So many people contact us regarding nonpayment issues on Georgia construction projects, and I thought you might appreciate reading a summary of options we usually discuss during our first conference with our clients:
First, we assess some fundamental issues by asking the following questions:
• What type of services, labor or supplies did you provide?
• What was the last day you actually provided services, labor or supplies to the project?
• Have you been given any notices regarding failure to perform, defects, or other notices?
• Were you providing services, labor or supplies on a privately-owned project, a project owned by a governmental entity (local, State of Georgia or federal project)?
• Are they payment bonds covering the project?
• Was your contract written or oral?
• With whom was your contract (what tier are you)?
• Did you have a personal guaranty from someone guaranteeing payment of the amounts you are owed?
Assuming that you were a general contractor, subcontractor or supplier who provided quality services, materials and labor in a timely fashion, then whomever you contracted with probably owes you the money you are due. And, that is great. However, Georgia construction laws, when correctly applied, may allow you to seek recovery of the debt from a third party. Thus, our next assessment is whether there is any viable third-party who may also be liable for the debt. This can get very technical and complex, but here are some of the common areas we explore:
• Can a materialmen or mechanic’s lien be filed (which may make the real estate where your services, materials or labor was provided liable for the debt)? Click here for more information on this topic!
• Can you make a payment bond claim (which may make a third-party insurer liable for the debt)?
• Can a Constructive Trust be claimed (which may make retainage or other monies owed to a higher tier) which may make provide a source of recovery for your debt?
• Are there circumstances which allow a quantum meruit claim (which may make a third party liable for the debt based upon “fairness” issues)?
• Is there a guarantor which can be pursued?
Needless to say, the more opportunities there are for recovery, then (i) the more likely the recovery will be made, (ii) the higher the recovery is likely to be, (iii) the more quickly the recovery will occur, and (iv) the lower your costs of collection will be.
Ultimately, then, how do you and your Georgia construction lawyer work to improve your recovery?
• Periodically, review your contracts to make sure they comply with current regulations and statutes;
• Obtain a personal guarantee and other useful information (click here for details!);
• Learn all the various deadlines in Georgia for filing Lien Claims and for making payment bond claims (click here for some important Georgia Lien & Bond deadlines);
• Learn the statute of limitations for filing suits to perfect your Georgia Mechanic’s Lien Claims, your private project payment bond claims, your local municipality, State or Georgia and federal government payment bond claims;
If you are looking for a Georgia Construction Law Firm who can handle your files anywhere in the State of Georgia and who understand Georgia’s Construction Lien Laws, Subcontractor Laws, Miller Act and Miller Act Claims, please contact the Cobb Law Group to see how we can improve your collection rate!
There is a fact about commercial collections that we think only credit managers and commercial collection lawyers truly understand: collection of account begin before any materials, product or labor are supplied!
What does that really mean? When a customer wants to purchase your product on credit, that customer is probably the friendliest and most forthcoming that he will ever be. So, here’s your chance to ask for information that will help you in the collection process in the event the customer’s bill is not paid.
Complete Application: In consultation with your commercial collection attorney, prepare a comprehensive application for credit. Then, when a prospective customer asks to purchase your materials, your first step should be to require the prospective customer to completely fill-out an application.
Guaranty: Collection of accounts can be difficult–customers with assets tend to pay their bills, but those without assets are typically sent to collections. While you may be able to obtain a court judgment against this customer, the judgment will be meaningless unless you are able to find some asset of the customer against which to collect. One way to increase the odds of recovery is to obtain a personal guaranty of one or more individual(s) who is willing to guaranty the customer’s debt. A business may be collapsed or put in bankruptcy with ease, but individuals are less likely to do so. Practical Tip: Look beyond the company’s owner for a guaranty: try to get a personal guaranty from the owner’s spouse, parent or child (where assets may be hidden).
Gather Information: Both the application and the guaranty form should be used as an opportunity gather information about the debtor. Be creative, but at a minimum get such information as:
- the customer’s legal name, type of entity, and jurisdiction where formed;
- the customers, EIN, physical addresses (not just post office box), and banking information;
- the guarantor’s full legal name and any aliases; and
- the guarantor’s physical address (not post office box), and social security number, and date of birth.
Make it Legible: None of the foregoing ideas will help you at all unless it can be read. It is amazing how many times a credit application is faxed, scanned and photocopied before it makes its way onto the collection lawyer’s desk. If a social security number is not legible or a name is not clear, then that information is useless. Before processing the customer’s application, please make sure it can be clearly and easily read.
Liens: There are all types of liens available to creditors in Georgia including UCC-1′s, security agreements, collateral pledges, mechanics liens, materialmen’s liens, etc. Contact your Georgia commercial collection lawyer to understand which liens may be appropriate for your type of business.
There are a lot of other things that can be done to help in the collection process prior to extending credit. We plan to discuss more of these in future posts. In the meantime, please share with us your ideas and success (or failure) stories!
The success of filing valid materialmen’s liens never cease to amaze me.
Although there are no guarantees, it has been proven many times that filing a valid mechanic’s lien will increase your recovery of bad debt. About three weeks ago, for example, a new client contacted us and stated that they had performed work in the common areas of a large development near Atlanta, GA. We confirmed that they had performed pursuant to their contract, that there were no defects, and double checked their invoices and demands. We confirmed the project location and confirm that our client had performed work on the site in the last ninety days.
Then, we filed a materialmen’s lien on their behalf and sent the obligatory copies of the liens to the homeowners’ association and the management company. Within days of their receipt of our letter, we received a telephone call from the management company stating that they intended to pay the debt in full. Five days later, we received a certified check payable to our client in exchange for releasing the materialmen’s lien. Needless to say, our client was very happy.
These results may not be typical. You may or may not have similar results if you file materialmen’s liens for your bad debt, but unless you (i) preserve your lien rights if you are a supplier or subcontractor and (ii) timely file a valid construction lien, then you may not get any payment of the money you are owed.
In the current economy, commercial collections of accounts is increasingly more difficult. Debtors own fewer and fewer assets which may be attached by creditors; thus, it is imperative that suppliers, subcontractors and contractors in Georgia who are not seeing payments file valid liens. Please contact the Cobb Law Group to see if you are able to file a mechanics lien and increase your recovery rates!
We receive a lot of telephone calls from subcontractors and suppliers who are seeking to file mechanics or materialmen liens. And, we are frequently asked why they should use a law firm to file their construction liens when the internet offers lien filing services who promises to do the same work for less money. That’s a good question. Here are some of the things we usually tell people:
We are good at what we do, and, simply stated, I do not know any lien services that provide the same quality of work. Lien laws change and each individual matter may fall into a category or an exception. Let us help.
Lien filing services may be less expensive in the beginning, but the costs to enforce their liens may be higher. In most cases, for example, we file a legal description of the real estate to be liened which is one thing they do not do; without a legal description it is very difficult to know if the lien properly “attaches” to the property. Without proper attachment, your lien may not be valid, it may not show up in the real estate records, it may not meet all of Georgia’s lien requirements, and you will probably not get paid.
We understand and educate you regarding the exceptions. Our expertise brings value to the table. If you lien cannot be filed for some reason–e.g., you did not send a Notice to Owner and a Notice to Contractor–we are able to review the facts to see if you fall into an exception to this requirement which, if allowed, may validate your lien and improve your chances of recovery.
In this economy, we all watch every dime that is spent; however, sometimes you have to invest in your collection to help you increase the likelihood of recovery. Simply stated, lawyers are more likely to get a response from your debtor than a commercial service.
We can handle your entire case. You don’t hire us just to file a materialmen’s lien, we can see your debt through completion. We do file lien, but we engage the debtor’s when they contact us to get you paid. We offer payment plans, Consent Judgments, and other ideas that increase your recovery.
It can be the difference between a tricycle and a jet.
Recently, we were interviewed for another Lowe’s for Pros article (click here to read the interview), and it made me think about a topic for this blog entry. It’s a new year, and that brings new goals for those in the consruction industry. Thus, we thought we’d help you work on some resolutions to help you with some business goals and practices to help your credit managers to improve recovery on your accounts!
As you know, the Cobb Law Group concentrates in small business law and construction law throughout the States of Georgia and Alabama. Until the economic collapse, we performed a lot of “positive” legal work for our clients such as entity formation, AIA contract review, mergers and acquisitions, etc. along with our traditional materialmen lien work and our payment bond claim practice. Since the recession/depression, however, we have had to learn much about commercial collections, garnishment, post-judgment collections, etc. in order to collect the money owed to our clients. In order to increase our collection rate, we learned very quickly to use every opportunity to collect information which might improve our chance of recovery.
For example, if we have contact with a commercial debtor, we try to gather information such as social security numbers, bank account information, or current construction projects which–if we obtain a judgment–gives us useful information to begin collection of the judgment sooner. Let’s say during a deposition we learn that a general contractor has several construction projects going, then we will try to get as much information on those projects; later, when we obtain a judgment, we may be able to garnish the general contractor’s draws on one or more of the current projects!
Similarly, you are able to help yourself and help us to improve the collectibility of a judgment. Usually, when you first encounter a new client or a new customer, they are very willing to share information about themselves in order to encourage you to supply them materials. Any information you gather could be helpful.
Thus, as the new year begins, you have the ability to improve your work habits by instituting a few of the following ideas:
1. Account Applications: If you already require customers to complete account applications, then you should review your current form. Consider adding additional information to include such things as (i) a corporate officer’s social security number, (ii) corporate officers’ home addresses, (iii) company website, (iv) names and address of those authorized to use the account, (v) email and mobile numbers, (vi) bank account information, (vii) for small businesses list the names of the shareholders. If you do not require a written account application, please consider using one!
2. Legibility: For all written communications (including account applications), make sure that everything is legible! I cannot tell you how many times we’ve seen a file with a faxed copy of a pencil message from someone with sloppy handwriting.
3. Guarantees: For new customers, particularly small, unestablished businesses, require the personal guarantee of an officer. This will probably greatly increase your ability to collect your debts down the road.
4. Notice to Owner: If you supply to anyone other than the prime contractor or the owner of the construction project, you probably need to send a Notice to Contractor and a Notice to Owner within 30 days of the first day in which you supply to the project.
5. Customer Comment Forms/Logs: Invest in software (or even a good notepad) which will enable you to memorialize information you receive from a customer. So, if he tells you that you that he hasn’t been paid, then get information from his as to whom owes him, the expected date of payment and write it down!
6. Contracts: Get it in writing. Include in your contract interest on past due balances and costs of collection (attorneys fees).
7. Consistency in Customer Names: Your customers may–either through sloppiness or intentional deception–give you inconsistent names. For example, they may contract with you are ABC, Inc., but their purchase orders are on ABC, LLC’s letterhead; their email domain may be ABC Company, but their checks to you are marked CBA Company. This can make identifying your customer difficult. Be vigilent and make them be consistent.
Of course, these are just a few general ideas. Each case is unique and each debt is different; however, the more information you have, it probably increases your chances of recovery. Please comment on some of your ideas below!