Why is the no law protecting our business

4 weeks ago

Hi
We own our Plumbing and Heating co. Of course we work with a lot contractors and do service work.
There seems to be a lot of frustration in the construction realm that people do not have to pay us. So are only choices is intent to lean. Where is the laws protecting us. We do large and small projects. Thanks

Senior Legal Associate Levelset

Obtaining payment has become a huge issue for construction businesses worldwide. This is true, despite a number of construction-specific remedies that are available in nearly every country (and every state). Levelset discusses the root of the issue, at least for the United States, in this article: Construction Payment and Financial Risk: A Primer.

Let’s look at some payment recovery tools available for Montana construction businesses.

Recovering construction payments without a lien or a lawsuit

First, it’s worth noting that gentle pushes like invoice reminders will often be enough to compel payment. Simply reminding a customer that they haven’t made payment yet and that you’re on top of things may be enough to push them to make payment.

Escalating things a bit further with a demand letter can do the trick, too. If a customer knows that their failure to pay will create them a world of headaches, they’ll be more likely to make payment. More on demand letters here: Demand Letters for Contractors – How To Write One That Gets You Paid.

Finally, if things start teetering toward a payment dispute, sending a document like a Notice of Intent to Lien will often force payment without the need for further action. A Notice of Intent to Lien acts like a warning shot before an actual lien filing. It informs the customer and/or the owner that if payment isn’t made and made soon, then a mechanics lien filing is on the horizon. Considering the drastic implications of a lien filing, they’ll usually want to resolve the matter before a lien becomes a reality. More on that here: What Is a Notice of Intent to Lien and Should You Send One?

Recovering payment with a Montana mechanics lien

As you mentioned in your question, a mechanics lien is a powerful tool for recovering payment. Mechanics liens are actually a tool that’s unique to the construction industry, and recovering payment in other industries is often a lot harder than recovery via a lien claim. Still, no one wants to have to resort to a lien claim.

Mechanics liens force payment in a number of ways (we counted 17), and they’re a relatively easy claim to make – at least compared to legal claims. Because they pose such a threat to the property title, an owner will often be ready to approach the bargaining table once a lien is filed – and they’ll certainly put pressure on their contractor to make payment, where applicable.

For more on Montana mechanics liens: Montana Mechanics Lien Guide and FAQs.

Beyond filing a mechanics lien, there are always other options for recovery.

For one, legal action will still be available – just like it would be for a payment dispute in any other industry. When payment hasn’t been made, as required, there’s a good chance that a breach of contract has occurred. And, when there’s no real contract for the work, then something like an unjust enrichment claim may do the trick.

Further, there are construction-specific legal claims, too. Montana’s prompt payment statute requires that payments be released in a timely fashion. And, the Montana retainage statute ensures that retainage abuses don’t go unpunished. And, an unpaid contractor or supplier can use those laws to their advantage. More on that here: (1) Montana Prompt Payment Guide and FAQs; and (2) Montana Retainage Guide and FAQs.

Finally, note that lawsuits don’t always have to be drawn-out affairs with exorbitant legal fees. For smaller disputes (those under $7,000), taking a dispute to small claims court may be an option. And, if that’s the case, an attorney typically won’t be required, and the dispute may be resolved pretty quickly. Granted, pursuing a lien claim will usually be a preferable option to small claims court.

Fighting off payment issues requires a proactive approach, not regulations

It’s important to take notice that recovery tools are great for when push comes to shove, but the real fix to construction payment problems starts before there’s even a hint of a payment problem. By communicating effectively, establishing a collaborative project atmosphere, and being willing to talk through disputes, construction businesses can drastically reduce their payment risk. More on that here: Construction Payment Utopia | How to Fix the Industry.

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