Construction law cases or disputes are diverse and may include several parties: the developer, the owner, the general contractor, the subcontractors, the vendors, the suppliers, and any other tradesmen and laborers along the way. That’s a lot of people for one project, but that’s also the nature of the work.
Given the amount of people involved, there are a number of potential negative consequences when someone doesn’t pay you on time. Unfortunately, this is another common aspect of the job: while everyone might be getting their paychecks in the beginning, the likelihood of missing a payment gets exponentially higher as the funding dries up at the end. Here are some of the most common scenarios:
You Can’t Pay Your Own Bills
If you’re a subcontractor, you’re dealing with your own suppliers and equipment rentals. Most subcontractors don’t own their own equipment, so failing to pay your excavator bill for a couple of weeks can run you $100,000. It’s easy to see how quickly delinquency can pile up and affect not only your budgets, but also your reputation as a company that pays its bills on time.
In this scenario, you have a couple of options: you could spend months or years in contract dispute and litigation, and finally get your money back. Or, you could file a lien against the applicable party (this could be a private or public entity) and try to force a sale of the property to get your compensation. Luckily, you’ll probably get a check before this happens.
You Can’t Pay Your Workers
The construction industry runs on very small profit margins. If you’re getting paid in percentage installments, you may spread yourself pretty thin trying to pay all of your own workers on time. When a contractor doesn’t pay you on time, one of the downstream consequences may be paying your workers late, which may lead to less job satisfaction and higher employee turnover. Hiring new employees is expensive, so getting into business with a contractor who doesn’t pay on time may end up costing you more in the long run.
Your Reputation Suffers
Unfortunately, one of the worst things to come out of all this is a mark on your company’s good name. Suppliers are going to be less enthusiastic about getting into agreements with people who don’t have a clean record of paying their invoices. One of the most frustrating things about working in construction is the domino effect: once one company fails to pay their invoices on time, everyone else suffers.
How Can I Break the Cycle?
Unfortunately, we can’t always guarantee that you’ll get paid on time or what was promised. On the other hand, there are a few things you can do to protect yourself:
- Spend the time and money on formal contracts. Oral contracts and handshakes are often only enforceable after years of litigation, if at all. With a written contract, you have an explicit outline of the scope of the work, as well as the payment schedule and terms. In a best case scenario, you’ll show the contracts and get a timely payment. In a less-than-best-case scenario, you might have to go through a formal dispute resolution process like arbitration.
- File a construction lien. If you’re not getting the payments you want, consider filing a construction lien against the owner of the property. Keep in mind that you’ll have to keep to a strict filing schedule if you take this route.
- Retain the services of a qualified Louisiana construction lawyer as soon as possible. We’re experienced in both construction contract law and liens. If you’d like a confidential review of your options, contact us.