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Recent economic trends have caused many contractors and other businesses to deal with accounts receivable issues.  Five years ago, when the economy was better as a whole, there was less concern with enforcing a contractual right to payment because bills were being timely paid.

For those contractors dealing with collection issues, not much can be done to “squeeze blood from a turnip”—if your customer has no money, collection efforts are often futile.

But to best assure your ability to collect debts, a few steps can be taken at the contract stage and during your work to best assure your ability to collect.

As a litigation attorney, I can advise you that these are the circumstances that best allow me to collect debts owed to my clients:

• Clear and certain scope of work terms set forth within a signed contract, including signed change orders confirming any revisions to the scope of work or the contract price (don’t forget to make sure your home improvement contract meets the legal requirements of Business & Professions Code section 7159, otherwise collection will be even more difficult);

• Attorneys’ fees provisions in a contract that help you leverage payment short of incurring attorneys’ fees;

• Service charge provisions in a contract that further help you leverage payment of at least the principal balance owed; continue

Contractors will find this article which summarizes the requirements and deadlines for mechanic’s liens very useful.

There are three basic requirements to preserve, maintain, and enforce mechanic’s lien rights for California projects. Following is an outline of those three requirements.

Requirement Number 1: Preserving your lien rights by serving a California 20-day preliminary notice

The California 20-Day Preliminary Notice form (aka “preliminary notice”) preserves a lien claimant’s (the person or entity who claims the mechanic’s lien) lien rights on a construction project when the notice is timely served by the lien claimant.

The notice MUST be served by the lien claimant (unless the lien claimant was hired directly by the property owner, in which case the contract between the claimant and the property owner serves as the notice) or the lien claimant will not have any lien rights.

The notice should be served no later than 20 days after the lien claimant first provides any benefit to the property, because the notice preserves lien rights for no more than 20 days prior to the date the notice is served through the completion of the contract.

If this deadline is not met, the preliminary notice should still be served as soon as possible thereafter, as the preliminary notice will still preserve lien rights for all benefits provided starting with the day that fell 20 days prior to the date of service of the preliminary notice. continue