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Hawaii payment plan

Northwest Steel Fab is a supplier of forged and fabricated material. We supply Subs and GCs with our work. We send out material a lot to Hawaii. What is the best way to know we are protected and will be paid for our work? Right now we strictly have joint check agreements on all Hawaii jobs. Is there anything new on the state of Hawaii you can inform me with?

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Mar 30, 2020

Joint checks are a great tool for reducing payment risks, but there are certainly other tools that can be helpful, too. Let's look at a few different options.

Sending notices and invoice reminders can nip issues in the bud

For one, it's a good idea to send preliminary notice on every job, regardless of what's required. Preliminary notices promote transparency, communication, and collaboration on the job - and, by setting up the job for success, it's easier to avoid payment problems altogether. Preliminary notices aren't required to preserve lien rights in Hawaii, though, so they're not necessary to make a claim later on. But again - even when a prelim isn't preserving the right to lien, it still works in the sender's benefit. If payments begin to fall behind, using invoice reminders can help. By sending invoice reminders, it's easy to nudge a customer to do the right thing and pay what's owed before things get out of hand. More on that here: How Invoice Reminders Help Contractors Get Paid Faster.

Demand letters and Notices of Intent can work if payments fall behind

If payment does become an issue, there are still some options for resolving the matter before claims become necessary. One option for escalating a dispute would be to send a payment demand letter. Demand letters put a customer on notice that you're serious about getting paid and willing to do what it takes to make sure that happens. Generally, they'll include legal threats and a deadline for making payment. Taking things a step further and sending a Notice of Intent to Lien can be effective, too. Notices of Intent to Lien are generally sent to the property owner, the GC, the customer - really, any party that can either pay the debt or apply pressure to make sure it gets paid. While it's not a required part of the mechanics lien process in Hawaii, a Notice of Intent to Lien is still a powerful payment recovery tool.

Pursuing payment claims

Obviously, actually pursuing a payment claim can be an effective option, too. For one, mechanics liens are a powerful payment recovery tool. They'll make sure that all parties involved in the project feel the sting of the payment dispute, and because they tie up the property title, owners will usually want to resolve these claims as quickly as possible. Though, keep in mind that filing a Hawaii mechanics lien actually entails proceeding with a lawsuit, unlike most states. More on filing a Hawaii lien here: (1) Hawaii Mechanics Lien Guide and FAQs; and (2) How to File a Hawaii Mechanics Lien – Step by Step Walkthrough. Naturally, including other payment claims in the lawsuit is an option as well. Claims like breach of contract, claims under Hawaii's prompt payment laws, etc. can be tacked on, as appropriate, to boost the chances of recovery.

Alternative options

Finally, there are always other options on the table. Working with your customer or the property to come up with a payment plan or to enter into some other form of payment security could make sure you get paid. Though, before doing so, it'd probably be wise to have your attorney review the arrangement and associated documentation. Further, if worse comes to worst, obtaining partial payment by sending a debt to collections is always another option.

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