The Polar Vortex was awful, there are no two ways about it. The extreme weather led to unthinkable property damage to businesses and homes alike. I’m no meteorologist – so I won’t try to explain how it happened or what it means moving forward. However, there’s plenty to consider for the restoration contractors who will be performing the restoration and repair work following the Polar Vortex.
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The Polar Vortex Caused a LOT of Property Damage
When temperatures drop to extreme levels, all sorts of damage ensues. Windows crack, pipes burst, tree branches fall, and freezing temperatures just further exacerbates all of these problems. Even when a property owner or business owner might think they’re in the clear, latent issues might still be lingering. It’s extremely common for an owner to think their property has made it out unscathed, only for a weakened pipe to burst some short time after.
Further, at some point, it doesn’t matter how well a property was built or how new the structure is – who builds to sustain at 50 degrees below freezing? Absurdly low temperatures like those seen with the Polar Vortex affect entire communities – not unlike a hurricane or a flood.
When entire communities need help rebuilding, the construction industry readies itself to come to the rescue. Disasters like these can show the best in communities – both citizens and construction businesses alike. However, for the construction businesses gearing up to make repairs and restorations following the Polar Vortex, there are some things to consider.
Quick Turnarounds and Lots of Work Lead to Piles of Payment Paperwork
There is a LOT of work for restoration contractors in the Midwest right now, plus teams are flocking to the area from all over the country. When there are a lot of jobs on the horizon, no company wants to waste time executing unnecessary paperwork. That could be time on the job!
Still, performing work without a written contract is extremely risky business. It seems like an inconvenience, but a clear contract is the first step to a successful job. It may sound funny coming from a lawyer, but not all contracts need to be complicated! A simple agreement that clearly states what will be done and the price for the work goes a long way toward avoiding construction disputes. Plus, if a dispute does arise, the contract is the first reference point when looking to how things should shake out.
There’s other paperwork, too, that should be taken care of (and we’ll get to that in a second), but successful jobs start with a written contract. Construction companies should have their standard form contract in their back pocket making it easy to plug in the relevant job information and get the contract signed and out of the way.
Need a simple, straightforward Contract Template for your jobs?
Preliminary Notices: Essential for Payment Yet Difficult to Manage
Much like the contract problem, having a high volume of jobs with quick turnarounds can make sending notices a pain in the rear. However, just like the contract problem, the value of sending notices outweighs the burden (by a long shot!) – and it’s an easy fix, too! Creating a systemized notice process isn’t that complicated.
Thinking of preliminary notices as “pre liens” is a little too simplistic. These notices establish communication early-on, and the use of preliminary notices actually helps prevent payment disputes on the job. When everyone’s on the same page, projects run more smoothly. That’s not just the work itself – but also payments! Communication and transparency lead to fewer payment disputes. Plus, by sending the required notices, claimants can protect their interests down the line. At the end of the day – what’s the point of taking on the massive volume of Polar Vortex repair work if you aren’t getting paid for it?
Here are construction payment resource pages for a few areas affected by the Polar Vortex.
- Illinois Lien and Notice FAQs
- Michigan Lien and Notice FAQs
- Minnesota Lien and Notice FAQs
- New York Lien and Notice FAQs
- Wisconsin Lien and Notice FAQs
Of course, we also have mechanics lien and notice resources for every state (and even DC)!
Working with Insurance Companies after the Polar Vortex: Pros and Cons
Every restoration contractor knows and understands this dance. Insurance work can be great because there’s definitely, actually money there for payment. In theory, since the insurance company is obligated to pay for work, the risk of nonpayment should go out the window!
On the other hand, it’s extremely common for owners and their insurers to get into disputes. Often, owners feel their insurance money is being wasted with restoration work so the owner may try to short change their contractor on payment. Plus, insurers often require loads of documentation in order to release payment. When a full-blown payment dispute arises, working with insurers gets even more complicated…
When Working With Insurance Companies, Payment Disputes Get More Complicated
There’s another insurance problem that’s often overlooked. Preserving mechanics lien rights (and leveraging them, if necessary) is a great way to ensure that payment will come. However, flexing those lien rights gets more complex when an insurer is involved.
For one, payment will often be coming from the insurer, not the owner. So, while a contractor’s payment remedies (such as a lien claim) will typically be directed at the property owner – the issue might not be their fault! Still, utilizing lien laws as leverage is still a great way to force payment on problem jobs.
Further, there are strict deadlines for mechanics lien claims in every state. These deadlines don’t care about the specifics of your job. If the deadline for filing a lien claim is closing in – that deadline will persist, even if the insurance company has promised direct payment, and even if the insurance company was supposed to release payment to the owner who’d then pass along to you. It’s harsh, but it’s a fact of life. So, if payment hasn’t come and the lien deadline is fast-approaching, a mechanics lien filing might, unfortunately, become necessary.
Of course, if there’s time, it’s generally a good idea to first try a warning (like a Notice of Intent to Lien) to compel payment before actually resorting to a lien filing. They’re required in some states but not the majority – but regardless, a Notice of Intent to Lien is a great way to force payment without dealing with the headache and expense of a lien filing. We’ll discuss that more later on.
We’ve written about these problems before: The Payment Perils of Property Restoration Companies
How Restoration Contractors Can Avoid Getting Burned on Payments for Polar Vortex Work
The best way to avoid getting burned on repair work is the same as it is for other projects. We like to use the acronym “SET”.
Making sure that everyone knows everyone on the project is (surprisingly) an underrated step in avoiding payment disputes. Insurers and owners should both know who the contractor is, as well as any subcontractors or material suppliers that will be helping out. When an insurer and/or an owner can be confident all payments are going where they’re supposed to, payments will come more quickly. Plus, communication up and down the payment chain will help to prevent disputes from occurring in the first place.
(Use) Easy Paperwork
It’s absolutely important to use a written contract. Exchanging invoices, pay apps, and lien waivers might be necessary, too. However, making these processes as easy as possible keeps things going smoothly. The fewer frictions there are on a job, the less of an opportunity there is for a fire. Easy paperwork will keep everyone on the job happy – but that doesn’t mean paperwork should be avoided altogether. It’s a balance!
Talk it Out
Look, we get it. Even when everything is done by the book, disputes might still occur. When issues do happen, and they will, it’s crucial to try and work through them before lobbing threats at other parties or bringing in the lawyers. Disputes often come down to reasonable misunderstandings. Opening a dialogue right when an issue is discovered is important, too. Letting the problem fester – be that a payment problem or a defect in the work – will only make things worse further down the line.
If a Payment Issue Goes From Bad to Worse, Don’t Be Afraid to Leverage Your Lien Rights
At the end of the day, getting paid what you’ve earned is what’s most important. When a payment dispute is at a deadlock, restoration companies have an ace in the hole – mechanics lien rights. The rules vary quite a bit from state to state, but generally, mechanics lien rights are generally available to those who perform construction work and go unpaid for that work. If construction work has permanently improved a property, the right to lien may be available (and you can learn more about your state’s lien rules here: Lien and Notice FAQs for all 50 States).
Often, simply leveraging these rights is enough to compel payment. Mechanics liens are powerful, and they work in a number of ways (we counted 17!) to compel payment. That means merely threatening an owner or insurer with a potential lien claim will often help to grease the wheels toward payment. Levelset powered by Levelset discusses this idea in greater detail here: What is a Notice of Intent to Lien?
If warnings aren’t enough, filing a mechanics lien will typically get the job done. Mechanics liens don’t automatically create a lawsuit, and they can often be filed on short notice. That means they’re usually less expensive and compel payment more quickly than a lawsuit might. Of course, that doesn’t mean a lien won’t lead to a legal battle – they often do. But still, mechanics liens were literally created to help construction companies get paid without having to go to court.
Additional Help and Resources for Restoration Contractors
Read more about improving cash flow: Restoration Contractors Can Boost Cash Flow and Reduce Stress With Lien Rights Management