We are a residential cabinet shop, but I thought I'd try commercial. I got a hair salon project, and the owner is acting as contractor. He has run out of money, and owes $22k. The job is complete, he is trying to get a line of credit to continue and get the salon open, and pay his bills. I'm licensed in California, and filed a pre-lien. What, besides putting a lien on the property, are my alternatives?
File the lien, there are time limits on how long you have to file.
Get a lawyer. Put pressure on him.
I have been paid even when the store owner declared bankruptcy because the store got bought up.
In the future put on your bids that the customer has to pay interest on the amount owed. You can negotiate on the contract, if you are unable to come to an agreement your bid becomes the binding contract.
Since he is the owner you maybe able to go after personal assets.
Other than that, sorry I don't know of anything else to do.
Generally in a commercial the building owner posts a notice of non responsibility, you may need to lien the lease. The other thing you could do is figure out how to take credit cards and let him put it on a credit card.
Startup retail is higher risk than residential, in the future you should get a deposit and balance before shipping, do separate contracts one for custom manufactured goods, another for install of owner supplied goods.
Alan- I did my regular terms of 40% deposit, 40% upon completion of building the cabinets, 20% upon completion of installation. He owed the completion payment, and I was out of town when the install started, so I didn't get the second payment, or the third. We do take credit cards, and I just offered (in a message because he doesn't answer my calls!).
Hopefully you can get your money...But without possession of the cabinets, that may be tough. Unfortunately, you broke your own standards, and are now paying for it. Ask yourself how your company allowed the product to be installed without the completion payment. If you can fix that, at least you'll reduce your exposure next time.
Sorry to hear of your predicament. As Gary pointed out and Pat expounded on, problems arise when you get out of your comfort zone of business practices.
Many viable next-steps have been posted, and I hope they work for you. Legal recourse is slow and costly, and you may have to confront this person face to face, stopping just short of harassment, to get your money, which is not how it should be, but these things happen.
Perhaps like many on this forum, my policies and practices are the result of having something go amiss on a past project. My proposal template starts out with 90 exclusions, and gets winnowed down to the ones applicable to the particular project at hand.
Every one of those exclusions represents a situation that I have either been involved with, or bore witness to, whereby a customer tried to take advantage of a scenario that was not contractually spelled out and adhered to. I still add exclusions to the list, but not as often as I used to.
You can't lower your guard just because someone waves a check in front of you. Pat is very right, "The biggest regrets I have had are when I did something against my own policy/thinking/gut or didn't agree with. "
I think because you sold direct to the owner you have either 60 or 90 days to file a lien. I would ask the owner for a note that is personally guaranteed so to not muddy the waters for the bank with the lien, though they should be able to work around it.
The other approach is for him to use a leasing company for the fixtures which may be easier than the bank.
Is the salon in a good location and in a higher dollar (3x for a haircut compared to Supercuts) location / clientele? If so there may be more value to the business and if you can afford it take payments with max interest. You could stop in on Saturday and collect "cash" so you don't have to wait for the checks to clear. Salons typically have and hide cash.
The goal is to get money in your pocket, not own a lease to a salon and liens take awhile to perfect and if a notice of non responsibility was posted any method that gets you $ is better than a lien.
If you could take over the lease and own all the improvements you might be able to sublet with enough to cover payments to you form someone else.
Here is an update. He stopped by with a check, payment in full, but post dated for next Friday. It's illegal to write a bad check, so now I wait to see if it clears. I actually trust the guy, but everyone is correct, I should have insisted on the completion payment before installing. It complicated thinks by being out of town, and also by having a trusting relationship with him.
What I have done is to have them date the check for the day it is written and not deposit it until they said on Friday . This way you have not accepted a post dated check , when you do, you realized the check was not good but you took it , this will not be helpful if you need to collect.
When I've taken a check that I have reason to believe may not clear, I'll do a couple of things.
- Open an account with that bank and bring it inside to confirm the funds are there before depositing. If so, request they cash the check and deposit the cash into your account rather than a normal deposit. If not, hang on the check and keep trying back. If you're a customer of the bank, they'll be more helpful and forthcoming regarding your customer's account status.
- Have your customer replace the one large postdated check with multiple smaller checks. You may able to cash a few of them even if all the funds aren't there. If your check is for $50,000 and he's only got a $49,500 balance, it's NSF.
I hope the check cleared and you're not still on the hook.
Not sure if this applies to all states, but in Texas there is no such thing as a post-dated check. Once presented, a check is considered good. Your client also put himself in a more vulnerable position by offering a check. Had the check been worthless, he had then committed theft by check. At that amount, the theft would have been a felony.
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