Can a general contractor retain a certificate of occupancy as any sort of leverage for unpaid debt to the Contracting company?
1 reply
Jan 28, 2020
A contractor might be able to force payment by withholding crucial project documentation, such as a certificate of occupancy. However, that's not really what that documentation is intended for - and I'm not sure whether there might be any drawbacks to leveraging a certificate of occupancy in that manner.
Of course, keep in mind that there are a number of payment recovery tools specifically designed to help contractors get paid when their customer is slow paying or not making payments at all.
Common and effective payment recovery tools
Below are a few different payment recovery tools that might be effective, from most gentle to most adversarial.
Invoice reminders
For one, something as simple as an invoice reminder can work to get paid. An invoice reminder is a nudge in the right direction - it lets recipients know that payment remains outstanding and must be squared away.
Demand letters
Escalating things a bit with a payment demand letter can be an effective recovery strategy, too. A demand letter lets the customer know you're serious about getting paid and willing to do what it takes in order to make sure that happens. Generally, it will include specific legal threats and set a hard deadline for making payment.
Notice of Intent to Lien
A mechanics lien is an incredibly powerful tool for recovering payment, which makes the threat of a lien claim extremely powerful, too. Sending a document like a Notice of Intent to Lien let's the property owner and other recipients know that there's a lien filing on the horizon if payment isn't made and made soon. And, because of the drastic effects of a mechanics lien filing, an owner can't really afford to ignore the possibility of a lien.
Pursuing a mechanics lien
If payment troubles continue, pursuing a mechanics lien filing is yet another option - and they're specifically designed to help in situations where an owner refuses to make payment, as promised. Generally, lien claims will lead to relatively quick payment without the need for future legal action. Though, lien enforcement actions are necessary at times.
You can learn more about the North Carolina mechanics lien process at the following resources:
- North Carolina Mechanics Lien Guide and FAQs- How to File a North Carolina Mechanics Lien | Guide + Form Download