The customer won’t pay. What now?
Question:
It finally happened. I am dealing with a customer who hasn’t paid his bill. I have been in business for four years and this is my first. It has been 75 days since I provided the service and the customer is a real estate agent who won’t return my calls. I finally stopped in his office, but he wasn’t there. His co-worker said the bank was slow to pay him on the house closing, etc. I said he still needs to let me know what is going on and asked for him to contact me. Still nothing. What should I do?
Answers:
If the property hasn’t officially closed, consider putting a lien against the house. Was this an inspection, a service call, or both? In counties that require maintenance, you may be able to add it to his property taxes if service was due.
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Send him a registered letter requesting payment or at least a payment plan. Give him 30 days. If you do not get a response, put a lien on his house and any other homes he has. He may have rental units since he is a real estate agent. People like that (bother me) because it increases the cost for people who actually do pay you.
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In California, when the house sells through a title/escrow company, the real estate agent gets his check within a day or two. Get with them to see if the sale is closed and settled. If not, go to small claims court. Once you get the judgment, file it against his name and any property he owns. Real estate agents say the owner has not paid them, so they can’t pay you. When working for real estate agents, let them know up front that if they order the work they are responsible for payment.
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When I was in septic cleaning, we used to imply that we would gladly give the customer a “return” of his waste if he would rather not pay the bill. When they see your pumper truck rolling up and you getting hose out, they come running out yelling. You hand them the bill and settle the matter right there. Now, the trick is that you cannot, under any circumstances, redeposit the sewage back in the system. But they don’t always know that. We’ve collected three of the five times we used this tactic.
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The issue with collection agencies is their high cost. Once you have gone this route you have committed to take 40 to 50 percent less than your original invoice. Many times clients who don’t pay will purposely wait for you to turn them in to collection and then bargain with you knowing that you’ve committed to accepting less money for the original invoice. If you turn it over for collection, let the agency collect it.
Property liens are the best way to get paid if, in fact, you have that avenue available. If this work was conducted as part of a property sale, be sure to exercise your lien rights and insist on payment at or before the closing. Many times you can get paid by the title/abstract company, which pays out the fees at the closing.
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Many states allow a contractor to put a mechanic’s lien against a property. If you do that, just sit back and wait. If you routinely charge a 1.5 percent per month late fee, the end result is that you could be paid quite well when this property changes hands again.
Find out from an attorney what you can do to deadbeats. Collection agencies, in my opinion, are a bad idea. Small claims court a worse idea, because it is far too expensive to spend the time preparing documents.
Keep in mind that your true customer is the property, not the person who hired you. Similar to a corporation, that property is an entity — it is responsible to you since you serviced it. That is your target. I hope the guy who hired you thinks twice next time.
In some states, a mechanic’s lien has precedence over every other type of lien, including a mortgage. Know what you are doing and hire a lawyer.
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I always find that the polite, persistent approach works well. But the important thing is to have at least one face-to-face meeting with him. Then he has to explain to you in person why he is not paying. Real estate agents have regular sales meetings at their offices, so just drop in and ask the receptionist when they are. Then wait for him and present him with the bill. You will probably shame him into making a commitment to you if he truly agrees he owes the money, especially if co-workers are present.
Try to get a check at the same time. Suggest he post-dates it if he needs to. If he conveniently doesn’t have his checkbook, arrange a time and date when you can meet him to collect it. It may take two or three polite meetings — I visited a customer’s home three times a week for three weeks to get paid — but you will probably get your money. It’s inconvenient and time-consuming, but I always feel the principle of being paid what I’m due is worth a fair bit. It’s also a lot less stressful and cheaper than using the hardball tactics.
