How long to wait to get paid

[sfav8r]

My contracts require a 10% deposit when scheduling the job, a progress payment after rough inspection is approved and the balance upon approval of final inspection.

On one recent job, I did the rough, got paid no problem. I was called for the trim, which I did except for three lights because the GC said the HO hadn't picked them out yet. That was 3 months ago. HO had a bunch of legit. delays with a fire at her business, etc.

What is reasonable here? I was just going to send the invoice for completion minus $75 to hand three lights.

Any thoughts? How do other contracts address this?

Thanks.

[ August 01, 2005, 10:13 PM: Message edited by: sfav8r ]

 

[mdshunk]

Re: How long to wait to get paid

Yep, I'd send the bill. What's the worst they're gonna do? Not pay it... which is basically what they're doing right now.

 

[luke warmwater]

Re: How long to wait to get paid

I'd send it also.
I wouldn't deduct anything as now you have to make a special trip just to hang three lights, which, in my contract, would require additional payment for.

 

[jeff43222]

Re: How long to wait to get paid

I got stuck waiting months for money enough times to have learned my lesson. Basically, unless the job is going to be completed in a very short time and doesn't involve a rough-in or coordinating with other trades or a GC, I expect an upfront payment of about 30%, a progress payment of about 60% when rough-in passes, and leave a retainage of about 10% for when final work is completed, not inspected.

I set things up this way because I have no control over when other work will be done after rough-in passes, and I've found that final inspections are very low on many inspectors' priority lists, unlike rough-ins, which they get to quite quickly.

 

[stud696981]

Re: How long to wait to get paid

I would send the bill, minus the $75. However, if they wanted me to do the other fixtures I would charge a service call plus T&M. Your making an unnecessary trip, you deserve to be compensated for it!

 

[stud696981]

Re: How long to wait to get paid

One thing to add, I probably wouldn't have given this 3 months. I would have spoken with the GC and advised him or her that I completed my work. The three fixtures not done was because of the home owners hold up. I would have asked for a timely payment without excuses.

 

[tx2step]

Re: How long to wait to get paid

I agree with everyone else. Send the bill ASAP and try to collect it ASAP. The delay is not your doing.

1. I'd restructure your contract document so that you have been paid at least 90% before the power is turned on. Not having power on is a powerful incentive to pay timely.

2. I'd include a clause to cover stuff like this. If there are some electrical items that can't be installed because the building isn't ready or the equipment or lights aren't there, then you should be paid 100% less a very minor deduction for these remaining "punch-list" items. Then you should be paid the balance plus a service call When you go to complete these punch-list items.

3. Be sure you comply with your state's lien laws. Some states start the clock running from when the bill was presented for payment -- but many start the clock running from the date the work was performed. In that case, you have already used up 3 months on the clock. How long do you have to file required notices and an actual lien? Don't let the ability to file a lien get away from you because you missed a required step or deadline.

4. Next time, bill it (less a reasonable (i.e. a low) hold-back $ for any remaining "punch-list" items) as SOON as your work is "substantially complete". Collect ASAP and within the payment terms of you contract. Your contract does have a defined "payment due" time frame, doesn't it? Make sure that your contract has all of the needed wording and clauses to adequately protect you.

"Substantially Complete" (and/or the "Date of Substantial Completion") is a standard construction and legal concept and term that is important for you to know, understand and use.

5. Make sure your contract requires that you are paid on time, regardless if the GC has received payment from the HO or not. Contract payment clauses that say that you are only paid when (if) the GC gets paid by the HO will eventually cost you $$$. You have no control over the relationship between the GC and HO. If they get in conflict and the GC doesn't get paid, that's not (or shouldn't be) your problem. The issue will probably not even involve you, but could cost you $$$ anyway, unless you have the correct payment clause.

 

[charlie tuna]

Re: How long to wait to get paid

consider this - which a mechanical contractor did.
he started a list of problems he ran into as he started in business. on the back of his proposals these problems were addressed through contact language. and at the bottom was a disclaimer for the owner to sign. he and i went into business about the same time and this was about five years ago at the time he showed this to me. his list was about thirty items long --but covered many common problems that i had. like parking--security--payments--dirty job conditions--jobs not ready--changes in plans--bounced checks--job access--interfearance with other trades--etc.. this worked for him!! and if something new came up -- he would just add it to the list!

 

[bradleyelectric]

Re: How long to wait to get paid

Originally posted by tx2step:
I agree with everyone else. Send the bill ASAP and try to collect it ASAP. The delay is not your doing.

1. I'd restructure your contract document so that you have been paid at least 90% before the power is turned on. Not having power on is a powerful incentive to pay timely.

2. I'd include a clause to cover stuff like this. If there are some electrical items that can't be installed because the building isn't ready or the equipment or lights aren't there, then you should be paid 100% less a very minor deduction for these remaining "punch-list" items. Then you should be paid the balance plus a service call When you go to complete these punch-list items.

3. Be sure you comply with your state's lien laws. Some states start the clock running from when the bill was presented for payment -- but many start the clock running from the date the work was performed. In that case, you have already used up 3 months on the clock. How long do you have to file required notices and an actual lien? Don't let the ability to file a lien get away from you because you missed a required step or deadline.

4. Next time, bill it (less a reasonable (i.e. a low) hold-back $ for any remaining "punch-list" items) as SOON as your work is "substantially complete". Collect ASAP and within the payment terms of you contract. Your contract does have a defined "payment due" time frame, doesn't it? Make sure that your contract has all of the needed wording and clauses to adequately protect you.

"Substantially Complete" (and/or the "Date of Substantial Completion") is a standard construction and legal concept and term that is important for you to know, understand and use.

5. Make sure your contract requires that you are paid on time, regardless if the GC has received payment from the HO or not. Contract payment clauses that say that you are only paid when (if) the GC gets paid by the HO will eventually cost you $$$. You have no control over the relationship between the GC and HO. If they get in conflict and the GC doesn't get paid, that's not (or shouldn't be) your problem. The issue will probably not even involve you, but could cost you $$$ anyway, unless you have the correct payment clause.

can you show me how you word your contract to reflect this?

 

[tx2step]

Re: How long to wait to get paid

Originally posted by bradleyelectric:
can you show me how you word your contract to reflect this?

Which part?

Are you trying to come up with your own custom subcontract? Or is it more of a combo proposal/contract that a homeowner signs to accept your bid, authorize you to do the work and guarantee to pay you?

Are you working as a sub to a GC or directly with the owner?

What type of work?

I end up having to deal with a number of different contracts. The wording can get pretty tricky at times.

As a sub, if it's a small project, I usually try to use the AGC Document No. 603 (Std. short form) as a starting point, modify it's wording (quite a bit) and add about 5 listed exhibits. This is for smaller commercial projects. For larger projects I usually use the AIA subcontract form or the AGC full subcontract form as a starting point.

One of the exhibits is "Payment Provisions". In it, I describe how payments are to be made. That is where you would want to list your payment milestones.
For instance in a residential setting:
Payment of subcontract amount:
30% due within 3 calendar days of execution of this subcontract.
30% due within 3 calendar days of rough-in inspection.
30% due within 3 calendar days of [whatever event triggers approval to turn on power]. Note that permanent power will not be energized until this payment has been received.
Remaining 10% due within 3 calendar days after Substantial Completion of the Subcontract Work, less $25 for any light fixture, ceiling fan, switch, receptacle or other electrical device that cannot be completed at that time because of lack of equipment or because some portion of the construction is not yet sufficiently completed. (etc, etc.)

A few payment provisions that I've used lately:

"Payments shall be made by the Contractor to the Subcontractor when due, regardless of whether the Contractor has or has not received a corresponding payment from the Owner for the Subcontractor's work."

"No retainage shall be withheld or deducted from any payment"

"Final payment of the entire remaining contract balance shall be made within seven (7) calendar days of substantial completion of the subcontract work or of the suspension of significant building progress by the contractor, whichever is earlier" (of course "significant building progress" can be open to interpretation)

None of this may fit your situation or be very helpful to you, but maybe it will give you some ideas.

Developing contract wording can be very tricky. It needs to fit the type of work you are doing and who you are working for. It is also affected by your state laws. If you're fairly new to doing this, then a little time with a good construction attorney is worthwhile. Make sure you use an attorney that specializes in construction law.

The first thing to do is to write down a complete outline (list) of everything that you would like for your contract to accomplish for you. Then figure out the wording that will accomplish it -- probably initially with legal help.

Bear in mind that one of the hurdles is getting the other side to agree with you over contract requirements. One of the methods I use is to ask them to explain what's wrong with what I'm asking for, and then ask them things like: "Well, sir, does that mean that you don't intend to pay me? Then what's your objection to saying in writing how you will pay me? If you were me, wouldn't you want it in writing, too? What happens if you get run over by a bus... whoever completes this project won't know what you promised me." etc, etc.

I'll be glad to help you in any way I can, but I certainly don't claim to be an attorney. (Insert all applicable disclaimers here )

[ August 04, 2005, 02:52 AM: Message edited by: tx2step ]

 

[George Stolz]

Re: How long to wait to get paid

Originally posted by tx2step:
For instance in a residential setting:
Payment of subcontract amount:
30% due within 3 calendar days of execution of this subcontract.
30% due within 3 calendar days of rough-in inspection.
30% due within 3 calendar days of [whatever event triggers approval to turn on power]. Note that permanent power will not be energized until this payment has been received.

Around here, rough-in inspection is also to get a meter on and energize the building, albeit for a temp circuit (laundry or bath GFI). So expecting 90% after rough inspection is pushing it, IMO.

 

[jeff43222]

Re: How long to wait to get paid

Originally posted by tx2step:
Developing contract wording can be very tricky. It needs to fit the type of work you are doing and who you are working for. It is also affected by your state laws. If you're fairly new to doing this, then a little time with a good construction attorney is worthwhile. Make sure you use an attorney that specializes in construction law.

Very, very true. The first lawyer I consulted when I was was getting started gave me contract advice that proved worthless. The next lawyer explained to me how the key clauses in my contracts weren't enforeceable because they weren't specific enough. Lesson learned.

 

[luke warmwater]

Re: How long to wait to get paid

I still would not hold-back my money.

Put a clause in the contract that states (to the effect) that if all light fixtures are not present at time of final that a keyless will be installed or blanked-off where applicable and final payment will be due. You'll gladly return to hang the missing fixtures for a fee.

 

[tx2step]

Re: How long to wait to get paid

Originally posted by georgestolz:
Around here, rough-in inspection is also to get a meter on and energize the building, albeit for a temp circuit (laundry or bath GFI). So expecting 90% after rough inspection is pushing it, IMO.

Hmmmm... well that wouldn't work too well for you. OTOH it never hurts to ask?

The idea is to get most of your money while you still have some leverage. The more leverage the better. In your case, you'll have to figure out what milestone to pick and what leverage you can use.

Sometimes it takes a while before you see that final payment on a job. You just want to figure out how to structure payment terms so that you keep that final payment $$$ amount as low as possible so it doesn't kill your cash flow.

If your work is 99% complete and they still owe you 50% of the contract price, then they have all of the leverage. They tend to use that to coerce you into doing things you otherwise wouldn't do.

The idea is to keep any leverage on your side.

 

[tx2step]

Re: How long to wait to get paid

Originally posted by jeff43222:
Very, very true. The first lawyer I consulted when I was was?getting started gave me contract advice that proved worthless. The next lawyer explained to me how the key clauses in my contracts weren't enforeceable because they weren't specific enough. Lesson learned.

Construction Attorneys are specialists. Construction law is very complex. Good ones are hard to find, but worth every penny. Don't waste your time and money on a cut rate attorney.

A really top-notch construction attorney will cost you less in the long run. He already knows construction laws and relevant decisions. He doesn't have to do a lot of research or look up case law. He already knows what the courts will likely do. He will give far better advice, make far fewer mistakes. He may charge more per hour, but will do the work in half of the time.

If you spend an hour or two with one getting basic advice (such as what contract to use, what it should say, how it should say it, etc.) before you get into trouble, then he can keep you out of a lot of bad situations. Think of it like starting off with a good design or maybe getting preventative maintenance.

The one that I use is a registered PE, has an MBA as well as a law degree, and exclusively practices construction law. He charges $250/hr and is worth more than that. He uses legal assistants, junior attorneys, etc. where possible (and charges far less for them) to help keep costs down.

You can explain a problem to him in 5 minutes where it would take an hour with a general purpose attorney (who probably still won't really understand and will probably offer bad advice).

I'm certainly not a big fan of attorneys. But when you need one, nothing else will do. And in my opinion, this is one area where nothing but the best will do.

Did you ever see some poor guy go through a divorce, and the wife's attorney was a LOT better than the one the guy used? How did that turn out for the guy?

 

[tx2step]

Re: How long to wait to get paid

Originally posted by luke warmwater:
I still would not hold-back my money.

Put a clause in the contract that states (to the effect) that if all light fixtures are not present at time of final that a keyless will be installed or blanked-off where applicable and final payment will be due. You'll gladly return to hang the missing fixtures for a fee.

That's a great idea -- I like it!

 

[bradleyelectric]

Re: How long to wait to get paid

Originally posted by tx2step:

Originally posted by bradleyelectric:
can you show me how you word your contract to reflect this?

Which part?

Are you trying to come up with your own custom subcontract? Or is it more of a combo proposal/contract that a homeowner signs to accept your bid, authorize you to do the work and guarantee to pay you?

Are you working as a sub to a GC or directly with the owner?

What type of work?

I'm really thinking along the lines of subcontract work while working for GC's. Wording on my proposal. I pretty much don't wait for payment while working directly with owners, and base that work off a 60-40 split. I can carry a little cash and don't worry about the fact that I'm leaving a little on the table in small situations. The GC's I've been working with on small commercial stuff usually just have contract language "net 30 days". I invoice by the 24th and typically expect payment by the following 1st, making it a 35 day pay, but have heard "I'll check to see if we have recieved the check on that" and get pretty stretched out sometimes. That is the situation that I'm looking to cover with "I could care less if you have received payment or not, I want my check" style. To clarify, I am very easy to work around and with to get a job completed and bid to make money, so if there needs a little "do this instead of that" in order to make it a quality job I'm for it due to the fact I didn't penny pinch on my bid. I'm just getting sick of getting stretched out on some stuff that I know full well I'm supposed to be paid in 30 days. If knew it was going to be a net 70 days pay, I'd have doubled my bid and been fine with waiting. Your help is greatly appreciated.

[ August 06, 2005, 09:41 PM: Message edited by: bradleyelectric ]

 

[tx2step]

Re: How long to wait to get paid

Bradley--

Then a proposal qualification and eventually a contract clause along the lines of the following should work:

"All payments to the Subcontractor are due no later than the end of the month following the date of the Subcontractor's invoice. Subcontractor shall receive payment no later than the due date. Payments shall be made by the Contractor to the Subcontractor when due, regardless of whether the Contractor has or has not received a corresponding payment from the Owner for the Subcontractor's work."

You should massage the wording to fit your situation, but that may give you some ideas. A construction attorney can tell you in about 30 minutes if that kind of payment clause is enforceable in your state, and if it would override any contradictory language in the GC's standard subcontract, and verify that the final wording is correct. If not, then he can recommend a clause that will work for you. Then you can just use the same clause in each of your proposals and contracts.

Depending on your situation, you might also want to include some type of defined penalty if you don't receive timely payment -- like $$$ per calendar day as a late-payment penalty (like a form of "liquidated damages"). Just make sure that the penalty isn't so low that the contractor says to himself "I can hold his money, then pay his penalty (or not), and come out ahead, so I'll hold his money for a while". Just be sure and run something like this by a construction attorney the first time you plan to use it to make sure that it's worded properly and enforceable, and that there's no unforeseen downside . Then you can just use the same wording in any of your future contracts.

If you do any projects that extend over several months (so that you make monthly progress payment draws), make sure that there are contract provisions that allow you to be able to stop work if you don't receive timely payment. Many (most) GC's subcontracts call for the sub's work to continue if there is a payment dispute. This can bankrupt you. Also, you have a much larger stick if you can legally stop work until you are paid without the GC being able to replace you. A construction attorney can give you a clause that will do this for you. It can save you from bankruptcy!!!

One other thought. If you deal with out-of-town or out-of-state GC's, then make sure that you have a clause that sets legal venue to your local court system (or whatever venue your construction attorney recommends as being to your best advantage). Home-field advantage is a biggie !!! Especially if the GC is out-of-state!!!

I hope this helps!

Not getting paid stinks!!!

Edited to add:

Any clauses that you add to your subcontract must typically be in an "exhibit" to the subcontract. That exhibit must be referenced in the subcontract as being part of the subcontract, and it must then be attached to the subcontract. A construction attorney can help you do this correctly the first time -- there's more than one way to do it. But just having it in your proposal isn't good enough -- it has to make it into your actual subcontract or you're out of luck.

[ August 07, 2005, 01:44 PM: Message edited by: tx2step ]

 

[satcom]

Re: How long to wait to get paid

"I expect an upfront payment of about 30%, a progress payment of about 60% when rough-in passes, and leave a retainage of about 10% for when final work is completed, not inspected."

This has worked for us, 10% is just not eniough to secure any job.

Construction Attorneys are specialists. Construction law is very complex. Good ones are hard to find, but worth every penny. Don't waste your time and money on a cut rate attorney.

The best $750 we ever spent.