We have a client that owes us a significant amount of money. our consultants have refused to continue working a few times now. occassionally the client will reluctantly give us a check just to get the consultants going. On top of that, The client has delayed the project over and over, which of course delays closing.
We have continued working in order to keep staff busy, but now face another change by the client and another delay.
you haven't described much about the project or its terms but, as a rule, you're agreement with the client should be tied to YOUR performance. i.e., even if the thing doesn't get built, you've held up your part of the bargain.
use your contract/agreement/signed proposal as the leverage that it's supposed to be. if architects have to be tied to the real estate transaction (unless we have equity), we're in big trouble.
if your agreement doesn't address things like this.... i bet it will next time.
It is tough times. At the end of the day, there's not much you can do if a client doesn't have the money.
I'd find out what their financial situation is. If they are on the verge of bankruptcy (for their company or the project), then you might want to just talk to them.
Good luck, a lot of companies are not getting paid (including mine). People tend to have decent intentions, but the credit market sucks out there and people are losing funding, funding is costing more or they are having to get more financing.
this almost entirely seems like a contractural issue - if you have a stipulation that says payment happens monthly, you have to hold them to it.
that said, we've had a developer try to play us that way, even with the consultants money. our standard response is to stop work after 30 days of no payment (we have all invoices on a 15 day due date - we'd stop 15 days after it's late). also, if it's not settled within 60 days, we simply file a lien. we try to make all that very clear, in writing, up front. try not to make it personal and we take the lien off the day payment comes in.
now, if you agreed to hold payment until the end, then you've got no case...
This type of thing is getting increasingly commonplace.. I was talking to one of our legal people and they're now getting all strange cat-ate-my-homework excuses for non-payment from nearly insolvent or at least increasingly cash-strapped clients.
I'd say that if you're at a small firm with some flexibility (which we're not) the best thing is to deal with nonpayment on a case-by-case basis. If its a valuable client, who is still solvent but increasingly working-capital strapped, tolerating the extension of payables cycles (your receivables) might a way to help them out and, in turn, help yourself out.
If however, you think that the client may fail, the opposite principle applies - get in front of them early and often with documentable claims of payment (repeated demand letters, etc), as this may help you with the courts later on, when you have to submit evidence that they owe you money to the liquidators/bankruptcy judge. The more evidence you have, the better.
Mechanics lien - go to Speedy liens.com...very easy. The bank won't fund if there is a lien on the property, so he will have to pay or no one including himself gets paid
i had a friend who tied his fee for a custom residence to the owner starting construction. he only made that mistake once.
nonarchitect,
at least in nm, architects can't file a mechanic's lien until the permit is pulled. people usually won't pull until the project is funded, ie. the contractor is hired.
Stop working on it! Don't make any more changes until they pay. And even if you keep your staff working - don't let the client know that, until they pay.
As a design/build contractor, during these tough times with the credit crunch and lack of financing on projects, I shift my focus to the owner, keep him on a short leash so not to allow him to get too far out. I do this as a protection to myself and the team consultants. We speak often about the payment status from owners.
Having lived through the past two recessions (early 80's and 90's) while contracting, I try to keep a very close eye on the tell tale signs of a owner/project in trouble. It is not fool proof but when I go astray from this I then put myself, my business concerns and other's at risk.
In your situation, head the other comments and stop work until payment has been brought to date (per schedule and agreement). Place a professional lien within all the prescribed time lines and requirements.
Most of the time, unless you've modified the B141 docs (or you've used your own contract) your only choice is to quit and demand every last one of the drawings back - we'll call that the nuclear option.
If you have adequate documentation of non-payment, in a little over half the states you can file a lien. Tis is not full-scale war, more of a police action - both of which can sometimes cause more animosity than an actual war.
Sometimes a nicely worded letter on your lawyers' letterhead, containing the words "mechanic's lien" somewhere in there can do wonders for loosening the purse-strings for the fraction of the cost (and hassle) of actually filing the lien. Saber-rattling can actually do some good sometimes.
One interesting thing about stopping work during construction is that on a financed job, for some lenders the fact that an architect is no longer certifying pay applications may prevent the developer from getting his construction draws.
Nov 10, 08 10:13 pm ·
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Client wont pay "until closing"
We have a client that owes us a significant amount of money. our consultants have refused to continue working a few times now. occassionally the client will reluctantly give us a check just to get the consultants going. On top of that, The client has delayed the project over and over, which of course delays closing.
We have continued working in order to keep staff busy, but now face another change by the client and another delay.
How do other firms handle this kind of situation?
thanks
Until closing of the sale of the property? F--- that. Put a lien on it.
you haven't described much about the project or its terms but, as a rule, you're agreement with the client should be tied to YOUR performance. i.e., even if the thing doesn't get built, you've held up your part of the bargain.
use your contract/agreement/signed proposal as the leverage that it's supposed to be. if architects have to be tied to the real estate transaction (unless we have equity), we're in big trouble.
if your agreement doesn't address things like this.... i bet it will next time.
It is tough times. At the end of the day, there's not much you can do if a client doesn't have the money.
I'd find out what their financial situation is. If they are on the verge of bankruptcy (for their company or the project), then you might want to just talk to them.
Good luck, a lot of companies are not getting paid (including mine). People tend to have decent intentions, but the credit market sucks out there and people are losing funding, funding is costing more or they are having to get more financing.
get a tattoo on your hand that says "pay up sucker"...that should scare the little weasels into paying
this almost entirely seems like a contractural issue - if you have a stipulation that says payment happens monthly, you have to hold them to it.
that said, we've had a developer try to play us that way, even with the consultants money. our standard response is to stop work after 30 days of no payment (we have all invoices on a 15 day due date - we'd stop 15 days after it's late). also, if it's not settled within 60 days, we simply file a lien. we try to make all that very clear, in writing, up front. try not to make it personal and we take the lien off the day payment comes in.
now, if you agreed to hold payment until the end, then you've got no case...
This type of thing is getting increasingly commonplace.. I was talking to one of our legal people and they're now getting all strange cat-ate-my-homework excuses for non-payment from nearly insolvent or at least increasingly cash-strapped clients.
I'd say that if you're at a small firm with some flexibility (which we're not) the best thing is to deal with nonpayment on a case-by-case basis. If its a valuable client, who is still solvent but increasingly working-capital strapped, tolerating the extension of payables cycles (your receivables) might a way to help them out and, in turn, help yourself out.
If however, you think that the client may fail, the opposite principle applies - get in front of them early and often with documentable claims of payment (repeated demand letters, etc), as this may help you with the courts later on, when you have to submit evidence that they owe you money to the liquidators/bankruptcy judge. The more evidence you have, the better.
Mechanics lien - go to Speedy liens.com...very easy. The bank won't fund if there is a lien on the property, so he will have to pay or no one including himself gets paid
tell them to pay or their kids dog might disappear.
i had a friend who tied his fee for a custom residence to the owner starting construction. he only made that mistake once.
nonarchitect,
at least in nm, architects can't file a mechanic's lien until the permit is pulled. people usually won't pull until the project is funded, ie. the contractor is hired.
Stop working on it! Don't make any more changes until they pay. And even if you keep your staff working - don't let the client know that, until they pay.
As a design/build contractor, during these tough times with the credit crunch and lack of financing on projects, I shift my focus to the owner, keep him on a short leash so not to allow him to get too far out. I do this as a protection to myself and the team consultants. We speak often about the payment status from owners.
Having lived through the past two recessions (early 80's and 90's) while contracting, I try to keep a very close eye on the tell tale signs of a owner/project in trouble. It is not fool proof but when I go astray from this I then put myself, my business concerns and other's at risk.
In your situation, head the other comments and stop work until payment has been brought to date (per schedule and agreement). Place a professional lien within all the prescribed time lines and requirements.
Good luck!
Don
Most of the time, unless you've modified the B141 docs (or you've used your own contract) your only choice is to quit and demand every last one of the drawings back - we'll call that the nuclear option.
If you have adequate documentation of non-payment, in a little over half the states you can file a lien. Tis is not full-scale war, more of a police action - both of which can sometimes cause more animosity than an actual war.
Sometimes a nicely worded letter on your lawyers' letterhead, containing the words "mechanic's lien" somewhere in there can do wonders for loosening the purse-strings for the fraction of the cost (and hassle) of actually filing the lien. Saber-rattling can actually do some good sometimes.
One interesting thing about stopping work during construction is that on a financed job, for some lenders the fact that an architect is no longer certifying pay applications may prevent the developer from getting his construction draws.
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