Episode 1: Highs & Lows in Construction Law
with Courtney Stricklen and Jessica Mora
Construction Law is a tricky topic. Luckily, Owner and Managing Partner of The Cromeens Law Firm, Karalynn Cromeens, is joined by Lien Specialist Jessica Mora and Sr. Managing Attorney Courtney Stricklen to discuss it all. Wins, losses, tips, and tricks; read the transcript of the first episode of The Quit Getting Screwed podcast, Highs & Lows in Construction Law below to get a look into the world of Construction Law.
INTRO: Welcome to the Quit Getting Screwed podcast, where we talk about everything related to contractors, construction, and information to help you run better businesses.
Karalynn: Hi, my name is Karalynn Cromeens, and I’m your host at the Quit Getting Screwed podcast. This podcast is all about subcontractors, real-life experiences, some failures, and some wins to hopefully help subcontractors run better businesses. I started this podcast in accordance with the book, Quit Getting Screwed. I’ve been in construction law for like 15 years and saw over and over and over again subcontractors signing contracts that they don’t understand and then coming back to bite them in the ass. So, The Subcontractor Institute is an attempt to help subcontractors understand the subcontract and all aspects of their business. And my law firm, The Cromeens Law Firm, does the same thing, and we partner with subcontractors to help them run a better business. So today, we’re going to look back at some experiences from 2020, um, some wins, some losses that we helped our clients manage through the best they could when they’re already in a bad situation. So today, I have with me my head of collections, Jessica Mora, and my head of my legal department, Mrs. Courtney Stricklen, which one of you ladies would like to hop in first with, start with a good story. Somebody give me a win.
Jess: Okay, I’ll go first. I had one this year who was owed about $400,000, and he was actually outside of the lien timeline, um, for the most of it. I think he was only timely, maybe for about 2 to $3,000. Of course, we know he’s out of the lien 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; Stirring up the pot enough to where he got paid. I don’t know how we did that, but we managed to get it done. Um, I don’t think even I know my tricks. I just go with my gut and just start riling everybody up to make sure I get somebody’s attention, the person that’s going to write me that check. They were very happy that we got them paid without having to file a suit or file a lien or anything; we just managed to get them paid.
Karalynn: What did it cost them to collect their $400,000?
Karalynn: Would you say that’s money well spent?
Jess: Very well. So, I think he was very happy with the outcome of that collection part and paying the thousand seventy. He was like, “I’ll pay you that if I can get all my money back!” So, it was money well spent.
Karalynn: All right. Court, can you give us an example of a more challenging situation?
Courtney: You know, I kind of wish I got these great stories that Jess has where it’s like, oh, you only spent a thousand dollars, and you collect $400,000! Unfortunately, that just does not exist in litigation. We’re expensive. The process is expensive, no matter how hard we try to keep that cost down. So, I have kind of a win. Um, that’s just the nature of litigation, right? I can’t tell you, “Yes. It’s a for-sure win!” 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. 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. 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 win. Right. But is that really a win 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 Karalynn has, since the first time I started working with her, she’s always said, “Principal is very expensive,” and that has been true every single time. It’s a lot easier to be happy on a principled argument than it is to just get paid.
Karalynn: So how often with your clients do you recommend going to litigation, Courtney?
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, we try to talk as much sense 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. 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 Jess’s department is so good at that. 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.
Karalynn: So, Jess, what percentage of collection files you get go to litigation?
Jess: Maybe about 5% to 10%.
Karalynn: Why do you think that is?
Jess: I think once we’re at the point where we’ve filed our liens, we have called everybody, and nobody’s paying attention, there is no other choice, right? Or their lien’s about to expire. 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, but there are certain situations where they’re just not going to pay you. I mean, unless you force their hand. And we’ve had that happen multiple times. For example, apartment complexes: Apartment complexes have no need to pay out your lien because they’re not going to sell the property within two years. That’s the first thing I tell clients when they want to lien an apartment complex, is 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 think I’ve learned that with the ten years of being here and being from that industry, they don’t like to pay their bills.
Karalynn: So, Jess, give me another story from your department this year.
Jess: 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 had lien rights. We did everything possible. We collected all of his money, but unfortunately, that put him out of business, the collection part. And why? Because there were so many months that went by that he wasn’t paid that at the end of the day, he couldn’t manage his company anymore, and 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.
Karalynn: 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?
Jess: I think we push. We have that tendency to make phone calls, to call people, not just sit on it. I’m not just going to send a letter and not call anybody, not follow up. And I’ll be honest, we piss people off, but I’ve had clients in the past that, I mean, people in the past that have hired us because we’ve pissed them off so bad and collected our client’s money that they’ll then call me and be like, “Hey, can you do that to them? Cause they’re not paying me,”. So, it works, phone calls to me, it’s a lot of phone calls.
Karalynn: And so, on that note, Courtney, what do you think makes our firm different than other law firms out there?
Courtney: You know, the good thing is, we’re not the kind of firm who’s in it to just bill the crap out of our clients. 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 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 long-lasting relationship that we’re going to have there.
Karalynn: Would you say in your experience that, um, being the little guy can be taken advantage of and litigation?
Courtney: When is it not taken advantage of? From the very beginning, it’s taken advantage of. You look at these contracts, oh my! It’s so bad that you had to go and do a whole class on it. Do 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 frustrated because your clients should know better. Like, why are you signing this? You know, you should not sign this. I have taught you better than this. But they’re the little guy, and 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, you know, you have to 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 that guy, and he just totally screwed you over, and you knew better. We have one client here at the firm, a very sharp guy. He does steel 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, so he was always kind of wary about entering into this agreement, and he does it anyway, but we end up getting him, minus attorney’s fees, the entire amount that he liened for. He knows better; he’s not going to go back in it with this GC ever again, he said that on a number of occasions, he just didn’t trust him, he said “I’m not doing this ever again”. And luckily for him, um, they screwed up actually, so he had 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 were entitled to that payment, after all, you know, good for you for being able to benefit off somebody else’s stupidity. But he was entitled to that, and he did the work. So that was a great, happy accident that can sometimes happen.
Karalynn: So, Jess, do you have another story you could share with us?
Jess: Yeah. My clients, 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 and 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 have one who we reviewed his contract, and I was like, “do not sign that. you’re going to have a hard time”, and he didn’t listen. A month and a half later, he comes to the office, and he’s looking at me like, I know I’m about to get in trouble because I signed it. And I was like, “I told you not to because here we go...” Sure enough, he didn’t get paid if he’s not going to get paid anytime soon, and unfortunately, now he has to be in litigation. But, we tell them on 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 me; 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?
Karalynn: It doesn’t make sense to go to work just to pay somebody to go to work, which is what happens when you don’t get paid. Jess, in your experience, how likely are subcontractors to collect their retainage?
Jess: Very low, maybe about 10%. And the reason why, the way I’ve explained it to our 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 didn’t file them, 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 liens and retainage. That is one of the biggest topics, retainage.
Karalynn: Well, 10% of the contract amount. That’s normally where most of the profit is. It’s very rare that on any project, somebody is going to make more than 10%. So, when you leave your retainage, you’re walking away from your profit. Do you guys have any other stories that you wanted to share?
Courtney: I have another one. 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 type of communication, the honest communication. You don’t have to beat around the bush. So, you know, every now and then, you get a client like Jess was just talking about. They don’t want to listen to you. So, we have a client, and 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 got screwed over by your GC. You need to work something out with this sub. Let this sub take over. Let this sub take over and work a deal out. But 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 remove, but they also sued them in small claims court, so you have two separate litigation cases that now must be dealt with because, for some reason, they just didn’t want to listen to us. And this is just another reflection of how we are trying to help you. You 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. And they know, and they came back with their kind of, you know, virtual head hanging down like, hey, I messed up here. Here’s where we are. 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. I love you, but I told you not to do that. So, you know, listen to your lawyer if you trust them. I say that as a lawyer, so obviously, I’m interested, but seriously do it.
Karalynn: No, you know, I agree that we’re here to help people. And I know lawyers get a bad rap, but we’re not those lawyers, right? We’re the lawyers that don’t suck. This podcast will air twice a month. This whole series has come to a head. There are 20 classes on Subcontractor Institute, and all these things are important because I’ve seen so many companies either have to pay substantial judgments or go out of business completely because they didn’t understand the subcontract they signed. And even if they did everything right, it didn’t matter. They could still be sued, and they 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.
OUTRO: Thank you for listening to this episode of the Quit Getting Screwed podcast. 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? If so, you can find us at subcontractorinstitute.com. We’re also on Facebook, LinkedIn, and Instagram, and the book is available on Amazon. Tune in two weeks from now for a new episode. Thank you.