Construction Law

Dealing with Non-Paying Owners Part 3

In this four-part series, a Chattanooga contractor attorney is discussing several ways you can resolve an issue of an unpaid invoice with an owner. In the first and second parts, we covered why owners fail to pay and developed an ironclad contract that features progress payments to protect contractors. In this section, we will discuss a few other cost-effective ways you can resolve a payment dispute with an owner.

Speaking with the Owner  

There are several ways a contractor can seek payment for a project from a delinquent owner. The first thing every contractor should consider before confronting an owner about a late payment is their working relationship with the owner. Is this a colleague that the contractor expects to work with in the future? Do they work well together on projects? Are they currently on good terms? In some cases, it may be best to give the owner the benefit of the doubt in the short term to benefit both parties in the long term. If the work relationship is worth salvaging, it may be best to initiate payment dispute with dialogue before taking legal action that can impact the working relationship moving forward.   

Sending a Demand Letter

In some cases, the contractor doesn’t want to pursue legal action quite yet but wants to show the owner that they are willing to pursue legal action if they must in order to receive payment. Sending a demand letter has several benefits including the following:

• Presents Your Legal Argument: A demand letter is a formal way of presenting your potential case. The letter should include the exact amount you are owed and any supporting documents that show how you were able to determine this total value. If there was a breach of contract, the demand letter should feature what clauses were violated by the owner.  
• Give Notice: A demand letter establishes a record in writing that you contacted the owner and requested payment. If the owner ignores this letter or doesn’t comply with the demand at a later date, this document could be used as an exhibit in litigation.
• Offer a Resolution: A demand letter written by a lawyer shows the owner that you are serious about pursuing legal action against the owner. With that being said, a demand letter should also afford the owner the chance to rectify the situation and pay the owed compensation.

In order to create an effective demand letter that sounds professional, is in compliance with the law, and does not sound threatening, hire a Chattanooga contractor attorney.  

For solutions to receiving a late payment from an owner, please read part four.

If you would like to speak with one of our Chattanooga contractor attorneys, please contact us today.

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.