Demand Letters and Mechanic’s Lien Filing
A demand letter is a strongly worded request for payment, most often served upon your customer, advising legal action may be taken if payment is not received within a specified time period.
A demand letter is not intended to be “a-walk-in-the-park-chasing-rainbows-and-butterflies.”
What should I include in a demand letter?
In order for a demand letter to be successful, it should contain factual information and be succinct/to the point.
- Date of the demand
- Your company’s name and contact information
- Your debtor’s name and contact information
- A reference to the debt (i.e. provide the project name or purchase order number)
- The amount of the debt
- The due date of the debt
- How the debt should be paid
- The consequence of not paying the debt
Who should receive a copy of the demand letter?
The demand should be served upon your debtor, but it is recommended you also send a copy of the demand to any party that may contribute to you being paid; this could include the project owner, project manager, prime contractor, subcontractor, lender and surety.
The Consequences of Not Paying
Any time you send a demand for payment, you need to ensure there is a clear consequence for failing to remit payment. You may be thinking “A consequence? Why? They should just pay me!” See, the party(s) involved need to know there is a consequence for not paying you – sort of like when a child goes to touch a hot stove,we warn them “Don’t touch that or you will get burned and it will hurt!” – getting burned and the significant pain are the consequences of touching the stove. (Just to be clear, I’m not condoning “bringing pain” to your customer, though I now hear a voice saying “You want I should break your knee caps”…)
Be specific as to a realistic ramification for not paying:
“…If payment is not received, we may pursue all available legal remedies against you, including, but not limited to, filing a lien.”
Can I send a demand letter if I didn’t serve a notice?
Yes, absolutely YES! There are no prerequisites for sending a demand letter, other than the outstanding debt. Just remember to word the consequence accordingly.
When would I send a demand letter?
Here are a few instances where a demand letter may be the most useful and cost effective tool for recovering an outstanding debt:
- Before proceeding with a mechanic’s lien or bond claim
- Before proceeding with suit to enforce a mechanic’s lien or bond claim
- Before placing an account with a collection agency
Remember: demand letters can expedite payment, allow you to maintain control of your collection process and save you money.
Looking for an example of a general demand letter? Download one for free!