If you’re a contractor, subcontractor, supplier, or property developer facing nonpayment issues, understanding how to collect what you’re owed is crucial for protecting your rights and maintaining your cash flow.

This guide covers everything from how collecting on a construction related issue works and how an attorney can help you recover what is owed to you.

Learn about the collections process and when it’s time to hire an attorney. Whether you’re new to construction collections or facing a stubborn, non-paying client, this article offers practical legal insight to help you act swiftly and decisively.

What are collections in the construction context?

Construction collections refers to the legal and procedural steps contractors, subcontractors, and suppliers take to collect unpaid amounts for labor, materials, or services provided on a construction project.

In the construction industry, delays in payment are common, but when they extend beyond reasonable limits, legal intervention may become necessary.

Nonpayment can result from:

• Disputes over scope of work
• Cash flow issues with general contractors, sub-contractors, or owners
• Project delays
• Poor documentation or missed deadlines

The process of collecting funds owed on construction projects may involve:

• Sending formal demand letters
• Filing mechanic’s or construction liens
• Pursuing legal action through litigation or arbitration
• Negotiating settlements

Proper documentation, timely invoicing, and knowledge of lien rights are foundational to successful collections.

Making a written request

The first step in the construction collections process is often sending a strongly worded letter, also known as a demand letter.

In the context of collecting funds on a constructed related issue, a typical demand letter may include:

• Detailed description of services provided
• Payment amount owed and any relevant invoices
• Payment due date and a clear deadline
• Consequences of nonpayment (such as legal action or lien filing)

Tips for Effectiveness:

• Be professional and factual, not emotional
• Reference prior communications and contracts
• Send via certified mail or email with receipt confirmation
• Retain a copy for your records

While a collections letter doesn’t carry legal weight on its own, it often triggers payment and is a required step before pursuing further legal remedies in many jurisdictions.

Process for collecting

The construction collections process typically follows a progression from informal to formal measures, depending on the debtor’s response.

Step 1: Internal collections

• Follow up on unpaid invoices
• Send reminders and statements
• Issue a demand letter

Step 2: Engage legal counsel

If the debtor ignores the demand letter, consult with a construction collections attorney to evaluate your rights and deadlines.

Step 3: File a mechanic’s lien

Contractors and suppliers have the right to file a mechanic’s or construction lien on the property to secure unpaid funds. This creates a legal claim against the property and can halt a sale or refinance.

Step 4: Lien foreclosure or legal action

If payment is still not made, legal proceedings can begin, including:

• Foreclosure on the lien
• Filing a breach of contract claim
• Mediation or arbitration

Step 5: Judgment enforcement

If you win a court judgment, collections may include:

• Garnishing wages or bank accounts
• Foreclosing on real property
• Placing liens on other assets
• Using a collections agency or sheriff’s office

Acting promptly is critical, as lien rights and legal actions are subject to strict deadlines and procedural rules.

How can an attorney help with the collections process?

A construction collections attorney helps contractors and construction professionals recover money owed for services rendered. Their role includes:

• Drafting and sending formal demand letters
• Advising on lien rights and timelines
• Preparing and filing mechanic’s or construction liens
• Initiating foreclosure proceedings or lawsuits
• Negotiating settlements or payment plans
• Representing you in court, mediation, or arbitration
• Enforcing judgments

They also ensure your contracts and documentation are legally sound, minimizing future risk.

When to hire an attorney

You should consider hiring a construction collections attorney if:

• You’ve issued multiple reminders and received no response
• The debtor disputes the quality or scope of your work
• You’re approaching lien or lawsuit filing deadlines
• You need help navigating lien laws in your state
• The amount owed is substantial and jeopardizes your business
• You’re unfamiliar with the collections or lien process

Early legal intervention often saves time, stress, and money, and may lead to a faster resolution than going it alone.