Taxes

What About Preliminary Notices and Mechanics Liens?

Here is a definition for you:  A Preliminary Notice contains language which describes the details of the contract and who the interested parties are to the transaction.  It also makes a statement to the property owner that a mechanics lien could be placed on the subject property, what the consequences of such a lien placement are, and what their remedies would be.  The placement of a Mechanics Lien helps to ensure that you receive payment for your services.  The owner of the property will not have clear title until the lien is released.

I’ve never filed a Preliminary Notice or a Mechanics Lien for work that I’ve done as a handyman.  Would I be sorry that I hadn’t?  Yes, if I’d done work for a homeowner or a contractor and never got paid!

As a handyman, we continually work under the assumption that we will be paid for the work that we do.  If payment is never received, the homeowner has great leverage against us.  It is usually impossible to repossess the work that we did.

A Mechanics Lien is our way of insuring that we receive payment.  The Preliminary Notice is the first step in the process and it lets the homeowner know that a Mechanics Lien could be filed.  This in itself is often sufficient to prompt the homeowner to pay for the work making the actual filing of the mechanics lien unnecessary.

Check your local authorities for details.  Each state has its own filing requirements, time restrictions and laws.

How Large a Deposit Should I Request?

There are limits on what you can request as a deposit.  Check the laws in your state for the exact limits.  In California, contractors are prohibited from asking for a deposit of more than 10% of the contract price or $1,000, whichever is less.

You’ve heard the horror stories about “tradesmen” asking for a 50% deposit and then skipping town with the money.  Don’t be mistaken for one of these people.   If you have to request a deposit, even if you’re not a contractor, follow the contractor laws for your state.  Following this rule will increase your credibility and increase your chances of getting referrals.

I have chosen to never ask a customer to pay for materials in advance.   I charge all of my purchases on an air miles visa card.  This gives me thirty days to pay and a free round trip ticket when it comes time for a vacation.  If you can, do the same.

If you don’t have the available credit and the job has a large materials requirement there are solutions.  Have the homeowner buy the materials so that they are on hand when you arrive.  You can also go to the store together and let the homeowner choose and purchase the materials.  Handled this way, the homeowner will know that they are paying nothing but cost for the materials and you will have stayed within the law.  Don’t ask for a large deposit.

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