Tips for Subcontractors to Ensure Payment

By Lauren White, RCS Reporter.

The work of a subcontractor is difficult, but there are ways to protect their right to payment with these legal tips.

Working as a subcontractor has pros and cons.  While plumbers, roofers, drywallers, and other subcontractors have the ability and flexibility to work on multiple projects simultaneously, they are typically the last laborers to get paid.  And sometimes they don’t even get paid for their work. If there is ever a dispute between a contractor and an owner, or if the contractors themselves are struggling financially, chances are good subcontractors are not getting paid.  

According to Cotney Construction Law, “They [subcontractors] are on the bottom of the payment chain, completely reliant on contractors to get paid for their work.  Oftentimes, they have to hope that contractors run their business in such a way that the expectation of prompt payment is always met.”

Cotney Construction Law shares four tips in a two-part article for contractors to use in order to help increase their chances of getting paid:

Part one focuses on explaining how to identify the financial health of a contractor and how to send a preliminary notice.  It is recommended that subcontractors do some research to determine if a contractor historically doesn’t pay. To find out if prompt payment will be an issue, Cotney Construction Law urges subcontractors to think about these questions, “Are invoices not getting paid in a timely manner?  Are you having more disputes involving money?” If the answer is “yes” to any of these questions, those are clear signs that the contractor is having financial issues. At this time, peruse the contract and consult a construction lawyer for additional help. 

It is also recommended for subcontractors to send a preliminary notice.  “This notice informs the owner that you are establishing your right to file a mechanic’s lien, if not paid,” Cotney Construction Law explains.  This is sent 20-days before the project begins to, “...indicate to an owner the expectation of payment and the consequences of non-payment.” This can increase subcontractors chances of getting paid.  If the payment is not made, the notice of intent to lien should be sent. And if that doesn’t yield results, Cotney Construction Law recommends that subcontractors exercise their mechanic’s lien rights.

Part two explains how to thoroughly read contracts and how to invoice consistently.  When reading through a contract it’s important to, “...know your scope of work, project plan, and payment schedule.  It’s also helpful to include a provision to stop work if payment is not received within a predetermined time period,” as explained by Cotney Construction Law.  Construction lawyers can ensure the appropriate provisions are in the contract.

Cotney Construction Law encourages subcontractors to, “Build a schedule for at which points you will invoice your client and stick with it.”  In doing this, it shows clients when money will be owed and it demonstrates professionalism, which can help increase subcontractors chances of getting paid. 

With minimal control over when, or if, they’re paid, the life of a subcontractor is stressful and challenging.  Subcontractors complete tasks and fulfill roles that are crucial to the completion of building structures, but it is common for other companies to get paid before them.  The four tips Cotney Construction Law shared should help subcontractors increase their likelihood of getting the payment they deserve.

Consult an experienced construction attorney like Cotney Construction Law for more information and tips to ensure subcontractors get paid. 

Read the original articles, both part one and part two.

Disclaimer: The information contained in this article is for general educational information only.  This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.