John Deere

Does anyone here have any experience with collecting money owed on a contract? I am a little confuzed with the particular case I am dealing with right now. I did a commercial tenant improvement job for a deadbeat customer who decided they did not feel like paying the final payment on the contract. I proceeded to file a lien on the leasehold, but I am unsure on how to go about collecting the final payment. The problem is the final payment is only about $2500, so no attorney is going to waste their time for that kind of money, but I want to collect on principle. I can only imagine the tenant will be in the building for at least the next 5 years and I don't want to wait that long to have the payment made from the lien.

Ayan Gonzalez

Let me take this oppertunity to educate some of you out there.

If you are going to stay in this bussiness, you had better wake up.

Let me give you a little known fact in this bussiness. LEINS DON'T DO SH**.

First you need to know the lein laws in your state. For the purposes of this lesson, I will use the laws of my state, Florida.

You signed a contract with the tennent. Therefore, the following applies.

You are required to send a notice to owner (certified return receipt) within forty five days of your starting the job in order to have lein rights in the first place to all parties invalved including the property owner and property mortgage holder or bank.

Then you have to send a notice of non payment within 90 days of the last day you worked on the job to all parties.

You should have done this among other things but, I am not going to get into all the details, the best thing to have done would have been to find a notice company that does all this for your.

There are several other things that you have to do in order to have a legal lein but you need to contact an atturny or notice company in your area to verify what they are.

But now for the best part. Once you have a legal lein on a property you have one year to take action on the lein or it is voided.

Action means. "you have to forclose on the property", but wait there's more.

In order for you to forclose on the property (assuming you know how to do this and don't need an atturny to do so), you first must be the first lein holder.

Now, how do you do this? You have to first pay off all leins including mortgages on the property that come prior to yours.

So for example, if the property has a first mortgage of lets say $ 500,000.00, you have to pay it off so you can have first lein writes on the property.

Most contractors don't know these facts.

The only way you can try to protect yourself in the future is first to modify your contract. Include legal fees to be paid by the client. Also add a binding arbitration clause to reduce the time and cost of going to court.

Even if you follow all the rules, if you are dealing with a savy client he can void your lein with just $6.00. But thats another story.

You have just learned one of the first laws of bussines "A CONTRACT IS ONLY AS GOOD AS THE TWO PEOPLE THAT SIGN IT".

You need to educate youself on these issues so you can be in a power position in the future.

By the way, I have a question for you.

When you call a credit card company and ask for their credit card, what happens? They send you a credit application and check your credit history to verify your ability to pay.

Did you perform a credit check on your client before you extended credit to him?

Did you verify that your client had the funds before you started work?

If he did have the money, here is an idea.

Have the monies for the construction project placed in an intrest barring escrow account with an atturny.

I could go on for along time but I will stop here.

My advice to you is to find a mentor and educate yourself.

Ayan Gonzalez
Cerified General Contractor
Empire Construction, Inc.

John Deere

Thanks for the educational post. I have followed all the steps you spoke about, but I am just not sure about how to collect the debt from the leaseholder...So my question is..what is the proceedure to collect on this balance?

Ayan Gonzalez

The only way to collect from the lease holder is to take action on the lein.

Forclose. See prior post.

A lein means nothing unless you forclose on the property or the property is sold.

If the property is sold it must have enough equity in it to pay your lein.

However, the property has to be sold before your year is up or the lein is voided.

Even if the property is sold within the year, the owner can place a bond on the lean and still not pay it.

John Deere

The lien I have filed is on the leasehold, not the property owner. From what I read, in this case you do not have the right to foreclose on the property. I suppose you foreclose on the leasehold? By doing so, would you take the rights of the leaseholder and their security in the building? This is where I got confused. I am pretty familiar with the contract and lien laws, but I have not read any literature on this particular situation...

I have never had to even file a lien on a previous client, let alone forclose on the lien. Does this require representation by an attorney?

Ayan Gonzalez

I do not know the laws of your state.

You need to see an attorney.

Some attorney's will give you a free consultation vist.

If you have to, buy an hour of his time. Before you go see him, wright down all the questions you have regarding this and anything else you can think of.

It is important that you let him do the talking. Cut the small talk you will be paying a couple hundred dollars for his time.

$ 200.00 or $ 300.00 spent with a good attorney will make and save you thousands in the future.

You are going to need a copy of the lease. You may have wrights to the contents in the unit such as stock and inventory. You will not know until you get a copy of the lease and give it to the atturney.

One word of advice. Not all attorneys are created equil. You wouldn't go to a bone doctor if you need help with your heart.

Find an atturney that does only construction law. You don't what to go to a jack of all trades here.

If I needed heart surgery, I would ask my doctor how many heart opperations he does a year. I want a doctor that does only heart surgery and has several hundred opperations under his belt.

Same principal applies here.

$ 200.00 an hour with a good atturney is just a cost of doing bussiness.

Seattle Builder

Let me finish off this post. Prior to becoming a builder, I owned a large well known collection agency and we had allot of clients that hired our services for one thing or another but about 30% of my accounts were subs and gens trying to get money out of deadbeat homeowners.

OPTION #1

I agree with the post above that LIENS don't do SH*T. The only time a lien is any good, is if you know they are selling soon. Its like money in the bank, forget about it and when they try to sell and the mortgage dude sees the lien, they will tell the seller to pay it, with interest, so there is that option. They will have to pay it, its the law and banks will be looking to see if the lien was cleared before funding so you got it down the road.

OPTION 2

You can still file a lien and do Option #2.

1. Send them a letter advising them that they have 10 days to pay in full, or you will sue them. Here is the letter:

Dear homeowner,

First let me thank you for allowing me to work on your home. I appreciate the work very much.

However, per the terms of our contract, I was to be paid the balance of $9000.00. As of todays date,
I have not received the money at all and have invoiced you and called you.

This letter is to advise you that if payment is not received within (10) days from the date of this letter, I will
be filing suit on the matter. If I obtain a judgment, I will hire the Sheriff to seize assets in an effort to satisfy
the judgment.

I am sorry it has come to this, but its time to take care of this matter voluntarily or involuntarily.


Yours,

Adam Ant
Ant Construction

2. Send this letter certified and keep a copy of the letter, and the receipt showing you send it. When they get the letter, you will get send to you the card they signed, keep that in a file along with the copy of the letter.

3. Now this gets tricky. Most scammers, especially here in Seattle, use defunct corps or LLc's when they hire you. This is so they can run and hide when it comes time to pay. They know they are protected by the corporate veil. So here is what I do. When I go out on a job and its not a homeowner, but some apts, or something and its a corp, I ALWAYS put the owners name or who I dealt with ON the contract along with the name of the company. This is so you can sue them too. Now if you did not do this, and or you have a corp that owes you money, I STILL sue both. let me give you an example.

I have had about 12 deadbeats not pay. Some were homeowners, some were corps. What I did on the homeowners is go and file a lein, and then i went to the courthouse, got a small claims form, and filed suit against the homeowner (after you send the letter and wait two weeks). I have the sheriff serve them. It's more scary that way when the Sheriff pulls up to the million dollar home and drops off a court date. In most cases, they homeowner will pay on the spot.

Now if its a corp, and or an LLC, I get creative. I go down to the courthouse, get a smalll claims form, and I sue the corp AND the owners personally. Now some of you will say, how can you do that? Easy, just type it on the form! Now I have the sheriff serve the cocky arragant LLC guy that stiffed me at his private home. He gets served and he gets pissed because he thinks he is protected by his corp. Well, in about 50% of the instances, they pay on the spot because they do not want the hassle. The corps that actually go to court I tell the judge this:

Sir, this man's corp is actually him. He does not do business as a corp, and he owes me the money. He is using his corp to steal from the public. In almost 80% of the cases, the judge allows it and allows them to be on the suit! Most pay when that happens. If they judge says, "do you have any proof", I say "no, but if the court can reschedule, i can hire an accountant and subpeona his books and see if he has used the money for the corp and not personal items". The judge will reschedule. In the meantime, the scammer with the corp gets to thinking. he has written a zillion checks (we all do) for personal crap. he knows just one instance and his corp is peirced, so he will pay.

You gotta be creative people.

Todd

nap

there is one thing which seatle builder said but not clear enough.

this is a small amount. It will be within the limits of most small claims courts. You can sue in small claims courts in most states.

In some states, there are no attorneys allowed. Some states there is.

If this is a corporation, in some states, the owner cannot represent the corporation. An attorney must represent the corp. If so, we are already looking at increasing the cost of the situation by at hundreds, if not thousands of dollars just to go to court.

Bottom line; due to the ralatively small amount in dispute, it would be financially frugal for the guy to pay.