Jaburg Wilk


The "Nine Commandments" for Getting Paid; Thou Shalt . . .

Categories: Construction, Article

legal tactics to ensure contractors get paid

1. If the Registrar of Contractors requires you to have a contractor's license, obtain the applicable license and do not enter into contract until the license is in good standing (in Arizona, failure to have such a license may prevent you from suing for amounts owed);

2. Have a written contract sufficient to addresses reasonably anticipated complexities of the project. At a minimum, the contract should reasonably describe the work and/or materials to be furnished, price (or terms addressing how price is calculated), payment terms, timeframes for performance, and liability for interest and costs of collection;

  • In AZ, if you furnish labor/materials to an "owner-occupied dwelling," you must have a written contract signed by the owner-occupant in order to preserve lien rights;
  • Make all contract modifications in writing and signed by all necessary parties (i.e., change orders, extras, subsequent waivers of finance charges, etc.);

3. Be aware of pay-when-paid / pay-if-paid contract provisions. Despite popular belief, such clauses may still be enforceable in Arizona (shared risk / payment source identified);

4. Utilize, but be careful with, joint checks and joint check agreements;

5. Consider ROC "prompt pay," "no-pay," or license bond complaint, but be wary the two sides of this sword (i.e., "ROC domino effect" - ROC inspector may err in contract interpretation, subjective evaluation of workmanship, or application of ROC's statutes, rules and regulations, but ALJ/OAH will still often side with the inspector's position, then submits a recommended decision to ROC which, in turn, typically adopts decision as final);

6. Preserve ability to leverage payment through lien, stop notice, and bond claim rights;

  • Timely prepare and serve preliminary lien notices on all projects of significant value;
  • Pay attention to recipient addresses and the estimated amount stated in the prelim (in AZ, you cannot lien for more than 120% of the stated estimate);
  • Do not sign an unconditional waiver and release unless cash or a cash equivalent is in hand for the amount indicated in the waiver and release through the date indicated;
  • Pay attention to the date indicated in the waiver and release and whether the waiver is on "final payment" or "progress payment";
  • "Perfect" and enforce your lien, stop notice, and bond rights before statutory deadlines run (consult an attorney knowledgeable in determining these deadlines);

7. Document, document, document;

  •  Maintain good business records and store them in an orderly, retrievable fashion;
  • Keep a written record of potential issues and problems (i.e., keep notes and write letters addressing issues and problems, and, if time allows, make reasonable, non-inflammatory written requests for payment before initiating heavy-handed tactics)

8. Utilize legal counsel well before litigation becomes the only alternative;

9. Learn the statutes, rules, and regulations in your jurisdiction which may provide unique and powerful payment remedies (e.g., AZ has specific statutes governing payment rights and remedies, including mechanics' liens, payment bonds, stop notices, "prompt payment," and suspension/termination of performance).

Founded in 1984, Jaburg Wilk offers extensive experience, diversity in practice areas and the ability to think like a business owner. We are an Arizona mid-sized AV rated law firm, the highest rating that a law firm can receive. Our attorneys, paralegals, and other support staff meet our clients' diverse legal needs and provide exceptional service through our 21 Fundamentals which comprise The JW Way.