Collecting What You’re Owed
Contractors don’t always have the luxury of getting payment up front. In fact, it’s often true that to get the work that’s available a contractor must take on some degree of risk – doing the work and trusting that he or she will be paid later. Unfortunately, there are times when that doesn’t pan out.
If you are a contractor or other provider who is owed money for work, you have remedies. And while folks often think that a letter on legal letterhead will scare a debtor into paying up, that’s often not the case.
First, if you are a contractor who has provided labor or services on a piece of property, a mechanic’s lien may be an available tool. However, there are various requirements to the mechanic’s lien statute, including the statutory window – 90 days from the date of the last labor or materials furnished. A contractor should be careful about filing a mech lien, though, as he or she can wind up paying the other side’s attorney’s fees if the lien is filed against an incorrect party or without meeting the statutory requirements. Still, if used properly, the mech lien is one of the most effective tools for getting a debt paid.
Second, a contractor who is owed money can use two South Carolina statutes. The S.C. Prompt Payment Act – found at the laws beginning at 29-6-10. This provides for 1% interest on a debt. If the debt isn’t large, this isn’t likely to scare a debtor. More effective is 27-1-15, by which you can make a demand for payment. The debtor then has 45 days to make a reasonable and fair investigation of the claim and to pay it, or whatever portion is deemed valid. If the debtor fails to make an investigation or unreasonably refuses to pay the claim, then the debtor may be liable for attorney’s fees and interest at the judgment rate, from the date of the demand.
Finally, if all else fails, then a contractor shouldn’t be afraid to file suit. A business decision must be made on the front end, to determine whether you are “throwing good money after bad,” but if your debtor is not paying due to a cash shortage, a lawsuit can make it such that you are the “squeaky wheel” and therefore the priority. As with all lawsuits, a suit should include discovery requests on the front end and follow-up Requests for Admission.
By applying legitimate, legal pressure, you can often get paid what you’re owed.