Archive for the ‘Payment Requirements’ Category

Attorney Demand Letter – Will It Get You Paid?

lawyer letter

Everyone in the construction industry has trouble getting paid at some point. In fact, when Construction Week Online conducted a poll inquiring who in the industry had payment problems, it found that a whopping 0% – that’s right, zero percent – reported they were always “paid in full and on time.”

Payment applications and invoices get sent out, and then it’s unfortunately a battle to always get cash flowing. What can you do to mitigate these circumstances and get paid more and more often?

The answer may be quite simple – sending a demand letter, and then sending an attorney demand letter / lawyer letter.

Getting Your Account Paid Means Prioritizing Your Invoice With Your Customer

First, non-paying customers are not uncommon, nor is it a problem unique to the construction industry.  One website I really love is the “World’s Longest Invoice,” which is just an on-going list of people and companies across the country who are not paying their bills.

If you’re going to turn a non-paying account into a paying account, you must first ask why the customer isn’t paying.  In most cases, it’s because your invoice is not a priority for that customer. This frequently boils down to something very simple: following up on invoices and amping up the pressure to pay.

Make your invoice or payment application top of mind. How? Make sure they have the invoice. Followup with phone calls and emails. Followup, followup, followup…and let us suggest sending a demand letter.

Payment Demands From Attorneys Presses The Right Buttons To Get You Paid

When followup phone calls, emails, and correspondence just doesn’t work, it’s time to start considering your other options. At the end of the tunnel is litigation, and you’ll want to avoid that at all costs. You can also file a mechanics lien to bridge the gap. Before these legal remedies, however, you may get good results from a simple and ineffective step: sending an attorney demand letter.

An attorney demand letter will accomplish two very important things:

  1. It will communicate to your customer that you are serious about the debt, and it will prioritize your account;
  2. The lawyer letter will put you in your best collectable position by availing you of all laws on your side to protect your right to payment.

There’s no reason why you should avoid sending a lawyer letter. It’s easy, and can be very affordable. Take our firm – Wolfe Law Group – for example. We have a flat fee to send an attorney demand letter. You don’t need to sign a complicated fee agreement, do a formal consultation, and worry about an hourly bill adding up.

You simply put your information into our online form and watch your letter get sent – it’s that easy. One flat fee and your customer gets the demand letter, and usually pays up.

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Joint Check Agreements On Construction Projects: What Suppliers Need To Know

Joint check agreements are very popular in the construction industry. In fact, many folks mistakenly believe that joint check agreements are exclusively a construction industry instrument.  Many folks also believe that joint check agreements are all the same, that there is standardized agreement language and rules, that they offer a lot of payment security, and a host of other incorrect assumptions. Perhaps the joint check agreement is the most misunderstood and dangerous document you can confront on a construction project.

Safety Is Not Guaranteed With Joint Check Agreements

zlien conducted a Webinar a few weeks ago titled “Joint Check Agreement Mistakes That Can Cost You Thousands,” and the video recording of that Webinar is embedded at the top of this post. It’s a great presentation that gives a high level overview of common joint check agreement mistakes.

One of my favorite parts of the presentation comes right at the beginning when it’s suggested that the Joint Check Agreement is not a security device, but is instead a “floatation device.”  These agreements, in other words, are only used by parties when things are going wrong in some way.

Think about when your company has encountered joint check agreements:

  1. Your customer doesn’t have the credit with you, and so you get a JCA with another party to back them up
  2. Your customer runs into cash problems on the project and you look for a JCA to continue furnishing
  3. Your customer gets replaced on the project and the GC or owner gives a JCA so you will continue furnishing to the new party

What do all of these things have in common?  Something has gone wrong with your customer, or your customer isn’t in a good enough financial position. Right from the start, therefore, you should be cautious about joint check agreements. They are a floatation device thrown at sea to help companies that are drowning. They help, and they may save the situation, but the parties are not out of the woods simply because it’s been thrown overboard and grabbed.

The Joint Check Rule Is Shocking, But Real

You likely never heard of the “Joint Check Rule,” or otherwise, you don’t understand it.  Nevertheless, if you’re not careful, you can find yourself on the wrong side of this rule and subjected to a substantial loss.

The rule as applied in California is explained (and defined) nicely by the court in Post Bros. Constr. Co v. Yoder as follows:

When a subcontractor and his materialman are joint payees, and no agreement exists with the owner or general contractor as to allocation or proceeds, the materialman by endorsing the check will be deemed to have received the money due him.

This interpretation of the “joint check  rule” has been adopted by a number of states, including Arizona, California, and Washington. However, these are not the only three states who’ve adopted the rule, and unfortunately for clarity’s sake, many courts have not weighed in on whether they would or would not adopt the rule. This leaves the parties subjected to a difficult legal gray area.

For various reasons, every supplier in every state should consider the joint check rule applicable to their project. Every time a joint check is received by a supplier, the supplier should only cash the check if the amount paid is the total amount due as of the date of deposit.

Yes, I understand that you do progress billing and progress payment. Yes, I understand that this isn’t how the construction industry practically works.  Yes, I understand that your business has been employing opposite practices for years. Yes, I believe that the rule is unfair and ridiculous.

Yet, it is the rule.

Conclusion: Use The Joint Check Agreement, But Keep Your Eyes Open

This article is pretty rough on the joint check agreement and that is a tad unfortunate, because the instrument is wildly popular and very useful for a lot of circumstances. There are a thousand examples of situations when the joint check agreement can be an asset for your company.

However, there are a lot of misunderstandings about these agreements, and a lot of dangers.

The moral of this article is not to bury the importance or usefulness of joint check agreements, but just to educate you of their dangers so you keep your eyes open and avoid costly mistakes.

 

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Posted in:     Construction Contracts, Payment Requirements  /  Tags: ,   /   1 Comment

In The Pipeline – Changes in Louisiana Construction Law

Louisiana State Capitol, Baton Rouge

Louisiana State Capitol, Baton Rouge (Photo credit: Wikipedia)

If there is any one constant in the legal profession, it is that the law is an ever-evolving, dynamic thing. While there are some general principles that tend to not change all that drastically over the years, the devil truly is in the details. Having to keep abreast of these changes is why you’ll hear people refer to the “practice” of law – we attorneys must continue to learn and adapt as we continue through our careers. Here at Wolfe Law Group, we make sure to have our ears to the ground in order to provide the most up-to-date information for our clients and their businesses. This legislative session, there are several proposed changes in Louisiana construction law, all of which may critically impact how contractors do business in this state. This post is the first of two parts discussing those changes.

 Proposed Changes to the Private Works Act

There are currently three bills in various stages of the legislative process that would significantly change how different parties secure their rights to payment. The first, Senate Bill 183, is the furthest along of the three, having successfully passed through the Senate and out of the House Committee on Civil Law and Procedure. It is the only bill this session, and the first bill since 1999, that seeks to amend La. R.S. 9:4802. This statute outlines which parties are entitled to assert claims for payment against an owner and a contractor. Should this bill become law (which is likely given the total lack of opposition in the Senate or in the House Committee), lessors of movables would be required to provide formal notice to contractors and owners within 10 days of their materials being used on a project, as opposed to simple delivery of a lease. This change might sound insignificant, but it is because of that very reason why it is important for us to keep our clients informed. Without paying proper attention to how the law evolves, current or potential clients might lose their ability to secure payment because they were unaware of this formalizing shift in the law.

The other two bills, House Bill 190 and House Bill 362, propose changes to La. R.S. 9:4822. This statute is arguably the most important in the Private Works Act because it outlines and defines the time and notice requirements that must be met in order for parties to secure their right to make a claim to secure payment. House Bill 190 has passed through the House and awaits a vote in the Senate Committee on the Judiciary. This bill proposes the least significant of changes, merely stating clearly that statements of claim and privilege need not have attached copies of unpaid invoices unless the statement specifically states they are attached. House Bill 362, however, would extend the time requirements for parties to file their claims by double. When notices of contract have been properly filed and you are one of the parties entitled to a privilege by La. R.S. 9:4802, you would have sixty (60) days to file your claim after the notice of termination, as opposed to the current thirty (30) day window. If you are a contractor that properly filed your notice of contract (if necessary), you would have one hundred twenty (120) days to file your claim following termination or substantial completion, instead of the current sixty (60) day window. These deadlines are extended throughout the statute: all 30 day limits are changed to 60 days, and all 60 days are changed to 120 days. The success of this bill has yet to be seen: unlike the others, it hasn’t even made it out of committee yet, and the session is fast coming to a close.

An Easing of Home Improvement Contracting Registration

Securing and maintaining the proper licensing and registration is incredibly important in the construction world here in Louisiana. The knowledge and expertise required in performing such work or providing these services is why it is always recommended that people seek out professional assistance, especially for work around the home. Surprisingly, and not necessarily wisely, Senate Bill 81 proposes to modify the status quo in relaxing registration requirement for home improvement contracting. Currently, no person shall undertake or perform or agree to perform home improvement contracting services unless they are registered with the Residential Building Contractors Subcommittee of the State Licensing Board for Contractors as a home improvement contractor. The proposed law (which unanimously passed the Senate and is scheduled for floor debate in the House on May 16th), adds the following exception to La. R.S. 37:2175.2:

No individual shall undertake on his own property self-performed home improvement contracting services having a value in excess of seven thousand five hundred dollars unless registered with and approved by the Residential Building Contractors Subcommittee of the State Licensing Board for Contractors as a home improvement contractor.

Basically, the legislature is trying to make it easier for a homeowner to perform certain work on his or her property without having to go through the necessary registration channels. While this might not be an issue for some, it is worrying that something as particularized as home construction may be continuing down a path of non-regulation. The true extent of this relaxation, of course, will remain to be seen.

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Posted in:     Construction News, Filing Requirements, Law Changes & Updates, Licensing, Louisiana, Mechanics Lien, Payment Requirements, Regulations  /    /   1 Comment

Louisiana Contractors – Workers Compensation Insurance

Back in 2009 this blog reported on the very topic of Workers Compensation insurance, stating that 1 and 5 businesses are breaking workers compensation laws. In my everyday practice, I feel like the trend is still prevalent in the construction industry. The main reason being is due to the exorbitant price of this insurance on contractors.

Workers Compensation is codified in Louisiana under Revised Statute 23:1021 et seq. There are a myriad of rules and definitions within this chapter of the code that would make any contractors head spin. There are a few key items to remember when classifying employees. First and foremost is that there is a presumption of employee status, as seen in La. R.S. 23:1044. This can be overcome by a number of factors which would make the worker, an independent contrator rather than a employee. La R.S. 23:1045 is where the law states that independent contractors and subcontractors are exempt from coverage. Although the price to insure all employees under workers comp insurance is high, the price that is paid if an accident happens to an uninsured worker is much higher. Furthermore, when the insuring companies do an audit at the end of the year of the status, there can be a hefty price tag for improper reporting.

I represent a number of clients who are learning the hard way that companies like LWCC and Louisiana Home Builders Association are not fun to litigate against for a contractor trying to make profits. These companies have either in-house attorneys or law firms who handle these cases day in and day out. There is almost no incentive for them to settle claims because there is no fear of pricey litigation. As for the contractor, attorney fee bills keep going higher and at the end of the day the contractor can pay double and triple of what they would have if they had properly reported or settled early.

So let this be a warning to all contractors who are trying to push the line when it comes to workers compensation insurance, its just not worth it. Just like fighting any insurance company, even if the insurer is wrong, they will fight to the bitter end to be proven so. Taking an early haircut, so that you can get back to making money in the industry, can be a win-win for your construction company.

Posted in:     Construction Contracts, Construction News, Disputes, Insurance, Labor Law, Litigation, Louisiana, Payment Requirements  /  Tags: , , , , , , ,   /   1 Comment

Scott Wolfe Quoted in New Orleans City Business Article About Delays When Paying Subcontractors

Scott Wolfe Jr. Construction LawyerSubcontractor non-payment is something very familiar to me. It’s been written about here on the Construction Law Monitor (especially with regard to how pay when paid clauses affect subcontractor payments), and it’s something my other blog (the Construction Lien Blog) focuses on exclusively in its discussion of mechanic liens.

So it’s no surprise that New Orleans City Business magazine contacted me to discuss how the law can help and hurt subcontractors who are frustrated when waiting for payments to trickle down from the owner.  The article can be found on City Business’ website (subscription required) here:  Subcontractors grow tired of waiting on delayed job payments.

The article’s author, Ben Myers, does a great job of capturing the friction between general contractors and subcontractors on the subject of payment. General contractors complain that getting payment can be complex and time consuming because that’s how money trickles through, and that subcontractors should be taking the risk for their portions of the work.  Subcontractors complain that they are bullied around and “pay when paid” provisions sometimes leave them drowning because of problems the general has completely unrelated to their work.

It’s a real complicated mess – and the article gets both sides on the subject and helps explain the complications.

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