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The Homeowner/Client Hasn't Paid - Now What?

One of the most common reasons that a contractor seeks counsel from an attorney is when it has performed the work for or provided the goods and services to its client, and then, the client fails - or worse, refuses - to pay.

First, do you have a written contract?

This month, Laura and I (Amy) have stressed the importance of having a written contract in place, whether you are a contractor or a client/consumer. Not only is there certainty and predictability provided by reducing the terms of an agreement to writing, but there are many scenarios in which a written contract is required in order for a contractor to seek repayment for the work it performed or the goods and services it provided.

Second, what are the terms of the contract with respect to payment?

When is the payment due? Oftentimes, a contract will provide for the procedure to be followed if a client is in default. Is there a cure period to rectify the default or a grace period for payment? Have you (as the contractor) communicated to the client that the project is completed and final payment is due? Does the contract require you to do so? Are the clients required to make installment payments as the project progresses? As the contractor, are you required to advise the clients when the project has reached specific milestones requiring another progress payment? Is there a specific reason given by the client as to why they failed - or refused - to make payment?

As you can see for this short list above, there are countless situations that a contractor may face or need to examine before they determine what the proximate step in recovery will be. Speaking with counsel to understand these terms is crucial.

Third, are you entitled to file a lien against the client’s property for the unpaid balance?

In speaking specifically to our New York clients, one of the first questions I ask a contractor is - when was the last time you performed work on the project? New York Lien Law sets forth a specific time period within which a mechanic’s lien may be filed, and the time period is dependent upon whether the project is residential or commercial. Generally, it must be filed within eight (8) months after completion of the contract or final performance of work or final furnishing of materials; but, with a single-family residence, a lien must be filed within four (4) months from the last date labor or materials were furnished. A mechanic’s lien has specific requirements and time limitations, so it is important to review the circumstances with counsel to ensure that you are timely in filing the mechanic’s lien.

While it can be frustrating to have expended the time, money, and effort in servicing your clients without being timely paid, hope is not lost, and there are options that you can explore with an experienced attorney in order to determine the next best step for you.

Disclaimer: The information contained in this post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls and communications. Contacting us, however, does not create an attorney-client relationship.

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