Demand Letter Tips for Contractors
The construction industry is riddled with disputes and slow payment. So the time will come when you need to send a nasty-gram to get paid faster on a job. There are special considerations for contractors when writing and sending a demand letter. This post has 3 tips for contractors to do their demand letter right, and for it to be effective!
1) Send Your Demand Letter To All Stakeholders
On most construction projects contractors have a huge collections advantage -- they can rope in a bunch of different parties. You may have contracted directly with the GC, or the property owner, but making a payment demand is a perfect opportunity to rope in all the other stakeholders touching the job. This includes the GC, the owner, the lender, the surety, and others. While you may not have contracted with these parties directly, since you have lien rights, you can bring them into your demands. And this is extremely effective!
2) Reference the Prompt Payment Code
The federal government, and almost every state, has a prompt payment code that benefits contractors. If you use this statute, you can be entitled to attorney fees, interest, penalties, and other remedies. Use it! All you need to do is reference your state's prompt payment code when making a payment demand. So definitely do this in any demand that you send. To find out more about your state's prompt payment codes, check out this resource and explanation of each state's prompt payment rules on Levelset.
3) Reference Your Mechanics Lien or Bond Claim Rights
Finally, the best thing you can do when making a payment demand in construction is reference your mechanics lien rights (i.e. on private jobs) or bond claim rights (i.e. on public jobs). Let folks know that if you aren't paid within a certain period of time, that you'll file your claim against the project. This will get everyone's ears up and your demand addressed.