What is a payment demand letter?
- Demand Letter Resources
Free Demand Letter Templates
Browse our selection of free, customizable demand letter templates.
Send a Notice of Intent to Lien
A Notice of Intent to Lien is a type of demand letter that lets your customer know you intend to file a mechanics lien if you aren't paid. Send one for free through Levelset.
In construction, a payment demand letter is a notice to your hiring party that payment is overdue. It is also commonly known as a Dunning letter.
Read more: What is a Construction Demand Letter?
How to write a payment demand letter
Demand letters should look as professional as possible, which means avoiding grammar or spelling mistakes. The document should include your business’ letterhead, and you should sign it.
Your demand letter should contain a short and concise account of the payment dispute.
Items to include in a demand letter:
- Name(s) of the property owner and/or general contractor
- Brief description of the work you’ve completed
- Description of the property
- Amount due
- Action(s) you will take if you don’t receive payment
After drafting the letter, document it properly by keeping a copy for your own records. You can attach it to the customer file, or create a new file to deal with outstanding payment. For evidence of delivery, it’s a good idea to send a demand letter by certified mail with return receipt requested.
Types of demand letters in construction – with templates
Notice of Intent
A Notice of Intent is a type of demand letter that can speed up payment and protect your lien or bond claim rights. In some states, sending a Notice of Intent is required before you file a mechanics lien or make a bond claim.
It’s also common for contractors to combine a payment demand letter and a notice of intent to lien. This is typically done simply by including language in your demand letter stating that you plan to file a mechanics lien if you aren’t paid. Generally, you should also reference the state law that gives you the right to file a lien.
- NOI: The demand letter that gets you paid in 20 days
- Download a free Notice of Intent to Lien template
Prompt payment demand
Prompt payment requirements are a collection of federal and state laws that set a deadline for payment to contractors and subs. These laws ensure that payment is made in a timely fashion. If a contractor isn’t paid within a certain period of time, prompt payment laws entitle the late-paid contractor to penalties, which may include interest fees and attorney costs.
Final notice before IRS Reporting
You can also threaten to report the uncollected debt to the IRS. When actually report it, the IRS treats it as “Debt Cancellation Income” for the party who failed to pay. They are then required to pay taxes on the “income.”