Speaker 1 00:00:12 Welcome to the quick getting spooked podcast, where we talk about everything related to contractors, construction and information to help you run better.
Speaker 2 00:00:24 Hi, hi, my name is Carolyn Crummins and I'm your host at the quick getting screwed podcast. This podcast is all about subcontractors, real life experiences. Um, some failures, some wins, um, to hopefully help subcontractors run better businesses. I started this podcast in accordance with the book, quit getting screwed after I've been in construction law for like 15 years and saw over and over and over again, subcontractors signing contracts that don't understand, and then coming back to bite them in the ass. So this is an attempt. The contractor Institute is an attempt to help subcontractors understand the subcontract and all aspects of their business. And so in my law firm, the chromium law firm does the same thing and we partner with subcontractors to run a better business. So today we're going to look back at some experiences from 2020, um, some wins, some losses that we help our clients manage through that the best they could and when they're already in a bad situation.
Speaker 2 00:01:26 Uh, so today I have with me, my head of collections is Jessica Maura and my head of my legal department, Ms. Courtney Strickland, which one of you ladies would like to hop in first with, start with a good story. Somebody gave me, okay, I'll go first. So give me a client. When I had one this year who was owed about $400,000 and he was actually out of lean timelines, um, for the most of it, I think he was only timely maybe for about two to $3,000. We, of course we know he's out of lean timeline, so we can't file a valid lien, but we can do everything in our power to try to collect, which means sending out notices, calling banks, calling owners, calling everybody, sorry, not the pot enough to where he got paid. I don't know how we did that, but we managed to get it done.
Speaker 2 00:02:21 Um, I don't think even I know my tricks. I just go with my gut and just start routing everybody up to make sure somebody, I get somebody's attention. The person that's gonna write me that check, which they were very happy that we got them paid, um, without having to file suit or file a lien or anything, we just managed to get them paid. What did it cost them to collect their $400,000 1,070? Would you say that's money well spent very well. So I think he was very happy with the outcome of that collection part and paying the thousand seven. He was like, I'll pay you that if I can get all my money back. So it was money welfare, all right. Court, can you give us, uh, an example of a more challenging situation? You know, I kind of wish I got these great stories that just has where it's like, oh, you only spent a thousand dollars and you collect 400,000.
Speaker 2 00:03:17 And unfortunately that just does not exist in litigation. We're expensive. The process is expensive. Um, no matter how hard we try to keep that cost down. So I got, I have kind of a win. Um, that's then this is just the nature of litigation, right? I can't tell you. Yes. It's a for sure when it's always kind of a win until, you know, five years down the road. So we had a client who was hired to remodel a house and they did their job and they ended up not getting paid for it and they didn't get paid about $5,000. So they file a lien on the property and the owner sues them. Um, and once you're sued, you're stuck. You have to go to you either you go to court or you get a judgment against you and you don't want that. So, you know, here we are fighting over a $5,000 lawsuit and 60 some odd thousand dollars later, we get a, we win.
Speaker 2 00:04:12 Right. But is that really a way when you spend $60,000 trying to recoup a $5,000 lien and you know, at some point it switches over from the work that I perform to the principle of the matter. And Carolyn has, this is the first time I started working with her. She's always said, principal is very expensive and that has been true every single time. Um, it's, it's a lot easier to be happy on a principled argument than it is to just get paid. So how often with your clients, do you recommend going to litigation Courtney? Oh, hardly ever. We always try to get this thing settled out ahead of time. If we can avoid it and we can do mediation. Um, we try to talk as much Sims to our clients as possible, and we try to get them to see what the risk is because I can't tell you how much it's going to cost, but I can tell you it's going to cost a whole lot more than you're prepared to pay.
Speaker 2 00:05:07 And if we can get you out for anything less than going to trial, then we will definitely try to do that. And thank goodness justice department is so good at that. Um, but you know, there are times where it gets kicked to us and we fight and we do a good job fighting. It's just costly. So Jess, how many, uh, what percentage of collection files you get, go to LA look, go to litigation, maybe about five to 10%. Why do you think that is? I think once we're at the point where we filed our liens, we have calls everybody and nobody's paying attention. There is no other choice, right? Or their lanes about to expire. Um, we even tell them, Hey, you guys don't have to jump into it. You have a year, you have two years. We try to push it out as much as we, um, but there's certain situations where they're just not going to pay you.
Speaker 2 00:06:01 I mean, unless you force their hand. And we've had that multiple times where, for example, apartment complexes, apartment complex, have no need to pay out your late because they're not going to sell the property within two years. And that's the first thing I tell clients when they want to lean into perfect conflict is we're going to file this lien. You have up to two years to file suit, and I'm telling you, now you're going to have to do that to get your money because they're not going to sell the property. And unless you force them into paying you, they're not going to pay it. And I've think I've learned that with the 10 years of being here and being from that industry, they don't like to pay their bills.
Speaker 2 00:06:45 So just give me, give me another story from your department this year. So we had another client as well. They were dirt work, so they removed dirt, you know, land clearings. So he came in and he had a ton of invoices that need to be paid. And it was a big amount. I want to say it was about another $300,000. And thankfully he have lien rights. We did everything possible. We collected all of his money, but unfortunately that put him out of business, that collection part. And why, because there was so many months that went by that he wasn't paid that at the end of the day, he couldn't manage his company or he couldn't keep up with his bills. So, um, I believe he was starting something new and we were going to be on his call list when he started the new company. But the company he had started already was put out of business because he didn't collect his money fast enough. So, Jess, what do you think is the difference between our collection strategies here at the firm and other law firms or other collection agencies?
Speaker 2 00:07:54 Um, I think we push, um, we have that tendency to make phone calls, to call people, not just sit on it. I'm not just gonna send a letter and not call anybody, not follow up. And I'll be honest, we piss people off, but, um, I've had clients in the past that, I mean, people in the past that have hired us because we've pissed off somebody so pissed them also bad and collected our client's money that build it and call me and be like, Hey, can you do that to them? Cause they're not paying me. So it's work phone calls to me, it's a lot of phone calls. And so on that note, Courtney, what do you think makes our from the chromosome from different than other law firms out there? You know, the good thing is we're, we're not the kind of firm who's in it to just bill the crap out of our clients.
Speaker 2 00:08:49 I mean, I think we know better at this point. You know, we, we represent the little guy a lot of the time and the little guy doesn't have these, an open checkbook where they can just spend a whole lot of money. And unlike some other firms, we are much more interested in keeping the little guy in business because we know that's the longer lasting relationship that we're going to have there. Would you say in your experience that, um, being the little guy can be taken advantage of and litigation, when does it not take it from the very beginning and taken advantage of, and you look at these contracts and I, and I, you know, it's so bad that you had to go and do a whole class on it. You know what I mean? Like that's how bad it is. And it's unbelievable, you know, on the one hand, as a lawyer, you're really, really frustrated because your clients should know better.
Speaker 2 00:09:43 So why are you signing this? You know, you should not sign this. I have taught you better than this, you know? Um, but they're the little guy, you know, they have the little guy syndrome where it's like, well, I have to do this because I want to build a good relationship. And I want to keep working for this guy. And, and it's kind of, um, you know, you have to, you fuss at them, you fuss at them and you tell them, look, you're paying me now because you thought you were going to do this with this guy. And he just totally screwed you over. And you knew better. We have one client here at the firm, very sharp guy. He does still fabrication and manufacturing, very smart. He's got a good contract. And he got into a situation with a terrible GC who is known for screwing over subs.
Speaker 2 00:10:26 Um, and so he was always kind of wary about entering into this agreement and he does it anyway, but we ended up getting him, you know, minus attorney's fees. He ends up getting the entire amount that he leaned for and he knows better. He's not going to go back in it with this GC ever again. He said that on a number of occasion, you just didn't trust him that I'm not doing this ever again. And luckily for him, um, they screwed up, uh, actually, so he agreed to settle for a little bit less than what he was owed. And then someone mistakenly sent him a check for the entire amount of his lien, which at that point we were like, oh, well, guess you are entitled to that payment after all, you know, good for you for being able to benefit off of somebody else's stupidity, but he was entitled to that and he did the work.
Speaker 2 00:11:10 So that was a great, happy accident that can sometimes happen. So Jess, do you have another story you could share with us? Yeah, my clients. So they are the little guys and most of the time, they're so little that they're the ones actually doing the work out there. They're the ones hustling. And the wives are, the daughters are the ones in the office trying to do their bills, trying to collect their payments. And we've reviewed some of their contracts and I'd have one who we reviewed if contract. And I like do not find that you're going to have a hard time and he didn't listen month and a half later, he comes to the office and he's looking at me and he was like, I know I'm about get in trouble. I signed it. And I was like, I told you not to, because here we go, Sharon, he didn't get paid if he's not going to get paid anytime soon.
Speaker 2 00:12:05 And unfortunately now he has to be a litigation, but we tell them in the front end not to do something, not because we're saying, oh, don't go do this work. It's because one, we've usually dealt with a GC that we know is going to give them a hard time, paying them, or it's going to cost them their profit. I mean, he's not going to make any money off of this deal. And these guys are just worried about, I want to make sure I have enough work. I want to make sure I can do this. But how many times have we said, if it's going to cost you to do business, don't do it because you're doing it for free over and over. Does it make sense to go to work, to pay somebody, to go to work? Which is what happens when you don't get paid?
Speaker 2 00:12:51 Um, just in your experience, how likely are subcontractors to collect their retainage very low, maybe about 10%. And the reason why it's the way I've explained, it's hard. Clients is you have one big job. And I explained this to them all the time. You have one big job out of 50 subcontractors, literally, maybe 10 of those subcontractors are going to file liens and maybe three of them will actually get it right. And then maybe one of them is going to file suit. So all of those other subs that didn't file their liens or did it fall on, right? Their retainage is gone. That GC has now pocketed everybody else's money. And they look at me like, I'm crazy when I say this. And I'm like, this is what really happens. You have to learn how to protect it. I don't know how many times we've given this class or speech or, you know, my webinars on lean then retain EJ. And that is one of the biggest topics. Well, it's 10% of the contractor mothers normally where most of the profit is. It's very rare that on any project, somebody was going to make more than 10%. So when you leave your retainers, you're walking away from your profit. Do you guys have any other stories that you wanted to share?
Speaker 2 00:14:10 I have another one about, you know, we love our clients, right? We have some of the best clients ever. It's this area, practicing construction law is a really great area because you can go have a beer with one of your clients. And it's just a good time. And you know, they're very Frank and honest and they appreciate that. That type of communication, the Frank and honest communication, I had to beat around the Bush. So you know, every now and then you get a client like Jess was just talking about it. They don't want to listen to you. So we have as client, they they're from out of state. They're trying to remodel a house here to flip it. And we had told them in so many different ways, look, guys, y'all screwed over by your GC. You need to work something out with this up, let this sub take over, let this sub take over, work a deal out.
Speaker 2 00:14:59 And they somehow blew it completely up to the point where the sub said, I don't ever want to work with you again. Not only do they have a lien on the property that we now have to move forward and removed, but they also sued them in small claims court. So you have two separate litigation cases that now have to be dealt with because for some reason, they just didn't want to listen to us. And we're, and this is just another reflection of how we are trying to help you. You can, don't want to spend this money on me when you can work this out yourself and we're telling you how to work it out. Um, you know, and, and they know, and they came back and they kind of, you know, virtual head hanging down like, Hey, I messed up here. Here's where we are.
Speaker 2 00:15:44 Um, and you know, w we're obviously always going to be there for our clients to help them, but I won't lie and say, there's not a moment where I have said in the past, I told you not to do that. I told you not to do that, you know, but I love you, but I told you not to do that. So, um, you know, listen, listen to your lawyer. If you trust them, I say that as a lawyer. So obviously I'm interested, but seriously do it. No, you know, I agree that we're here to help people. And I know lawyers get a bad rap, but that's, we're not those lawyers, right? Lawyers that don't suck, right? That being said, this podcast will air twice a month. This whole series has come to a head. And really there's 20 classes and stuff, contractor Institute that are all of these things are important because I've seen so many companies either have to pay substantial judgements or go out of business completely because they didn't understand the sub contract I signed. And even if they did everything right, it didn't matter. They could still be sued and I could still lose. So that's what all of this is about and this podcast as well. So with that being said, I look forward to the next episode and thank you so much for listening. Hi, bye.
Speaker 1 00:16:57 Thank you for listening to this episode of quick getting screwed. I hope you found it helpful. And if you like what you hear, please like us and follow our podcast. Do you want further information? So you can find [email protected]
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