Once the project begins, collection issues cannot be forgotten as the services are delivered.
Statutory Lien Protections
In addition to the contractual provisions, any design professional working on a construction project also has statutory lien protections. Such provisions may often be the most useful tools for securing payment in that it can invoke pressure from third parties such as lenders, investors, and buyers who may demand a “clean title” on the project. Such provisions will vary from State to State. The most common tools are mechanics liens and Stop notices. Some States have also historically added specific design professional liens as well. Each remedy is often very time- and procedure-sensitive. Which scheme applies and provides the greater tools will vary depending on the project and the circumstances (i.e., what type of project is it and who is the professional’s immediate client). Accordingly, each set of statutes should be analyzed within the context of a particular project. However, this analysis should always be performed at the outset of a project, since some rights may be foreclosed if certain steps and notices are not accomplished at the very outset.
A related “statutory” tool often available to protect design professionals is copyright, patent, and professional licensing provisions which limit unauthorized use of a professional’s work product. Again, the applicability and value of these tools will vary by project, and should be evaluated both at the time of contract to make sure necessary rights are retained and when the actual work product is “released” so that any necessary procedural formalities are observed.
Non-Contracted Additional Services
The best contract and the most strict adherence to lien laws often cannot protect the professional against the self-inflicted damage of providing non-contractual additional services. Most often, such services arise in one of two ways: the professional falls victim to “scope creep” and unilaterally provides services beyond the contracted scope, or the professional provides what he or she perceives to be “additional” services, often even at the client’s request, without reducing the Agreement to provide those additional services (and the related payment obligation) to writing. When such events occur, the professional and its attorney are often left with few arguments but equity and mercy in order to secure payment. Accordingly, any professional must strive for two standards during the course of a project:
- Strict adherence to the contractual scope of work.
- Consistent and thorough written documentation of requests for and agreements to additional services. Often, this effort is aided by self executing provisions which put the onus on the client to say that such additional services are not requested or to be provided.
Finding Leverage for Bringing Payments Current
During the course of a project, there will frequently be those times when a client needs an extra service or favor. These are the times to make sure all payments are verified. Common opportunities for leverage include the following:
- Additional Services
- Reduction in Services
- Acceleration in Services
- Requests for Services on a New Project
- Change in Project Financing
- Assignment of Project
- Change in Project Ownership
- Providing Value-Added Services or Courtesies (here, there should be a limitation or release of liability as well)