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Developer Client won't pay - options (Mech Lien? Other options?)

sundanceuiuc

Like any practicing architect, I have the occasional slow/no pay from clients. Often it is below $1K and it's grudgingly (a) let go as 'the cost of doing business' or (b) negotiated to a settled cost.

However, I have an issue with a client that owes me approx $13K (~$8.5K in fee and ~$4.5 in travel expenses). 

The particulars are, in abbreviated fashion:

  • My proposal limits expenses to a set amount except for in writing if more is needed.
  • The job took a LOT longer than expected, so travel exploded on my end for consulting out of state.
  • I have an email approving one of the invoices in question in full, same email lists the scheduled travel addition as well.
    • To above, the client's project manager approved in one email the invoice with the first batch of disputed travel expenses and the schedule for the additional travel. (Meets the written approval clause)
  • At project conclusion and delivery, the client THEN tells me (2 months later) they will not pay the disputed travel costs despite the email approving same, since the job took longer than it should have.
  • Full disclosure, the scope exploded a little and it did take longer on my end than I expected, but they gave a revised schedule the negotiated hat I met +/- a day or two.

They will now only pay the $8.5K if I sign a lien wavier. Potentially relevant, this is an out of state project and I am a consultant (as builts, minor emails) and not the designer or architect of record.

The client is a developer who has an army of lawyers and I'm a small practice architect with a budget to match. As lawyers earn way more than architects, it is probably not worth it to spend more time on a lawyer (a local lawyer consulted with me on this at a very generous reduced fee to send a 'pay me' letter. The client responded to basically tell me to go bleep myself), so....

  • Does anyone know if a lien waiver stops me from following up with a small claims court claim for the $4.5K after the initial payment of $8.5K is received?
  • Has anyone filed a mechanic's lien and had it succeed? It is an option to get the whole $13K... or lose it all I guess....
  • Anyone see a potential countersuit in my future on the lien?
  • Does this sound like a 'take my medicine, get the $8.5K and chalk it up to a lesson learned?
  • Does anyone know how serving a lien affects your professional practice insurance?

Obviously, this is a question that is murky to answer. If anyone is kind enough to answer, I will state explicitly that I assume that forum posters are not licensed to practice law in the NorthEast states and this doesn't constitute business / law advice. ;)

Thanks for any thoughts, being a small business owner sucks at times.

This whole situation is depressing as hell. Nothing like a big boy taking your lunch money ;(

 
Aug 25, 16 9:27 pm
Olaf Design Ninja_

baseball bats and ski masks.....call your pro prac insurance agent, have seen unpaid architects get help from their insurance lawyer on collection.

Aug 25, 16 9:34 pm
urbanity

take the money and run.......

did you get a retainer?

Aug 25, 16 10:44 pm
Non Sequitur

I think it's murky enough to stretch the definition of north-east to include the state of Oregon. 

Balkins to the rescue, shortly, no doubt.

Aug 25, 16 10:47 pm
bowling_ball

Where I am, liens can't be taken out by consultants, only contractors. Might want to get that clarified before you do anything.

Aug 25, 16 11:11 pm
What bowling_ball said. Liens are good when you have goods or products that you can't take back for non payment (try repossessing the studs from a project ... Doesn't do you much good) but you can collect on the property where those goods are installed.

Services are a different ballgame. There is no physical property to put a lien on, and repossessing the drawings won't do you any good.
Aug 26, 16 10:23 am
Some states do allow liens by architects though because the services you rendered do result in an improvement to the property. So best to check what is allowed by your state.
Aug 26, 16 10:31 am
Beepbeep

Design  Professionals Lien in some states could be used in which the the owner/developer could not sell o market the property until it was cleared.

Aug 26, 16 10:44 am
mtdew

Is your scope of your work completely done? Do you have any further deliverables, or on going CA? If so, you can use this as your leverage to get paid. 

If the developer is done with your use, you're in a bad place for negotiations.

Aug 26, 16 3:15 pm
wurdan freo

Tell em you'll sign a lien waiver for 12500... see if they will up the ante.

Aug 26, 16 11:18 pm
jcarch

What wurdan said...but even if the client won't meet you half way, it's not worth filing a lien or going to court over $4,500, especially against a client with deep pockets.  For next time, structure your contract, and your behavior, to reduce your exposure.

I'm guessing all these services and travel didn't happen in one month.  If that's the case, then once your monthly invoice is past due, you stop work until paid.  As a small firm owner, I used to frequently fall behind in invoicing regularly.  I stopped doing that, and it vastly improved my cash flow (duh) and eliminated problems like this.

I also added a paragraph to our standard contract that says that if an invoice is past due, we have the right to stop work, and that any added costs to the project caused by that stoppage are all on the client.  I usually give a client one get out of jail free card if they're late, but after that, we really do stop work until paid.

And as suggested above, structure the repayment of your initial repayment so that you hold as much $ as you can at the end of the project - that's always when the bad apple tries to screw you.

It's a crappy and expensive lesson, but learn from it for next time.

Aug 27, 16 10:55 am
geezertect

^  Good real world advice.  Also, get any out of pocket expenses like travel up front.

Getting paid is a major problem in this profession.  It's a crime that they don't teach you anything about this stuff in school.

Aug 27, 16 1:21 pm
Bloopox

Liens don't have any impact on the owner until he wants to sell, or to use the property as collateral.  In the meantime you have to renew the lien annually or it ceases to apply.  With a developer this might be an effective strategy, because he most likely intends to sell in the near future, and will understand that the lien will throw a wrench in that.  It's not as effective a strategy with a residential client or small commercial building owner who intends to hold onto the property for the long haul, because they can just wait you out for years, hoping you'll not want to keep paying to renew, or will forget.

Is the project complete? And were you involved in CA?  Most of the states that do allow an architect to file a mechanic's lien require that the architect was involved in the construction phase and that it resulted in a completed building - in other words you can't usually file a lien for just design-phase involvement.

Aug 27, 16 1:59 pm
geezertect

A lien really isn't that much of a monkey wrench unless it's for a really big amount because the owner can always bond around it if they want to sell.  You hope that by becoming a nuisance or an embarrassment at closing that they will pay you to get rid of you.

With a homeowner, they might be naive enough to think it's a bigger deal than it is.  Does anyone know if the filing of a lien would screw up somebody's credit rating?

Aug 27, 16 2:15 pm
Bloopox

That depends on the state.  Liens that stem from civil judgements and from tax debts are reported to credit bureaus, and so they affect credit scores.  In most states mechanics' liens are classified as civil judgements and are reported to credit bureaus, and stay on the credit record for 7 years, even if they're paid or expired.  But in some states mechanics' liens are specifically not classified as civil judgements, and so even though they appear in public records and will turn up in a title search and usually that will prevent a sale until they're dealt with, they cannot be reported to credit bureaus. 

Aug 27, 16 2:50 pm
accesskb

Ram a bulldozer into the building you assisted with.

Aug 27, 16 4:51 pm
starrchitect

If only there existed a valuable professional organization that helped in dealing with such conflicts, lectured on how to best practice financial matters, and looked out for the best interests of professional architects. 

Aug 27, 16 11:37 pm
sundanceuiuc

All,

I greatly appreciate the input and will proceed with some of the advice above. Some of the advice was already considered, others not and all was instructive.

Again, thanks for all your help, be well and good luck to you all!

Aug 27, 16 11:53 pm

starrchitect, that's commendable, but ultimately a pipe dream. Glossy photos in magazines are much more important when talking about best interests of professional architects. How else are we supposed to know what to design in order to win awards? Winning awards is what sets us apart in order to allow us to procure more work from clients. Just because the clients won't pay us is simply a minor triviality. That's what unpaid interns are for. Plus, interns flock to firms with lots of awards and lots of photos in magazines. So, the focus of the professional organization seems perfectly aligned with reality ... keep dreaming.

Aug 29, 16 2:43 pm

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