Understanding Your Rights When a Customer Doesn’t Pay

You rely on invoice payments to stay in business, so when a customer doesn’t pay for services or supplies that you provided, it impacts your ability to meet operating expenses. With your livelihood on the line, you have every right to pursue payment.

According to the Construction Financial Management Association, the average profit margin for a general contractor is 5-7% annually. This means that you need $300,000 of new revenue to compensate for $18,000 in unpaid invoices. Clearly, non-paying customers are bad for business, so what can you do to collect your money?

If following up on the invoice doesn’t bring results, New York lien laws give you the right to pursue payment by filing a lien against the property or the funds set aside for its completion, depending on whether the project was private or public. Below is an overview of two claim types and how you can pursue them.

Mechanic’s Lien

A mechanic’s lien is designed to guarantee payment to contractors, subcontractors, and suppliers who provided labor or materials to a construction project. They give you an interest in the property, so if the owner still refuses to pay, you can foreclose on it and have the property sold to satisfy the debt.

In New York state, a mechanics lien must be filed within eight months of last supplying services or materials. It typically stays effective for one year from the date it was filed, which means that you must enforce the lien during that time or risk losing your claim. If you can’t take action within the year, you can protect your claim by applying to the court for an extension.

In New York City, subcontractors and suppliers who worked on public improvement projects can file a Notice of Mechanic’s Lien on Account of Public Improvement against the funds owed to the general contractor. The City will withhold payment from the contractor and publish information about the lien in the Public Improvement Lien Docket, which lists the liens filed against contractors in the city.

Bond Claim

Under the Miller Act, general contractors must post a payment bond for government projects valued at $100,000 and up. If you are a subcontractor or supplier and your invoice remains unpaid, you file a claim on the bond instead of the property. Bond claims must be filed within 90 days of last providing labor or materials and you must foreclose on the claim within a year after filing.

New York’s version of the Miller Act, which is known as the “Little Miller Act,” allows subcontractors, suppliers, sub-subcontractors, and suppliers to subcontractors to file a bond claim against a public project valued at $100,000 and up.

If you are a general contractor, you do not have claim rights under the Miller Act, but if you aren’t paid, you can file a lawsuit against the public entity that hired you.

Work With a New York Mechanic’s Lien Provider

You have rights when a customer doesn’t pay, but working with an experienced mechanic’s lien provider can ensure that no missed deadlines or paperwork errors jeopardize your claim. At NYLiens LLC, we have been preparing and filing lien documentation for construction professionals for over a decade, and are here to help you collect the funds you need to stay in business. For more information, please contact us or call 718-444-LIEN.

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For over a decade, NYLiens LLC has prepared and filed Notice of Mechanic’s Lien documents for all types of contractors and suppliers throughout New York State.

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