How to Create a Consistent Collection Strategy
If you have been following along with our four-part series on covering your ass for a Material Supplier, we have broken down the importance of a credit application, what information you need to get for every project, utilizing the power of a lien, and filing a lien correctly. In this blog, we discuss how you can use that information to create a consistent collection strategy.
Your Collection Strategy is Key
Most Material Suppliers have 30-day terms. With that being said, we all know that payment in the construction industry rarely happens in 30 days. So, when should you take your first action to collect if you are unpaid after 30 days? It is best to set up a collection strategy that is consistent with your state’s lien rules. For this example, we are going to explain what is required for a Material Supplier in Texas. Please note that every state is different, and you must know what is required in your specific state. If you don’t know, give us a call, and we will tell you the rules at no charge.
If you are a Material Supplier in Texas, for a commercial project, you need to do the following to have a valid lien:
- The first notice you need to send is to the General Contractor.
- This notice needs to be sent on the 15th day of the second month after the material was first supplied.
- For example, if you supplied materials in May, June, and July, this first notice would need to be sent to the General Contractor on or before July 15th. If you do not send this first required notice, you will lose your lien rights for material supplied in May.
- The next notice you need to send is the 15th day of the third month after you first supplied material.
- This notice needs to be sent to the Owner of the property and the General Contractor.
- So, using the example above, if you supplied material in May, June, and July—this second notice would need to be sent on or before August 15th.
Don’t work for free
Collecting what is yours is crucial to the livelihood of your business. We have a team ready to take your call to protect what is yours, collect what is yours, and educate yourself on the front-end!
Essential Facts (Texas Lien Filing Process—Commercial Projects)
- Your lien needs to be filed on the 15th day of the fourth month after you last supply material or within 30 days of the project’s final completion.
- You don’t have to file a lien for every month you are owed for material that was supplied. You can file one lien for everything as long as you keep sending timely notice for the amounts you are owed.
- A copy of any lien that is filed needs to be sent to the General Contractor and Owner within 5 days of filing.
- All notices that are required to be sent must be sent certified mail with a return receipt requested.
- The only way to prove beyond a doubt that a letter was sent on a specific date is to take it to the post office and have it stamped. Otherwise, the validity of your lien will be questioned.
A lien is an extreme remedy, and you need to follow all the rules exactly. Even being one day late in sending any of the required notices or filing your lien will make your lien invalid. We have seen invalid liens countless times at The Cromeens Law Firm because a comma was in the wrong place or a number was incorrect. What seems to be a small slip-up can impact your lien on a large scale, and it could be thrown out and considered invalid. Do not let small errors like this impact the validity of your golden ticket to rightful payment. Mistakes happen, but there is no grace in the lien filing process.
There are countless rules regarding liens, especially in each state. Whether you reside in Texas, Arizona, California, or beyond, we pride ourselves on being educated in the lien filing process in all 50 states. Give us a call, and we will explain each step you need to take to have a valid lien. If it can be collected, we will get it done. Hire us to do it all for you for a flat monthly fee (link to payment options page). If you didn’t catch our FREE C.Y.A. for Material Suppliers Webinar on Thursday, May 13th, you can now view a recording of it on YouTube! Associate attorney, Ieshia Dunmore, goes over everything you need to know to cover your ass and collect what is rightfully yours.