In the construction industry, subcontractors often face the challenging situation of not receiving payment from contractors after completing their work on a project. This issue can cause significant financial strain and disrupt business operations. Construction Dive reported that contractors are twice as likely to receive payment over subcontractors and that it can take subcontractors over 60 days to finally receive their payment.
Non-payment from contractors is not only frustrating but also unfair. Subcontractors invest their time, labor and resources into completing their part of the project, expecting timely and full payment as agreed. When contractors fail to pay, subcontractors need to take certain steps to ensure they receive what they are due.
Communicate with the contractor
The first step should be to directly communicate with the contractor. Reach out to discuss the payment issue. Sometimes, non-payment could be due to a misunderstanding or an administrative oversight that the contractor can quickly resolve.
Review your contract
Check your contract to understand the terms of payment and any clauses related to late payment. Additionally, the contract will clarify if you should seek payment from the homeowner or the contractor, so you will know how to proceed.
Send a formal payment request
If initial communication does not resolve the issue, send a formal payment request or a demand letter to the contractor. This letter should detail the work completed, the agreed-upon payment and a request for immediate settlement.
File a mechanic’s lien
If the contractor still does not pay, consider filing a mechanic’s lien against the property. A mechanic’s lien is a legal claim against a property for unpaid construction work. Filing a lien can prompt the contractor to settle the payment to avoid legal complications with the property owner.
Seek mediation or arbitration
Mediation or arbitration can be a way to resolve the dispute without going to court. These methods involve a neutral third party who helps negotiate a settlement.
Explore small claims court
For smaller amounts, taking the matter to small claims court can be an effective solution. The process is generally quicker and less complicated than other legal proceedings.
It is important to keep detailed records of all work and communications to support your case. Taking these steps can help ensure you receive the payment you rightfully earned for your hard work and contribution to the construction project.