Question for Independents - Fee Colle...

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Author Message Ron Beard CCS Senior Member Username: rm_beard_ccs Post Number: 300 Registered: 10-2002 Posted on Saturday, April 04, 2009 - 12:58 pm:    For all of us who have been independent long enough, we either have or will have issues with selected clients who either are very slow in paying their fee or, shutter the thought, haven't paid at all. I would be interested in finding out to what degree of "strong arm" tactics other independents have resorted to in fee collection. Excluding the filing suit option, which is IMHO a lose-lose situation, to what degree can one press for payments without losing a client [assuming you want to keep the client]. I have considered placing a lien on a project. Has anyone done this and what are the consequences? J. Peter Jordan Senior Member Username: jpjordan Post Number: 321 Registered: 05-2004 Posted on Saturday, April 04, 2009 - 01:32 pm:    On several projects, I have clients who have not been paid for the work they did (which includes the work I did). There is not much that can be done on these projects; there is nothing to lien since no work has been done at the jobsite. I may be receiving payment on one project since it has been reactivated. Three more have been virtually abandoned by the developers (one after DD and two after complete CD phase). The developer on a third project is, in my opinion, in denial about his ability to obtain financing. My clients have been making good faith efforts to get paid and have been forthright in answering my questions. It is difficult for me to press too hard, but it does seem to me that I take an disproportionate risk. The only thing I know to do is to build risk into future fee proposals for these clients. I have another client with a project under construction who has received some payment. I am familiar with the owner's attitude about contracts and do not find it surprising that he has not paid for the design work. On this project, I am much less tolerant and am considering various type of legal action or at least contacting a collection agency. Through their mismanagement of their contractural relationship with the owner, their attitude about their obligations to their consultants, and mismanagement of their practice, they have so far effectively cheated me out of 100% of their fee. Even if I am able to collect some or all of my fee, I may respond to a proposal request from them in the futurewith a fee which will include a significant adjustment for the risk associated with doing business with them. For those of you thinking about going independent (either voluntary or involuntary), this is one of the realities of design practice and specialty consulation. I guess that I should thank my lucky stars that in the 3 years that I have been doing this I have only had this happen on less than 10 out of more than 150 projects. Jo Drummond Senior Member Username: jo_drummond_fcsi Post Number: 29 Registered: 06-2007 Posted on Saturday, April 04, 2009 - 08:30 pm:    I've been in business as a consultant for 24 years, and I frequently write off 1/2 to one percent of fees each year There comes a point at which the grief and anxiety exceeds the benefit, so I just drop it. If I do more work for that client, I build the shortfall from the previous project into the new one. Most of the time, I have found that the people who don't pay, probably don't do more work either, at least that I see. Recently, I was owed more by 2 clients than I was willing to write off. I sent them several reminder invoices. I called them (they were out and didn't return the calls). I finally engaged an attorney to write letters to them. One paid, one didn't. The one that didn't is a foreign firm, main office in Korea, quite possibly has quit the Los Angeles area, as no one else I know has heard of them. I decided not to pursue that issue further, painful though it is. Years ago, I tried to file a claim in small claims court. It turned out, whether deliberately or not, on the part of the architect, that there was a comma in their letterhead on the drawings that wasn't in their incorporation forms, so it wasn't the same company, and couldn't be served. If I wanted to pursue that, I would have to find the "correct" name of the firm, file again, pay the fees again, etc. So I dropped it. That firm is still in business here, and I have not done further work for them, and wouldn't. William C. Pegues, FCSI, CCS Senior Member Username: wpegues Post Number: 784 Registered: 10-2002 Posted on Sunday, April 05, 2009 - 01:19 am:    Jo, What an interesting story - the company name. That so goes to the heart of what I am always saying to my PMs/PAs to make sure they have the owner/developer name for the company doing the project correct. So many think I am just too picky and never try to get it right. But I am always hitting them over the head with this kind of thing. Thanks for posting that tidbit. I hope it hits home to a lot of people. William William C. Pegues, FCSI, CCS, SCIP Affiliate WDG Architecture, Washington, DC | Dallas, TX Phil Kabza Senior Member Username: phil_kabza Post Number: 381 Registered: 12-2002 Posted on Monday, April 06, 2009 - 09:46 pm:    We've benefitted from SCIP discussions concerning contracts and collections. Our agreement stipulates payment on delivery of work product, not pay-when-paid. License to use our work is contingent on payment in full. We're not in business to assume payment risk from our clients; that's what their bank is for, and we don't think our paying clients should be underwriting those who wouldn't pay. We've been most fortunate, but also have walked from more than one project because we weren't convinced of the financial viability. As far as I know, every real estate developer in town lives in a bigger house than I do; I'm not interested in underwriting their risks, just in providing them with a valuable service, or not. Some years ago I liened a project after the owner took my documents and used them without paying me. Whether I had an enforceable lien or not didn't matter so much as did his bank's balking at closing a loan with the lien mucking up the works. I got paid, and even repaired the relationship. Marc C Chavez Senior Member Username: mchavez Post Number: 340 Registered: 07-2002 Posted on Monday, April 06, 2009 - 11:22 pm:    last annon. post by me. Sorry not logged in. (Unregistered Guest) Unregistered guest Posted on Monday, April 06, 2009 - 11:21 pm:    Phil you aren't an old dog for nothing! Yes, yes and yes! I got the paid-when-paid story once and had built my contract in a similar manner (thank you Anne W.) I asked the office manager to review her copy of the contract and get back to me - she did …with a check. Usually, I was such small potatoes compared to the engineers it was no problem. I was once asked to design an apartment building on the cheap. When I quoted my price, the developer stated that XYZ architects would do it for 1/2 of that amount, I told him he had a great deal and he should sign them up. (there was no way that was a real number) The look on his face when me, the solo practitioner, turned him down flat was priceless. Richard Howard, AIA CSI CCS LEED-AP Senior Member Username: rick_howard Post Number: 205 Registered: 07-2003 Posted on Tuesday, April 07, 2009 - 09:40 am:    I once worked for a prominent international firm that sued a developer for tens of thousands in unpaid fees under the racketeering statute (RICO Act), which carries triple damages. It made big headlines in the Dallas Morning News and turned the entire developer community against the firm. It was a spectacular way to go out of business.