This Is the Best Way to Avoid Construction Payment Disputes
Construction payment disputes. There’s no bigger headache for a contractor, and they deserve so much better.
But why is it so hard for contractors to be paid on time for work they’ve already completed? Project overruns and problems that arise during the job can be partly to blame, because owners are often stretched on their budget as is.
The good news is, contractors have legal recourse for collecting payment when a dispute arises in the form of mechanics liens. Filing a lien and taking a client to court can be expensive, though, so the best policy is to avoid disputes when at all possible. Here’s the best way to make that happen.
Be Clear About Expectations
The first step to avoiding payment disputes is to be clear and upfront about payment expectations before work begins. An application for payment form is a great place to start. You can use this form to clearly outline what materials will be used and in what quantities, which subcontractors will step in and what their role will be, and labor costs.
The application for payment should be filled out and signed by the contractor and owner ahead of starting the project. It can easily be updated as needed, and when used in conjunction with a schedule of values, payment tracking will be simpler for everyone involved. This form can be used to speed up payment and reduce the possibility of error [The Balance].
Clear expectations and thoroughly documented work will make payment disputes less likely to happen in the first place and easier to resolve when they do arise.
Read Through the Contract
Before you sign the contract with the owner, read through it thoroughly. Many payment disputes arise because one or both of the parties didn’t read or understand part of the contract before signing. Pay special attention to the sections of the contract that go over scope of work, payment terms, change orders, project schedule, completion deadlines, and any other portions that are likely to cause a dispute.
Communicate and Work Together
A natural response to non-payment is to get angry and hot-headed. But that will only make things worse. The first step to avoiding construction payment disputes is to communicate clearly with the owner and try to work things out on your own. Try to come to a clear and fair resolution. Maybe the owner will ask for a payment plan, or an extra week or two to get payment together.
Unfortunately, there will be times when the owner won’t respond to any attempts to collect payment, and in these situations, pursuing legal action is your best option.
CoFi Is Here
Construction payment disputes can be stressful and overwhelming. That’s why CoFi is here to help contractors get paid on time, every time. Our construction payment software helps improve communication and streamline payment processes between lender and contractor. Our technology will save you time, increase efficiency, and speed up payment timelines without automated draw process. See how CoFi can help your business. Schedule your personalized demo today.