Byron Carlson Petri & Kalb, LLC | attorneys at law

How construction companies can effectively collect on unpaid invoices

On Behalf of | Mar 1, 2024 | Business & Commercial Law

Construction work can be very lucrative. Unfortunately, actually securing full payment can sometimes be a challenge for those in the construction sector. Unpaid invoices can impact a company’s operations by straining its budget, and many companies occasionally encounter clients who don’t pay in full.

Property owners often negotiate arrangements in which they only pay a portion of the project’s costs up front and then pay for the remainder of the work and materials after the completion of the project. Doing so gives them leverage in case the construction company doesn’t complete the work or does not do the job to the specifications set in the contract. Unfortunately, some property owners refuse to make the final payments due on the work performed on their properties or the materials provided for large projects.

How can construction businesses or contracted professionals secure overdue payments for services rendered or materials delivered to a client?

Illinois courts can grant mechanic’s liens

There are numerous ways to collect on debts that can work for businesses in an assortment of industries. For those in the construction sector, it is possible to treat the property that required work as collateral for unpaid invoices.

Both material providers and construction companies can theoretically go to civil court over unpaid construction invoices in pursuit of a mechanic’s lien. If the courts grant a lien, the construction company or professional can record the lien at the appropriate County Recorder’s Office. The lien can prevent the property owner from selling the property, transferring title to others or even refinancing the property without first paying what they owe for the completed construction project.

To enforce a lien if the property owner is still not forthcoming with payment, it may be necessary to go back to court and essentially foreclose on the property. The courts can force the owner to sell or at least refinance as a way to secure the necessary capital to pay what they owe for the work performed or the materials delivered.

Although many construction professionals dislike the idea of taking legal action against clients, a mechanic’s lien is one of the few options for securing full payment for services rendered. To that end, taking timely action is often necessary if one party hopes to secure a mechanic’s lien in response to an unpaid invoice.