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What To Do When Customers Won't Pay
 

What To Do When Customers Won't Pay

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What do you do when your customers won't pay? In this economy, more and more business owners and construction professionals are facing this question. ...

What do you do when your customers won't pay? In this economy, more and more business owners and construction professionals are facing this question.

Stites & Harbison attorney Anne Gorham shows you what you can do to get the money that's owed to you. Anne has more than twenty years of construction legal experience, representing contractors, design-builders, owners, developer and design professionals. She has also been involved with projects that range from industrial and commercial distribution centers, pipeline construction and chemical manufacturing facilities to highway construction and energy production facilities including coal gasification and biomass.

For more information on construction law issues, please go to our website, www.Stites.com, or visit our constrution page at http://www.stites.com/services/126/construction

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    What To Do When Customers Won't Pay What To Do When Customers Won't Pay Presentation Transcript

    • What to do when a customer doesn’t pay? Thirsty Thursday May 26, 2011 Lexington, KY Anne E. Gorham
    • Payment Remedies Retainage laws Public and Private Mechanics Liens Federal and State Prompt Payment Statutes Payment Bond Claims Theft by Unlawful taking
    • Kentucky’s Fairness in Construction Act KRS 371.410 Retainage
    • Owner’s Release of Retainage Not for materials provided by owner 30 days after Substantial Completion
    • Contractors &Subcontractors Release of Retainage 15 days after release from owner – Business days
    • Failure to Release Retainage  12% per year  Send Notice
    • Mechanics Liens
    • Private Projects
    • Preliminary Notice ID the Owner ID Yourself
    • Preliminary Notice ID labor, mtls providing Price ID who contracted with ID Property Sign, Notarize, Send Copy
    • Notice of Intent to Lien If no contract with owner Anne Gorham 859-226-2308 859-425-7884 FAX agorham@stites.com[Insert name and address of [real estate owner]  ID Your Relationship to Project  Owner of Construction Project v. Real Estate Owner
    • Notice of Intent to Lien Time Limitations – $1000 or more – 120 – < $1000 – 75 – Residential – 75 Days after last day of work (LDOW) Owner of Project = Owner of Real Estate
    • Statement of Lien ID ID yourself LDOW ID Owner of Real Estate ID $ File with County Clerk – 6 months of LDOW Copy to owner within 7 days of filing
    • Statement of Lien ID Property ID who contracted with
    • Statement of Lien ID Process Agent The name and address of CONTRACTOR’s agent for service of process is_______________; however, service of process may be accomplished by serving Anne E.Gorham, Stites & Harbison, PLLC, 250 West Main Street, Suite 2300, Lexington, KY 40507. The Affiant states that the foregoing statements are true: ______________________________COMMONWEALTH OF KENTUCKY ) ) ss.COUNTY OF FAYETTE ) The foregoing instrument was acknowledged, subscribed and sworn to this ___ dayof _________, 2011.
    • Perfect the COMMONWEALTH OF KENTUCKYLien ROWAN CIRCUIT COURT CIVIL BRANCH _____ DIVISION CIVIL ACTION NO. ________________ 12 months PLAINTIFF v. Other lien DEFENDANTS holders or COMPLAINT mortgage holders * * * * * For its cause of action, the Plaintiff states:
    • Design Professional’s Lien Statute KRS 376.075 Who Can File – Professional Engineer – Licensed Architect – Licensed Landscape Architect – Real Estate Broker (under certain circumstances) Only if they contracted directly with owner or owner’s agent
    • Design Professional’s Lien What does the lien attach to? What does the lien secure?
    • Design Professional’s Lien Statement 6 months Lien Requirements
    • Public Construction Kentucky Public Mechanics Lien Statute – KRS 376.210
    • Statement of Lien File with County Clerk Later of – 60 days – or the date of S.C. Time not extended by trivial or warranty work
    • ID Project
    • LDOW $ owed Agent
    • Perfecting the LienPerfecting public Liens Attested by County Clerk Send letter and lien by certified mail – to owner – and person contracted with (if not the owner)
    • Protests GC has 30 days to file protest Owner to hold funds If no protest – owner pays If protest – file suit & serve owner within 30 days
    • Suit to Enforce Lien KRS 376.110 Filed in Circuit Court in County where project is located Parties -- Party with whom you contracted -- Any party who has an interest in the property Cause of Action -- Breach of contract -- Enforcement of lien – must be carefully drafted -- Unjust Enrichment
    • Bonding Off Surety bond for twice the amount of the lien Filed with the County Clerk Bond substitutes for property as security for lien Property is free and clear of Lien
    • Overstating Lien  Don’t overstate lien  Public Projects – KRS 376.220(3) – Damages  Slander to Title – Malice – 1 year SOL
    • Failure to Release Lien Release lien within 30 days of satisfaction $100 penalty per day Penalty increases to $500 per day after 45 days - KRS 382.365(1)&(3)
    • Prompt Payment Act
    • Kentucky’s Fairness in Construction Act KRS 371.410 Payment of Invoices – Owner to pay within 30 days - Notice within 25 days –15 day rule for subcontractors
    • Kentucky Prompt Payment Act Public Projects KRS 45.451 - .453 Application - state purchaser Paid within 30 days 1% penalty per month
    • Federal Prompt Payment Act (31usc § 3902) Interest on unpaid amounts Rates change Use the calculator – http://www.fms.treas.gov/prompt/ppinterest.html
    • Payment Bond Claims Private Projects  Before you start work  Get a copy  Deadlines are different – Typical Notice - 30-90 days – Suit – 1 year of date that notice was provided or last day of work
    • Payment Bond Claims Public Projects Bonds required for public projects in excess of $40,000 Covers – Subcontractors – 1st tier subcontractors and materials suppliers No coverage for 2nd tier
    • Federal Miller ActPayment Bond Claims
    • Federal Miller Act Payment Bond Claims Application - contract > $100,000 – public building of the United States Covered parties: – The general contractor – 1st tier – 2nd tier
    • Federal Miller Act Payment Bond Claims Notice of Claim on Bond – 90-days LDOW Notice must state: –$ – Name of party Claimant contracted with Send to general contractor by registered mail
    • Federal Miller Act Payment Bond Claims Enforcement of Claim Against Bond – File suit within 1 year of the last date labor or materials were supplied – 40 U.S.C. §3133(b)(4)
    • Theft by Unlawful Taking &Making Required Disposition  KRS 514.030 & KRS 514.070  KRS 446.070 – injured by the violation of any statute may recover damages
    • Things to Remember Develop a checklist of deadlines – Liens (every state different) – Notice requirements (bonds, claims, etc) Don’t wait to call Document, Document, Document Lien Releases Final Payment
    • What to do when a customer doesn’t pay? Thirsty Thursday May 26, 2011 Lexington, KY Anne E. Gorham