Non-Paying Clients 1

[SinStrucEng]

Good day everyone,

Looking for opinions and experience-based feedback from other engineers regarding an unfortunate situation that has arisen. We have a non-paying client that has refused to settle their bill. Fortunately, this is a first for us. The bill is truly minor (~$1,500), but has been overdue since May. The scope of services was for the structural design of specific elements on a custom home. We have completed our scope of work, but the client is adamant that they will not pay until we provide additional detailing pertaining to fire separations and insulation (there are three suites in the home - it is for a large family with in-laws, grandparents, etc.). These services were not included in our scope nor were they priced.

To date the client has:
1) Disappeared for weeks on end only to return out of the blue;
2) Emailed and confirmed in writing that they would pay by a certain date (and then proceed to not pay);
3) Argued that cheque, EFT, or Interac e-Transfer are not convenient methods of payment;
4) Asked if we could waive taxes if the bill is settled in cash (this query was also sent to us in writing via email);
5) Threatened us with legal action for "delaying their project" and threatened to submit a complaint to our licensing body.

We have refused to proceed with any work or project support until their bill is settled. We have also notified our licensing body's (PEO) practice advisory team of the situation.

Per our professional practice guidelines, a number of other engineers and firms have contacted us asking about the project, and the situation, as they've been approached by the client to take over the project. We have been truthful and advised them of the situation in full. To date all of the engineers/firms have notified us that they have declined to work with the client/take over the project due to the situation, admitting that they share concerns of non-payment.

Question - Short of small claims court, what would you folks do? Is there something else that we should be doing in the meantime? Should the AHJ (municipality) be contacted and advised of the situation? Any risks or concerns that stand out? We are frankly OK with leaving the money on the table and walking away but obviously want to ensure safety and prudence are respected.

Thank you in advance.

 

[JStephen]

Quote:
"Who Can File A Mechanic’s Lien In Texas?
In Texas, Property Code Chapter 53 allows for three different types of parties to file mechanic’s liens. These include:
Any party who furnishes labor or materials
Parties who fabricate specialty materials
Design professionals"
Not sure you'd want to pursue it this way, but one option.

 

[WARose]

Good day everyone,

Looking for opinions and experience-based feedback from other engineers regarding an unfortunate situation that has arisen. We have a non-paying client that has refused to settle their bill. Fortunately, this is a first for us. The bill is truly minor (~$1,500), but has been overdue since May. The scope of services was for the structural design of specific elements on a custom home. We have completed our scope of work, but the client is adamant that they will not pay until we provide additional detailing pertaining to fire separations and insulation (there are three suites in the home - it is for a large family with in-laws, grandparents, etc.). These services were not included in our scope nor were they priced.

To date the client has:
1) Disappeared for weeks on end only to return out of the blue;
2) Emailed and confirmed in writing that they would pay by a certain date (and then proceed to not pay);
3) Argued that cheque, EFT, or Interac e-Transfer are not convenient methods of payment;
4) Asked if we could waive taxes if the bill is settled in cash (this query was also sent to us in writing via email);
5) Threatened us with legal action for "delaying their project" and threatened to submit a complaint to our licensing body.

We have refused to proceed with any work or project support until their bill is settled. We have also notified our licensing body's (PEO) practice advisory team of the situation.

Per our professional practice guidelines, a number of other engineers and firms have contacted us asking about the project, and the situation, as they've been approached by the client to take over the project. We have been truthful and advised them of the situation in full. To date all of the engineers/firms have notified us that they have declined to work with the client/take over the project due to the situation, admitting that they share concerns of non-payment.

Question - Short of small claims court, what would you folks do? Is there something else that we should be doing in the meantime? Should the AHJ (municipality) be contacted and advised of the situation? Any risks or concerns that stand out? We are frankly OK with leaving the money on the table and walking away but obviously want to ensure safety and prudence are respected.

Thank you in advance.

I think you can file a lien. But for the long haul: I'd just stay away from residential. Where I live, most engineering companies avoid it. Biggest bunch of deadbeats you'll find is in residential. At one company I worked for (that actually did it): the office manager had drawer in her desk just filled with bounced checks from homeowners.

 

[LittleInch]

What have you handed over? All details and stamped drawings or is some part missing like the actual calculations?

Can you "withdraw" your design and notify the AHJ that any design with your name on is now invalid.

People like this generally are not open to reason or negotiation and the written requests to avoid taxes is unreal.

Fight fire with Fire. Send a letter from your lawyer threatening action, removal of the design, notification to the AHJ and to the IRS on the grounds of attempted defrauding of the revenue, or local state body, whoever you pay your taxes to. Also add any attempt to libel you or send in spurious complaints will be met with robust action and responses. Demand payment in full by cheque, cash or electronic transfer within 7 days.

Or ghost him.

 

[Eng16080]

Luckily I haven't had this happen, but I would relay this information to my insurance provider to get their advice (they have a legal department for this purpose). I'd want to be sure that I'm taking the proper actions to minimize my own liability.

Ultimately I'd want to end the contract with this client (regardless of them settling the bill).

In terms of collecting the fee, if it's simple enough to go to small claims court or file a lien, I might do that, although most likely, I'd just say goodbye to the $1,500. Fighting for that small amount probably isn't worth the time, effort, and aggravation.

But for the long haul: I'd just stay away from residential. Where I live, most engineering companies avoid it. Biggest bunch of deadbeats you'll find is in residential. At one company I worked for (that actually did it): the office manager had drawer in her desk just filled with bounced checks from homeowners.

My work is almost exclusively residential and I rarely have any issues. I typically work for an architect and not the homeowner directly though.

 

[dik]

Not sure you'd want to pursue it this way, but one option.

Filing a lien will likely affect the owner's mortgage and his credit rating. In most jurisdictions liens are very time dependent. If you take that route, I'd advise him in advance.

 

[SinStrucEng]

@JStephen Thank you, we have looked into liens but have not made our mind up. This is a good option, admittedly.

@WARose I am aware that residential is a pain in the ass, but honestly, we make a pretty good haul on it. It's a big chunk of our business and we are selective in our clients. We don't work with shoddy companies (or at least try not to) and a lot of our residential jobs are by reputable builders who we've worked with many times before. Furthermore, in our operating area we are one of very few companies that do this work so it's financially rewarding. As mentioned this is our first time having this issue so our "vetting" process seems to be working, mostly.

@LittleInch We have provided stamped drawings, yes. We are not obligated to turn over calculations in our province/country (Ontario, Canada). I also want to "withdraw" the design from the municipality but I am unsure if that's even a thing. Looking online for an answer hasn't fielded an answer, yet, hence why the thread was started. As for ghosting... that's basically the situation as this point. After the last "either pay or go **** yourself" email (it was very polite and professional in reality) we haven't had any communication regarding the project except from other firms/engineers.

 

[SinStrucEng]

@Eng16080 Filing in small claims court is very, very cheap/easy in our jurisdiction and we've been thinking to go that route, honestly. Easiest to do and with the ample evidence that we have (in writing no less) our success is probably guaranteed. As you said, however, it's also just ~$1500 so others in our team are stating that we should just drop it. I see their point.

@dik Thank you for the advice; we will look into it further.

 

[LittleInch]

So how did you end up with this person?

Bad luck?

Just keep an eye out for any reports, but it sounds like he's gone away. Basically advising other firms verbally only that he's a bad payer is more than enough payback and will cost him a lot more than your invoice if the word gets out. So anyone who does will demand payment up front.

 

[lexpatrie]

It will be difficult to lien if a) the owner is not the actual client (i.e. Arch signed the contract) and b) no contract "oral agreement".

You've not been allowed to inspect the work, therefore you cannot vouch for the safety of the building. Inform the Building Department. They can red tag them and well, health, welfare and life-safety are handled.

Generally as a professional, you can refuse service to people for any reason (unlike a store that has to offer all goods without prejudice to all customers). (Not that I'm an attorney, also, not Canadian).

 

[SinStrucEng]

@LittleInch It was purely bad luck. He came to us with pretty good architectural drawings and was very reasonable/respectful in initial discussions. His personality abruptly changed after we turned over the completed work, and that set off alarm bells, obviously. Kind of seems like we've been had. It was probably his plan all along.

@lexpatrie In this case our contract is directly with the homeowner. Architectural drawings did not have a firm on them (despite being good). As far as I am aware no building permit has been issued for the project because he still had insulation/fire separation deficiencies. Furthermore, the fact that other firms are calling and asking reinforces that likelihood.

I think that notifying the AHJ is best, thanks.

 

[jerseyshore]

For $1500 it's most likely not worth the time or effort to pursue payment, but there certainly are ways to put the pressure back on them. Going to AHJ is a good move, but don't make it specifically about the payment. No building department gives a shit about who got paid or not, but make it a general design concern regarding the submitted plans.

 

[phamENG]

Unless, of course, your contract indicates that they'll be responsible for the cost of any effort to collect payment. In that case, make sure your firm's highest billing principal hand delivers the complaint to court and sits through the hearing...

 

[SinStrucEng]

Thanks guys, and I appreciate the cheeky advice @phamENG.

 

[EngDM]

@LittleInch Fight fire with Fire. Send a letter from your lawyer threatening action, removal of the design, notification to the AHJ and to the IRS on the grounds of attempted defrauding of the revenue, or local state body, whoever you pay your taxes to. Also add any attempt to libel you or send in spurious complaints will be met with robust action and responses. Demand payment in full by cheque, cash or electronic transfer within 7 days.

Scorched earth, I like it.

 

[Enable]

I practice in your jurisdiction and have had to collect unpaid accounts on both the contracting, and engineering sides of things. My honest advice is to chalk this up as a tuition payment. Any remedy you may avail yourself of (e.g. small claims, lien, etc) will just cause more pain and headache than $1500 CND is worth. It will be much better for your sanity if you simply tell your accountant to place it under doubtful accounts on the balance sheet and forget about it.

I generally don’t deal with homeowners these days but to the extent that I have at other companies the practice would be to require payment prior to the deliverable. It’s very common for contractors in residential to do the same, and for the same reasons. Homeowners are people to which the fees are a lot of money, and being people they are, depending on your view of it, likely to suck more often than not. Repeat builders / architects / professionals are different. One-off homeowners? Payment in advance.

As far as dealing with the municipality, I wouldn't concern yourself with that. To pull a permit with your drawing set they'd need you to fill out a commitment to general review form, which you have not / will not. You can notify them but since no permit has been pulled I am not sure what for.

 

[PlinkoEng]

@JStephen Thank you, we have looked into liens but have not made our mind up. This is a good option, admittedly.

@WARose I am aware that residential is a pain in the ass, but honestly, we make a pretty good haul on it. It's a big chunk of our business and we are selective in our clients. We don't work with shoddy companies (or at least try not to) and a lot of our residential jobs are by reputable builders who we've worked with many times before. Furthermore, in our operating area we are one of very few companies that do this work so it's financially rewarding. As mentioned this is our first time having this issue so our "vetting" process seems to be working, mostly.

@LittleInch We have provided stamped drawings, yes. We are not obligated to turn over calculations in our province/country (Ontario, Canada). I also want to "withdraw" the design from the municipality but I am unsure if that's even a thing. Looking online for an answer hasn't fielded an answer, yet, hence why the thread was started. As for ghosting... that's basically the situation as this point. After the last "either pay or go **** yourself" email (it was very polite and professional in reality) we haven't had any communication regarding the project except from other firms/engineers.

Asking the jurisdiction to pull your stamped drawings is very dependent on the justification. They will usually do it for safety or compliance concerns but rarely for non-payment.

I've done liens, I've done small claims, I've sent lawyer letters. My method now is to always work through a contractor, designer or architect and to not do any work if payment hasn't come in. If they resist payment I won't work with them again. The joy of permit review and inspections today is that there is almost certainly going to be an issue they need resolved.

Working through a professional has a few purposes. Main one is repeat business. Second is contractors usually carry a bond you can threaten and licensed architects you can get after through the licensure board. Designers usually pay up just by threatening that they will have to find a new engineer.

It takes time to build up a good base and filter out the chaff but residential is a nice place to hang for a small firm. I have a base of about 70 contractors, designers and architects that all bring me multiple jobs a year with 0 marketing.

 

[human909]

Interesting how things vary across the sectors we work and the localities we live.

For residential my normal practice is to bill the individual. The architect is often the go between who engages me but the client ultimate chooses the engineer and pays for them.

So for residential work you are placing all your trust in the honesty of the client. There is often little recourse if you have provided all the deliverables and can't withhold anything.

Thankfully non payment here is less of an issue in general at least in my experience.

On the flipside we are apparently one of the slowest payers of bills:

Australia- The slowest paying country on earth

In 2019, a worldwide report into invoicing found we were the worst payers on the planet. 26 days late.

www.linkedin.com

 

[XR250]

This is the first one for me this year. Homeowner owes me $440 for a site visit. Finally paid me after 2 months then he disputed the charge and he is being evasive now. I am going to take him to small claims court just to f' with him even though it is not even close to be worth my time. Figure I will get a judgement against him then I can ride with the sheriff over to his house and start taking shit .

In general, my non-payment rate is about $1,000 per year.

 

[PlinkoEng]

This is the first one for me this year. Homeowner owes me $440 for a site visit. Finally paid me after 2 months then he disputed the charge and he is being evasive now. I am going to take him to small claims court just to f' with him even though it is not even close to be worth my time. Figure I will get a judgement against him then I can ride with the sheriff over to his house and start taking shit .

In general, my non-payment rate is about $1,000 per year.

Thats probably what mine is now. I have had years in excess of 50k between multiple clients. That's why I don't work direct with home owners.

There is a large amount of people who think if they don't build it they don't need to pay lol