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Remodeling Contracts - Intent to Lien, Payment Schedules

by Michael Stone

I've taken several calls this past week from contractors asking for help with problems they're having on their jobs. I've talked about these issues before, but it's springtime and new contracts are happening, so let's go over some of these again.

Intent to lien. Send your notice of intent to lien, or whatever the document is called in your state, to your client the first day of their job (or before the job starts). Don't wait until the job is in process, when they get upset about something and you're concerned they'll decide not to pay. Because at this point in time, all you're doing is making them more upset. Dumb move. Send the notice before the job starts. Be sure to explain when they sign the contract that they'll be receiving this notice, and the reason is that it's required by the state for you to maintain your contract rights for your business. Practice wording it correctly so it doesn't come out wrong, but be sure to explain it because you don't want them blindsided when it shows up. With the intent to lien, if your client decides they want to arbitrarily change the payment schedule for your work for whatever reason, you're protected.

Payment schedules. Be sure that your payment schedule is on the last page or last two pages of your contract, close to their signature. Otherwise they might claim they didn't see the payment schedule when they signed the contract. You should have a down payment, progress payments about every two weeks and your final payment should not be more than 2% of the sales price of your job. This is all outlined in Chapter 7 (pages 155 to 159) of the new Markup and Profit Revisited book.

Contract language. You should also have language in your contract that specifically states that if they miss a payment, and it does not matter why, you reserve the right to shut the job done if the payment is not made in 48, 72 or however many hours. Unfortunately, too many people today are more than willing to ignore their commitments, and that includes your contract. Not everyone – there are a lot of good clients out there – but there are some who think they can arbitrarily change the payment schedule to suit themselves. Don't allow it to happen. If you let them change one payment, you aren't following the contract and you may be stuck for the rest of that job trying to collect monies due. When it comes to following the contract, don't try to be Mr. or Ms. Nice Person. You follow the contract, and make them abide by it as well.

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