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Getting paid

As a contractor, you work way, way too hard to let yourself get stiffed for money you have fairly earned. A primer on the ins and outs of collecting what you're due.


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September 24, 2012 by Steve Payne

By Bruce MacKinnon

As a contractor, getting yourself paid on time starts at the beginning of your job, not at the end. It starts, in fact, with a tight contract. The first thing in that contract should be a stipulation of thebasic structure of the agreement, laying out the work to be done and specifying that anything else is an extra that is subject to a contract on its own.

When you believe you are done, and ready to ask for payment, you have to be sure that, in fact, all of the basic work is done. The space has to be at least livable, says Shelby Whittick, a paralegal in Oshawa, Ont. who focuses her business on contracts, receivables and collections. It is a matter of liability. “Where the client cannot use the space, or the item, the contractor is going to have a problem collecting,” Whittick says. “For example, you can’t leave the living space with no electricity, or have the plumbing leaking, if the contractor dealt with these areas, even if the customer has been a pain or is abusive.”

Even if you are dealing with a clearly unreasonable client, you can’t just walk out on the job if you expect to be paid, Whittick says. “You, as the contractor, have to live with the terms of the agreement as well,” she says. “It is possible to walk away from the job if the place is livable, the electricity is on and the plumbing is done and the walls are painted. Only then do you have grounds to leave, even if you believe the customer is unreasonably and constantly unhappy with your work.”

Be proactive. Put language in the contract about late fees and collections and talk about it up front. Build a concrete foundation and rapport with your client which will in turn breed accountability. If you do wind up in court, you can then point to the agreement and the fact that the client was clearly aware of the terms.

And avoiding deadbeat clients means that you have to refuse to work for some prospective customers who give you a “sixth sense” that they may not be honest, creditworthy, or properly financed. “Not every potential client has to be your client,” Whittick says. “If you sense something isn’t right, in advance, run.” In almost all cases, deadbeat clients will trigger negative emotions
from your very first meeting with them.

Sending signals to prospective customers, up front, that you are running a serious business, is a good idea, Whittick counsels. You can start with documentation. “Try to get some identifying documents up front, like a photocopy of their driver’s licence and ensure you have a contractual clause stating this information may be used for credit purposes. It helps later if you need to go for collection help,” she says. If this feels uncomfortable, remember the last time you checked into a hotel. You were asked for ID, then, too. This simply lets the customer know that you have boundaries and that you will use their information to help you collect later if it comes to that. Good fences make good neighbors.”

Don’t be overconfident that the law is on your side. Because, if you do have to go to small claims court to enforce payment, be aware that the rules have changed in favour of deadbeats. The new maximum time limit to collect through the courts what is owing to you is two years since the last payment. It used to be six years. So if someone is determined not to pay, the best way to collect is to try to collect minimal amounts periodically to keep them on the hook. Even ten dollars here or there keeps resetting the clock and restarting the limitation period and it also nurtures your initial relationship by making that client feel accountable for the debt.

Another option, if the client refuses to pay, is to use a collection service. Here again, having identifying information on your customer is critical. Yes, it may cost you about one third of what you are owed, but is it better to have 100 percent of nothing or two thirds of something?

Going to court
Here is where you have to really decide, “Is this really worth it?” If you decide to go to small claims court, and represent yourself, you may feel that you can save yourself the costs of a lawyer ($250 per hour and up) or a paralegal (beginning at $100 per hour, on average, depending on location).  But be careful if you decide to do the legal work yourself.

“Small claims court is for the layman who doesn’t know the system,” Whittick says. “But if you do go to court by yourself, you run the risk of making errors, which sets you back and slows down the process and could lessen the chances of you collecting your money. Whereas, with professional counsel, you are always going forward. A good paralegal has the expertise and experience to weave through the process for you.”

And if you do decide to take your customer to small claims court, without legal counsel, you are the one responsible for serving the customer with the court papers, letting them know they are being sued. Or you could pay a process server to do this for you. Then, in many jurisdictions, you will have to wait 20 days to let them file a defense with the court.

Before going to trial, there will be a mandatory mediation meeting between you and your customer. It’s a chance for both parties to try to come to a resolution before appearing before the judge. The length of the legal process, the date of the trial, whether there will be delays, and your total investment of time, is very difficult to determine in advance. Only you can weigh the cost of all this – in terms of hours lost on other jobs and the stress and overall hassle – if you decide
to proceed.    

Bruce MacKinnon is the editor of PRO PAINTER magazine and a frequent contributor to CANADIAN CONTRACTOR


Steve Payne

Steve Payne

Steve Payne is the editor of Canadian Contractor magazine
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18 Comments » for Getting paid
  1. norm richter says:

    After almost ten years in this field I would like to add that their are habitual offenders out there that mean you can never lower your guard. They make it a practice to pray on unprepared contractors. These offenders look for weaknesses in your methods of doing business. They use tactics like adding, removing, changing their expectations or their requests. They confuse workers to a point where the original instructions that define the jobs in the agreement become blurred. As well, they will use tactics like false complaints about “shoddy work ” or they find other picky excuses for not paying, until everything is delivered. One day, you arrive at the job site only to find your tools on the sidewalk, and a police cruiser nearby, should you protest your eviction. Usually, but not always an uneasiness begins to exist early on with this type of client (that’s the time for you to act) .Unfortunately, and deliberately so, they will eventually question your skills, integrity. etc. Once they they provoke emotional reactions from you and your workers they use this excuse to have you removed from the job. These offenders use websites like Yelp, HandyCanadian, etc. and other web sites as a form of extortion, until the end game is revealed. In the end, you (beaten down contractor) is forced to settle for a fraction of what is owed to you. Once you have settled they will remove (but not always) their lies and negative comments from these web sites. I’ve been there and done that. As a result, I am extremely careful and picky about who I deal with or provide estimates. During my initial meetings, with prospects I search for common values (i.e. BBB Accreditation requirement, past history with contractors etc.) etc.. If their histories, experiences and personal values are in agreement with my own, I will stick with this client. If they are not, I’ll ask more questions and try to quantify their budget. In the end I always ask for 80% of the money up front, until I get to know them. They either agree to my terms of payment, or I move on. Their are no exceptions to this policy other than work for seniors, disabled or sick.

    • Robert Koci says:

      I think your point about their effort to confuse is a good one. Where there are a lot of changes to the plan; where there are too many communications flying around; where there is confusion; it can be a conscience effort on the part of the client to hide an intention to get something for nothing.
      It’s not worth the aggravation, the time or effort to sort it out. You as a contractor are by nature a straight shooting person and you should always return to that very conservative, straight shooting thinking. And trust you gut. Get out early. There are plenty of good customers around. Go find them. Let you competition have the headaches.

      I never thought of consumers using bad reviews as a source of extortion. Hmmm. Got to get the guys at Homestars to comment on that one.

    • Robert Koci says:

      80 per cent of your money up front!! Wow!

  2. Jim Gaffney says:

    Incredible, I didn’t know tha this was widespread method, we have had the same, customers who confuse the guy on site, we even use the term ‘blurry’ we do try to make them sign a change of workorm but it alsways difficult to justify.

    We had another guy who refused to pay, we stopped work over non-payment, he claimed there was all this shoddy workmanship, we told him that if we recieved partial payment we would addres all of his issues. He paid a partial on day 45 from last day worked, we put a lien on his property anyway, there were multiple lawyers notices and offers to address all concerns, but we were always denied access and not allowed to see a written list of defects, we finally beat him down with the legal process and got our money minus legal fees. He did rip off other contractors on the job by delaying past the 45 days. He always played dumb and pretended to be a victim, but he knew what he was doing.

  3. Paul Halonen says:

    Strengthening accountability within the contractor industry
    Showing the consumer the bad from the good contractors by doing the screening and background checks for them
    A contractor registry showing a list of mug shots of convicted fraudulent contractors throughout Canada and the US
    A paid registry of certified licenced professionals that shows the consumer that these groups of contractors are trusted, honest and accountable and can start working for you today. We have taken the due diligence to hire a private investigator to do an extensive investigative background check on all contractors wanting to list their services on our site.
    All contractors must agree to the screening process and pay a fee of $1,500- per year. A onetime fee of $500- non-refundable and non-negotiable which covers the cost of the background check. Every company will fall into a rating system as well as a separate rating system created for customer feedback and reliability.
    We deal with:
    – Home Renovators
    – The Handy Man
    – Painters
    – Construction Companies
    – Any company dealing in Windows, floors, counters, Doors, Electrical, Plumbing, Heating, Drywall
    – All contractors within the construction and restoration business.

    • Sean V says:

      Well, I think a one-sided solution is really a part of the problem in fact since it not only ignores, but rewards dishonest greedy employers seeking free work or slavery just as much as the when the same kind of people are the ones posing as contractors. Therefore (as much as you may not like this due to naturally inherent human self-centeredness), inspired by the Turkish Ottoman Emperor, I think the best solution is to take injustice very seriously- AND NOT JUST FOR OUTRIGHT BRAGGING CRIMINALS WHO TEMPORARILY LYE AND ARE TREATED LIKE THE SMOOTH SLICK GENIUSES THAT They’re NOT- meaning instead of attracting resentment of those victimized by police members, and courts (ie. justice system), there should be broadened enforcement from MInistry of Labour on payments for confirmed good work for example by dedicated and often licensed people who often get shafted especially if w/o support from allies- like a parallel police force that can arrest any who commit slavery. Nothing could be better- instead of overdoing the safety thing as if they don’t know what to do with themselves or the idiots who embody danger, laziness, and abusiveness who are allowed or used by higher powers to point the fingers and make problems for others always, usually after most of the work(and hardest work) is done. The problem here is there would have to be yet another police force like a D.A. to monitor the first two. And the money for this could come from better utilizing the regular police to solve problems and distinguish who needs what level of consequence accordingly at the phone-call level before millions and billions more loss/damage/waste occurs to the system and innocent people usually without account. I think most the countries problems would be addressed this way, but unfortunately, those currently well off or wealthy with more to lose from change will probably fear & resist ANY unpredictable big changes. Good luck to all.

  4. patrick dann says:

    I have a customer claiming that they shouldn’t have to pay for the unforseen charges and extras based on a ruff price and drawing which was done months before actual drawings and contract. It is a substantial amount of money’s. The job is complete minus a generac that is set to go in but I am reluctant to do so because I know I won’t get paid. I have been lenient with the customer because they where friends. From day one the contract has not been met by them and was curious what my best course of action is. I am not a big company and have a young family which has created a financial strain on my family causing more depth that we can handle do to the fact I am unable to pay the sub trades that did the work for me.
    Appreciate your time,
    Patrick Dann

  5. Jen says:

    Hi,
    On June 2, 2015, I entered into an agreement with a highly recommended contractor to renovate my existing basement apartment. start date June 2, completion date June 30. The contract basically involved changing a 1 bedrm to a 2 bedrm and updating the bathroom, move the kitchen. He was also to repair the outside walkway leading to the basement apartment. The details were outlined, and we understood each other clearly, or so I thought. The value of materials and labour was $18K. He requested $9k upfront to purchase all materials for the entire job. After 1 week had passed, I called him and asked when he will start, he made an excuse saying that he was sourcing materials. The following week, he delivered a monster sized bin on the driveway and did the appropriate demolition which only took a small part of the bin. He did nothing else all of June and by the completion date June 30, he said that he had been ill and needed another month August 1. He had not even purchased any materials. early July, he came and asked for more money saying that he had used up the money on something else. I said no and our relationship deteriorated by the minute. He worked at a snail’s pace not showing up for a week at a time. He asked for money 4 times in July and each time I refused to give him. he was belligerent when I asked him why he was not working or when I asked about some worked he had done, he yelled at me. He would hang up on me or just not return calls. August 1 came and went and around middle August, I sent him a letter stating that he has two weeks to finish the job or return $5k of my initial deposit. In two days, the two weeks will be finished and I will change the locks and hire another person. I would like to go to small claims court but I am afraid that my contract is not very tight. It was on an estimate sheet with a start date and an end date and not spelled out really well. Myself and him understand the contract but I am not sure that the judge will. I will still try to give the court a shot and see what I can get back.

    • John Bleasby says:

      Hi Jen…Very sorry to hear about your problem. There are bad apples out there, and no one in the industry likes to hear about someone who brings it into disrepute. There are other options than small claims court. I wrote a 2-part series concerning the provincial Consumer Services ministries across Canada. Here is Part 1 http://www.canadiancontractor.ca/canadian-contractor/the-dreaded-letter-from-consumer-protection/1003274204/
      You can find Part 2 on the ‘News’ portion of our website. What you can through these services is instigate a form of arbitration which may give you a resolution without the hassle of court and the worries about not having an air-tight contract. Try it. Let me know if it works. JB

  6. Questo says:

    https://www.youtube.com/watch?v=3dU4sRXhzsA&feature=youtu.be

    These are getting paid by doing nothing in all shapes and forms, by selling to us demise destruction, disease, dead, ect, using peoples unwilling consent.
    How large should be the law suite? Can they be allowed to operate, on and on? What are we the people doing to get these scam bags out of business and out of our lives. I want what is belong to me back, what about you?

  7. I’ve had the pleasure of working with some really good contractors in Halifax, but I’ve also run into at least one full-blown disaster. A website has been set up to warn homeowners – at least in Nova Scotia – who seem to get ripped off with some regularity. http://liensliesandlitigation.com/
    Filing bogus liens is a favorite, and it’s become so common in the US that they have a name for it – “Paper Terrorism”.

  8. DJ says:

    what if the contractor screws up the client ever think of stating this part ?

  9. Deborah says:

    I am helping another person here and writing it as she tells here :
    I hired a Contractor to do my Mobile Home skirting here , He wanted paid Cash up front . He gave me a Quote of $2000. for all of it If only half needed to be done Then half amount quoted .
    After getting paid and starting the job the Contractor tell me . Oh all it did not need to be done I checked around back its all good . I checked out the the side where the door is to my main water is . I am sight impaired and live on a Disability . I need the door where the Water Shut Off is or I cannot find it . He also knows this since he knows me but threw his dad . It’s not their . I called I wrote him . No reply , I live on a very low fixed income . So the person that helped me pay the contractor contacted him also. Neither of us got a reply back from him
    Earlier to I took my hand all the wat down the side where he and his men replaced the skirting . Its not all where it should be .
    So now if I have a water problem . I can not turn it off . And abit scared if I calling a Plumber they will tare the skirting all up and can not afford to get it redone
    So you see it’s Contractors like this that really givwe the Good ones and Honest ones a Very BAD Name
    You really need to see the Clients point of Views before stating all you do here

  10. Anne-Marie Starkey says:

    A friend of ours is a sub-contractor. That friend owes money to the contractor from another job ( I do not know all the details) . A job was finished this week but he(friend) could not pay his guys (one of them being my husband), because the contractor deducted all the money that was owed to him (almost $2,000). That meant that my husband could not get his full pay this week (but will get what is owed to him next week).

    My question is, is the contractor allowed to deduct money from the sub-contractor’s pay, money that is owed to him (contractor), from a finished paid job, or should it be that the contractor pays the sub-contractor in full and then the later pays the money owed to the contractor according to an arrangement?
    Thank you for your time.
    AM

    • Steve Payne says:

      Anne-Marie, we have sent this off to our legal experts, and hope to have a reply really fast. It gets into lien law, employment law, and contract law. Can I ask what province you are in. We aren’t lawyers, but something about this bothers us: and that is, that under the Construction Lien Act here in Ontario, money received from owners but not paid out to subtrades, exposes the owner of the property to liens from the subtrades. So we would not recommend GC’s refuse to pay subs because of money owed to them on UNRELATED jobs. We predict the lawyers are going to agree. But let’s find out. We hope your husband gets his money really soon.

    • Bob Haagensen says:

      Sounds like you live in Nova Scotia. This web site’s for you.
      http://liensliesandlitigation.com/

  11. Colin says:

    Hi, I am writing this on behalf of a contractor I did work for back in November. Myself, another worker and the contractor did work for a lady that we had done work for previously. The work was spanned over a month or so with a couple days here and there. Greg, the contractor, paid for all the materials himself and we all did the work. He has had communication with the lady several times but she refuses to pay stating some of the hours were unjust. By the way we all work by the hour at the same rate and don’t charge for any extra like some do. So asking for money up front wasn’t really an option. As a result of her non payment Greg is on the hook for all costs including interest on his credit card. I would just like to point out that he is not an established contractor and only does work for clients he has a reputation with. I was just wondering if you or anyone knew what actions he could take to get this resolved as it has taken a toll on his family and caused many arguments. Now he has cancer and this is something he doesn’t really need to deal with right now. Thank you.

  12. Ernie says:

    I am a well seasoned contractor and strive for an over the top satisfied customer in the end. I was the project manager only on this job. I get constant compliments of the quality of our homes.
    I recently finished a house for a couple who told me that they were honest people and that we didn’t need to go with a lot of signage. They did sign an estimate of cost as a go ahead but did not give much detail to finishings They added many finishes to the house and each item was priced and they approved. When it came to paying the invoice they didn’t want to pay for them .They started complaining about shoddy hideous workmanship. All the miters were presise, doors plumb and square.They paid most of the invoices and now they are suing for full refund plus for work done. I’m just reminding contractors to be wary of people that come on that way.They are the seasoned con artists.My suggestion is to not start any additional projects without a signature on a detailed quote. People will ask why you don’t trust them. It’s because of these “honest” people that we almost need to treat honest people as dishonest. Personally I hate it . We as contractors can’t let ourselves be abused by those kind of people.