“Like Ma Bell, I’ve Got the Ill Communications”
~The Beastie Boys
When a contractor or supplier isn’t paid on a construction job, s/he may be tempted to walk off the job site or take back the materials or equipment and decide not to finish the work. The desire to take such a dramatic step isn’t about spite as much as it is an attempt – a threat really – to try to to get paid for the money they’ve earned but can’t collect.
While this may work in some instances, is it really the best option, or is there another way to get paid instead of stopping the work?
The short answer is, ‘No;’ walking off a job is usually not the best idea.
Ill Communication, Not Ill Will
While it’s no secret that getting paid in construction can take a very long time (too long!), it’s often the case that the cause of the delay isn’t any ill will on the part of anyone connected to the job. No, more often than not, payment delays are caused by a lack of collaboration that affects everything from the timing of payments, and even to who should be receiving the payments.
A 2015 survey by the NAHB, showed that it takes about 22 subcontractors to build the average residential house. And if you think that’s a big number, just think about the typical, large commercial project! Often times, the top half of the payment chain may not know who’s on the project and vice versa or may be prioritizing payment to the lower half. No, as we’ve written about before, the key to getting paid faster is more transparency, greater visibility, and better communication.
And besides, when a contractor or supplier threatens to leave the job site (or follows through on the threat) it can cause multiple problems, not only for themselves, but also for all of the other participants on the project.
This “collateral damage” can include:
1. Delaying the Project
If you walk off a job, there’s a good chance that your actions are going to adversely affect some of the other project participants. Is that really fair to do, considering that you may not have done all that you could have to prevent winding up in this situation?
2. Burning Bridges
Similar to number 1 above, is it really smart to run the risk of irreparably damaging a business relationship before you’ve taken every step you can to proactively rectify the situation. Even if the general contractor has ignored repeated requests for payment by phone, fax, or email, it’s still a better method to put the hiring party on notice sending a Notice of Intent to Lien instead of just walking off the job.
3. Does Walking Away Even Work??
There’s no guarantee that walking off the job will result in receiving payment, so why risk it?
Next Time, try These Instead
What are some best practices or options instead of leaving the job site that will help the project stay on time and get you paid faster?
Send Conditional Lien Waivers with Every Pay App / Invoice
By sending a conditional lien waiver with every pay app or invoice, it alleviates some of the risk of double payment for the general contractor and other parties at the top of the project. Reducing this risk usually means that you’ll get paid faster.
A subcontractor or supplier is essentially stating that if paid for the agreed upon work and amount stated, then he/she is willing to waive lien rights on the job. This ensures that the project can move forward and on schedule if payment is issued and also makes the general contractor’s job easier in not chasing down lien waivers and ensures that unnecessary liens won’t be filed.
Send Notices on Every Job
Sending preliminary notices on all jobs ensures that the parties up the chain know what work was performed, who performed the work, and for what amount. Not only that, but it puts the party’s payment in line because general contractors are used to receiving preliminary notices as a general business practice in order to protect lien rights. For example, Levelset’s customer data shows that receiving preliminary notices was helpful to other parties on a project 93% of the time.
File a Mechanics Lien or Bond Claim if Necessary
When all else fails (and sometimes, that’s the way it goes), contractors and suppliers might need to mechanics file a lien or a bond claim in order to get paid and avoid writing off a bad debt. When other options at collaboration and communication fail, the best option might be to move forward with filing.
However, most business that send notices and exchange waivers on an ongoing basis rarely need to file a lien or bond claim. It’s for this reason that many companies choose to send preliminary notices early, often, and on every job to ensure that they’re first in line for payment on every job and avoid payment disputes altogether.
