November21

December 2014 – Keep Youself On Solid Ground

By Tony Shepley

As we near the end of the year, it’s a good time to take stock of the lessons we have learned to date. As a materials dealer, we get an insight into many of our customer’s businesses, and some of the lessons they learn, often times the hard way. One area in which builders can have trouble, is that of getting paid. In the spirit of “Well begun is half done” here are some of the important steps you can take, as a builder or subcontractor, to make sure you’re on solid ground with your clients from start to finish.

  1. Provide a written contract to your client and have them sign it. A contract doesn’t have to be a Choate Hall & Stewart masterpiece that costs half a college tuition. It can be a one page document that simply spells out for whom the work will be performed, where the work will be performed, the scope of the work, the cost of the work, the amount due for the work, a completion date and a payment schedule for work completed. There should also be provisions for how extras and change orders will be handled. Change orders , by the way, should address how much the cost and the schedule will change as a result of what is being requested under the change order. In other words, the contract should paint a clear picture of the job.
  2. Stick to the price and schedule or notify your client if either will vary and have them sign off on it. “A verbal contract isn’t worth the paper it’s written on.”, said Samuel Goldwyn (American Producer) many years ago. If you have trouble with writing things down, just imagine for a moment that the judge will have no such problem throwing your case out of court. A recalcitrant client’s defense is frequently “I didn’t know, or I didn’t understand”. Don’t set yourself up to fail by leaving the details vague, imagine yourself standing in front of the judge presenting Exhibit A (contract), Exhibit B (change orders), and Exhibit C (demand letter). If you can imagine this, it is much less likely to actually happen, because you will have the facts to spell out your case, no if’s, no ands, and no buts (remember, judges hate if’s ands and buts, because they have heard them all before). Clients behave better when the details are spelled out.
  3. If you have spelled out the elements of the job in a written contract and change orders, and you have lived up to your side of the contract, but your client is not paying, you have rights under Massachusetts law to protect your interest and to get you paid. As a contractor, subcontractor or supplier, you have the right to file a Notice of Contract, that is recorded at the Registry of Deeds, as the first step of the Lien process against the property where your work was performed. This is a very effective way to get an owner to face their responsibilities and to have to respond to your demands.

In order to use a Notice of Contract, you must have your paperwork in order, as outlined above. If an owner is going bankrupt or losing the property to foreclosure, the Notice of Contract will likely be of little use, so Notices of Contract will not make good guys out of bad guys. The burden is on you, the contractor to pick a creditworthy , honest client and to put your ducks in a row in terms of documentation, up front. However, pinning down the details on paper, will scare off some of the fringe clients, who don’t want to sign on the dotted line for all the wrong reasons. Here’s where we can help. We can give you the relevant documents you need and even suggest an attorney to help make sure you cross your T’s and dot your I’s just right.  With the right elements in place, your chances of ending up in front of the judge or arguing with a challenging customer, go way down.

You can find additional information by visiting Mass.Gov, and searching for “Mechanics Lien Law”.

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