Somebody to lien on: Experts share five steps Nevada contractors can take to help ensure they get paid

Mike Derer / AP

In this April 5, 1990, file photo, Donald Trump stands next to a genie’s lamp as the lights of his Trump Taj Mahal Casino Resort light up during ceremonies to mark its opening in Atlantic City, N.J.

Hillary Clinton joked at the Alfred E. Smith Memorial Foundation Dinner in New York: “I have deep respect for people like (Donald Trump campaign manager) Kellyanne Conway. She’s working day and night for Donald and because she’s a contractor, he’s probably not even going to pay her.”

The line got a mild chuckle but touched on what is otherwise a serious issue. Recent stories in The Wall Street Journal, USA Today and elsewhere have outlined an extensive history of Trump companies withholding payment for completed or in-process work in an effort to renegotiate.

These hardball tactics have left contractors entangled in protracted lawsuits lest they settle a debt for less than favorable terms.

The Las Vegas Sun recently published a roundup of Trump’s business dealings in Las Vegas, which found a trail of controversy and complaints. In Atlantic City, Trump’s bankruptcies left a string of businesses in the red or simply closed.

Trump has proudly defended his business practices in his books and in interviews. He reasserted his penchant to renegotiate by withholding payments — on subjective matters of workmanship or other flaws he could find and use as reasons for not paying.

“I’ll do that with probably 10 or 15 percent of contractors,” he told Reuters in 2015. In other interviews, he’s provided a number as low as 1 in 1,000 to quantify the practice.

With all the talk of Trump stiffing scores of contractors, new light is being focused on business practices that may be legal but still draw smaller business owners into a brutal game that can leave them in a debilitating squeeze.

“The reality is he who has the gold makes the rules,” said Richard Peel of Peel Brimley, a construction law firm with offices in Henderson and Seattle.

In Las Vegas, the problem of predatory renegotiations was particularly common and coincided with the arrival of larger corporations in the 1980s and ’90s.

“In the ’90s, corporations came to town, it was big business, and they brought their Wall Street ways to Las Vegas,” he said. “The owners who had more money were able to dictate the terms of the contract. If you wanted to work, you had to accept.”

Peel co-authored a series of “prompt-payment” statutes in the late 1990s and early 2000s that gave contractors and subcontractors power to force timely payments with the right to claim a mechanic’s lien, which essentially prevents an owner from taking full ownership of a property built by people who hadn’t yet been paid.

“We have good laws in this state, some of the best in the nation,” Peel said. “They’ll provide protection to construction contractors if they use them.”

Before Nevada’s prompt-payment laws existed, “it became all too common to see people not getting paid for their work,” Peel said. “Unfortunately, a lot of people were getting hurt.”

But just because these laws are in place, that doesn’t mean the problems they sought to address have disappeared.

“As the economy starts to tick back up, you have good owners and bad owners, and issues of nonpayment are always going to be a tagalong,” Peel said.

The Nevada State Contractors Board oversees about 15,000 licensed businesses in Nevada. The seven-member board, overseen by a governor-appointed executive director, fields complaints from or about its licensees — on issues related to workmanship quality, violations of industry regulations, fraudulent or unethical practices or just about anything else that threatens the confidence Nevadans have in their contract labor relations.

The board also has the right to conduct investigations, in collaboration with law enforcement authorities, and can levy fines up to $10,000 for each violation it finds.

The board handles between 1,800 and 2,100 cases a year. According to NSCB reports, 240 of these were for “money-owing” complaints in 2015.

“Western states tend to be more progressive in enforcement efforts,” NSCB public information officer Jennifer Lewis said. “In Nevada, we have a pretty expedited process for investigations and disciplinary hearings.”

The board doesn’t have the power to force payment. It does, however, have the authority to suspend contractors’ licenses during the course of an investigation or until payment issues are resolved.

Below are five steps a contractor can take before, during and after a project is complete to avoid predatory renegotiations.

These do not guarantee payment in full but can help push forward a slow-pay situation and push back against Trumpian tactics of withholding money to pressure smaller businesses into accepting less money for services rendered:

Get licensed

Contractors in Nevada are supposed to be licensed with the NSCB. This costs $300 for an application fee and about $600 for a biennial licensing fee (which can vary depending on business type and size). The license also requires contractors to pass certain tests about basic business law and safety matters specific to their trade. This license is a foundational requirement for small businesses looking to take full advantage of protections in Nevada law. And while not having a license doesn’t prevent you from pursuing other legal remedies, unlicensed operators face a more difficult slog — in part because you could face criminal penalties in Nevada for contracting without a license and end up on the NSCB’s most-wanted list.

Know your rights, and let them know you know your rights

Before work even commences on a project, contractors should issue the owner a “Notice of Right to Lien.” This simple one-page form, delivered in person or sent by certified mail, requires no action from the business owner but lets them know you intend to be paid in full and will be lining up any ducks necessary to help in the fight accordingly. With this paperwork in place, you are set for best results should you need to progress to the next steps.

Stop working

Once work has commenced, a missed date on a payment schedule can signal trouble. Since 2005, Nevada’s Prompt Payment Act provides contractors tools that prevent owners from stringing them along with a promise of payment as work continues. First, you have to notify the nonpayer of your intent to stop working in 10 days if you are not paid. If that doesn’t result in a check, the contractor should follow through — assuming you fill out proper paperwork and abide by certain deadlines. From there, additional forms within certain time frames let you terminate the contract while retaining rights to sue for full amounts.

File a mechanic’s lien

Lawsuits aren’t ideal, particularly when work has begun and a project’s future is in the balance. One of the strongest tools available for contractors, subcontractors and suppliers is a mechanic’s lien. Nevada’s mechanic’s lien laws allow for just about anyone involved in a project to stake a claim for whatever property they played a part in building — if they are licensed and have filed all appropriate paperwork within specific deadlines. In 2010, a group of 25 subcontractors used this method to recoup nearly $490 million from MGM Resorts. In the Trump cases, a mechanic’s lien preceded several incidents of what would later become amicable settlements.

File a money-owing complaint with the NSCB

In cases where one contractor or material supplier has allegedly stiffed another, the NSCB will step in to try to resolve the issue in response to a complaint — at first informally but eventually backed by investigative authority and the ability to conduct disciplinary hearings (which could result in fines or, in extreme cases, license revocation). The board can’t force anyone to pay a disputed debt directly, but it can suspend licenses of contractors facing payment complaints until they show proof of financial responsibility, which tends to push parties toward an expedited payment resolution while also pushing truly disreputable businesses out of town.

Business

Share