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Should I complete the work 100% for a customer who will not pay the whole amount due.

PennsylvaniaCollections

Hi I gave my customer a QuickBooks Estimate which see verbally approved and has paid Progress Invoices off of. Now near the end of the Project she has decided to not pay the full amount because she feels I charged too much. I am only looking to be paid the Estimate/ Contract, no extra billing. There is about 20% of work to be completed. The balance due is $353.73. The total Estimate/Contract amount is $793.32. Should I complete the job so I can sue for the total amount? If I take a partial payment to complete the work does that void my right to sue for the balance? Thanks, Keith Kling kkling4@gmail,com

1 reply

Dec 13, 2019

Accepting partial payment

Accepting partial payment will not result in the loss of rights, as long as certain precautions are taken. Typically, contractors will be asked to execute a lien waiver in exchange for payment. In this case, if accepting less payment, be sure that the lien waiver is for a partial (progress) payment. Since lien waivers aren't regulated, there are a few things to look out for such as unconditional language, or inaccurate "through dates." This article provides a full breakdown of things to look out for: Should You Sign that Lien Waiver?

Suspension of work for nonpayment

Many states have enacted prompt payment laws that specifically deal with the ability to suspend work for nonpayment. Unfortunately, Pennsylvania's prompt payment laws (a) only cover public works projects, and (b) do not address the right to suspend work. Therefore, a thorough review of your contract documents is advised to see if there is any right to suspend work. If not, walking off the job can cause more problems than it solves, as the contractor is exposing themselves to liability for delays and breach of contract claims. The best practice is to continue performance according to the contract terms, while securing your rights in case of nonpayment. In this scenario it appears that communication has broken down and the client is simply refusing to pay the remaining balance. In that case, leveraging your mechanics lien rights is likely your best option.

Pennsylvania mechanics lien rights

The best way to ensure payment is to take full advantage of Pennsylvania's mechanics lien rights. First and foremost, preliminary notices are only required in very specific circumstances, you will only be required to send a preliminary notice if you (a) did not contract directly with the property owner, (b) the project is over $1.5M, and (c) the owner filed a Notice of Commencement. If any of these three circumstances aren't present then a preliminary notice isn't required; although sending a prelim even when not required is a useful tactic to increase your visibility on the project.

Sending a Notice of Intent to Lien

In that case, your mechanics lien rights are intact, and that's the best leverage a contractor can have. One way to escalate your dispute is to send a Notice of Intent to Lien (NOIs) to the general contractor and property owner. Think of this document as a demand letter with extra gravitas. In Pennsylvania, this notice must be sent at least 30 days prior to filing a mechanics lien. this notice needs to be sent by either first class, registered, or certified mail in order to be valid. Personal service is also an option, but mailing with a return receipt requested will help provide documented proof of service. Property owners will want to avoid mechanics liens at all costs, as they cloud the property title, and make selling, transferring, or refinancing the property incredibly difficult. Threatening a lien through an NOI is a great way to escalate your payment dispute, not to mention it is a prerequisite to filing a PA mechanics lien.

Filing a Pennsylvania Mechanics Lien

If the NOI is ineffective to inducing payment, then it may be time to file a mechanics lien. PA mechanics liens must be filed with the county prothonotary's office within 6 months after the completion of the work. Remember, that you must wait, at minimum, 30 days after serving a Notice of Intent to Lien on the property owner. Once filed, the lien will be valid for 2 years. During this period, you can increase the pressure on the property owner by sending a Notice of Intent to Foreclose. This can act as a final warning shot, before enforcing the claim through a foreclosure lawsuit. And, if all else fails, it may be time to seek legal counsel to help you enforce your lien claim. For more information on the mechanics lien process in Pennsylvania, head over to:
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