplifying the issues, most states (including Washington) have very powerful laws that impose penalties against dishonored checks.   It is key to follow the relevant statutes and properly demand that the NSF Check be paid.   Take special notice of RCW §62A.3-520 and RCW §62A.3-522.

Step 1:  Give Notice of Dishonor

Upon receipt of a NSF check, you should deliver a “Notice of Dishonor of Check” to the drafter.   The preferred language is provided for by statute, as follows:

NOTICE OF DISHONOR OF CHECK

A check drawn by you and made payable by you to ….. in the amount of ….. has not been accepted for payment by ……, which is the drawee bank designated on your check. This check is dated ……, and it is numbered, No…….

You are CAUTIONED that unless you pay the amount of this check within fifteen days after the date this letter is postmarked, you may very well have to pay the following additional amounts: (1) Costs of collecting the amount of the check, including an attorney’s fee which will be set by the court; (2) Interest on the amount of the check which shall accrue at the rate of twelve percent per annum from the date of dishonor; and (3) Three hundred dollars or three times the face amount of the check, whichever is less, by award of the court.

You are also CAUTIONED that law enforcement agencies may be provided with a copy of this notice of dishonor and the check drawn by you for the possibility of proceeding with criminal charges if you do not pay the amount of this check within fifteen days after the date this letter is postmarked.

You are advised to make your payment to ….. at the following address:  ………

Step 2:   Execute Affidavit of Sending Notice

This is a lot easier than it sounds.   Simply add the following language to the end of your “Notice of Dishonor of Check,” fill in the blanks and sign it.    Make sure you keep a copy of the Notice being sent, along with a signed Affidavit of delivery.

While not required by the terms of the statute, it’s good practice to send this notice via Certified Mail so you can track its delivery.   Here is the affidavit of delivery language:

AFFIDAVIT OF SERVICE BY MAIL

I, ………., hereby certify that on the ….. day of ………., 20.., a copy of the foregoing Notice was served on ……… by mailing via the United States Postal Service, postage prepaid, at ………., Washington.

Dated:  ………………….
(Signature)

What NOT To Do

The first two steps are things you should do…this is a list of statutory things you should not do.  The Washington statutes specifically enumerate these actions, and state that if a party does any of these things, that party will not be entitled to penalties, interest & attorneys fees in collecting on the NSF check:

• Do Not demand interest or collection costs in excess of the amounts provided for by statute;
• Do Not demand interest or collection costs prior to the expiration of fifteen days after the mailing of notice of dishonor;
• Do Not demand attorneys fees without having the fees set by the court, or prior to the expiration of fifteen days after the mailing of notice of dishonor.

Your Reward and The Next Step

If you follow Steps 1 and 2, and do not do the forbidden items within the “What NOT To Do” step, the statutes provide that you are entitled to the following if the check is not honored within 15 days of the notice:

1. A reasonable handling fee for each instrument;
2. Interest at the rate of 12% per annum from the date of dishonor
3. Cost of collection not to exceed $40 or the face amount of the check, whichever is less
4. Reasonable Attorneys Fees
5. Penalty in the amount of $300, or three times the face amount of the check, whichever is less

If payment is not made as requested in the Notice of Dishonor, you can proceed with a civil action to enforce payment of the check, along with the penalties, interest and attorneys fees provided for by statute.

This article was originally posted on Wolfe Law Group’s topic-specific Northwest Construction Law Blog.

Construction Outlook Grim through 2010 – Staying Ahead of Accounts Receivables To Retain Its Importance

Ken Simonson, the chief economist for the Associated General Contractors of America, doesn’t have good news for the construction industry as the challenging year 2009 drags into its 3rd Quarter.

According to Simonson, the commercial construction industry forecast remains grim “at least through 2010.”

For contractors, suppliers, and other construction professionals throughout the nation, this means that good record-keeping and collection practices remain important.

Almost one year ago, Wolfe Law Group posted an article on its Construction Law Monitor after Ken Simonson reported that 2009 would present economic challenges to contractors.

Now more than ever, the article stated, contractors should consider the benefits of a construction or mechanics lien.  The article went on to state:

As soon as the construction project comes to a halt or payment is late, contractors, subcontractors and suppliers should rush to file its construction / mechanics lien to protect its interest in the property. Construction liens are available in virtually every state, and works to transform the project job site as a sort of “collateral” to the contractor for its payment.

The time available to file a construction lien is not indefinite, and the legal requirements should be followed to the letter. However, when filed correctly, a construction lien can help your company recover payment for its project.

Although the stimulus spending will be cause for some optimism in the construction industry, it appears economic struggles will stick around into 2010.    And the recommendations of Wolfe Law Group in 2009 are repeated today.

This article was originally posted on Express Lien’s topic-specific Construction Lien Blog.