{"id":888170,"date":"2016-04-13T10:26:55","date_gmt":"2016-04-13T16:26:55","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=888170"},"modified":"2016-04-13T10:26:55","modified_gmt":"2016-04-13T16:26:55","slug":"construction-due-diligence-sooner-is-always-better-than-later","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/","title":{"rendered":"Construction Due Diligence: Sooner is Always Better than Later"},"content":{"rendered":"

Walter D. Cupkovic and Jack L. Parrino | Thompson Coburn LLP | April 1, 2016<\/p>\n

Non-payment of receivables is an ongoing problem for contractors, subcontractors and material suppliers notwithstanding the strength or weakness of the economy. Having knowledge of one\u2019s alternative available legal remedies gives contractors, subcontractors, and material suppliers a distinct advantage.<\/p>\n

When a contractor, subcontractor, or material supplier \u201csells\u201d a job, it is selling three things \u2014 \u201clabor, materials, and credit.\u201d The sales department\u2019s job is to sell the \u201clabor and\/or materials,\u201d while the credit department\u2019s job is to evaluate whether to extend credit on such sales. These conflicting goals could result in friction between the sales department and credit department. In fact, it has been said that the ultimate conflict in life is not between good and evil but rather between sales and credit. However, if the parties work together towards an acceptable solution balancing the sale with the extension of credit, ultimately the company will benefit. This is where the construction due diligence<\/a> process and understanding the laws that benefit contractors, subcontractors, and material suppliers is valuable.<\/p>\n

The first step in the due diligence<\/a> process is the determination of the creditworthiness of the customer. This is performed by the credit department of a contractor, subcontractor, or material supplier. The review of the creditworthiness (or so-called \u201ccredit due diligence\u201d) of a potential customer is not only good practice but essential in becoming a part of a successful and profitable construction project.<\/p>\n

While credit due diligence is an important factor, there is no guarantee that a particular construction project will be successful or that otherwise having a \u201cgood customer\u201d will result in payment in full. Let\u2019s face it, contractors, subcontractors, and material suppliers sell to and\/or work with many qualified contractors and owners but still find themselves in the middle of a troubled project, whether as a result of lack of additional financing to complete, a bankruptcy within the tier of contractors, or some other circumstance.<\/p>\n

The importance of due diligence<\/strong><\/p>\n

What can a contractor, subcontractor or material supplier do to help protect themselves in such situations? An important option to consider is to perform \u201clegal\u201d due diligence up front at the same time that the credit decision is being made. In other words, in the event of non-payment by your customer, what rights and legal remedies may you have in the event of such non-payment above and beyond a breach of contract action against your customer? Such rights as to third-parties (other than your customer) are known as \u201cthird-party\u201d rights. Such third-party rights may include mechanics\u2019 lien rights<\/a> against the subject property, lien rights against undisbursed constructions funds, and\/or rights against a surety under a payment bond.<\/p>\n

The availability of such rights varies by state and is based upon the type of project (i.e., public project or private project) and the nature of the owner (i.e., federal, state or local agency, or private entity). Also, the determination of where a contractor is within the tier of overall contractors (i.e., general contractor, subcontractor, sub-subcontractor, material supplier, etc.) is crucial in making such determination. As part of the analysis, it is essential to obtain as many facts related to the project as possible at its beginning (i.e., owner\u2019s name, legal description, etc.).<\/p>\n

Third-party rights<\/strong><\/p>\n

It is important to consider the availability of third-party rights<\/a> sooner rather than later because depending on the circumstances, in order to preserve one\u2019s rights, proactive prosecution of a claim in the form of a notice and\/or filing may be required at the beginning, during, and\/or within a limited period after the completion of the work or shipment of materials. If any deadlines are missed, the rights are waived.<\/p>\n

Knowledge of the availability of third-party rights is extremely beneficial in making a credit determination about a customer and assessment of a project. To the extent third-party rights are available, a contractor and\/or material supplier may still decide to perform work and\/or sell to an otherwise questionable creditworthy customer. Other forms of protections to consider are personal and corporate guaranties, joint check agreements, and a requirement that questionable customers provide a surety bond for the company\u2019s benefit.<\/p>\n

Third-party rights are a valuable tool…<\/p>\n

To finish reading this article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Walter D. Cupkovic and Jack L. Parrino | Thompson Coburn LLP | April 1, 2016 Non-payment of receivables is an ongoing problem for contractors, subcontractors and material suppliers notwithstanding the strength or weakness of the economy. Having knowledge of one\u2019s alternative available legal remedies gives contractors, subcontractors, and material suppliers a distinct advantage. When a… Continue reading Construction Due Diligence: Sooner is Always Better than Later<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[14,8],"tags":[12,9169,8,9170],"class_list":["post-888170","post","type-post","status-publish","format-standard","hentry","category-construction-2","category-mechanics-lien-rights","tag-construction","tag-due-diligence","tag-mechanics-lien-rights","tag-third-party-rights","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nConstruction Due Diligence: Sooner is Always Better than Later - Advise & Consult, Inc.<\/title>\n<meta name=\"description\" content=\"The first step in the due diligence process is the determination of the creditworthiness of the customer\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Construction Due Diligence: Sooner is Always Better than Later - Advise & Consult, Inc.\" \/>\n<meta property=\"og:description\" content=\"The first step in the due diligence process is the determination of the creditworthiness of the customer\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\" \/>\n<meta property=\"og:site_name\" content=\"Advise & Consult, Inc.\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\" \/>\n<meta property=\"article:published_time\" content=\"2016-04-13T16:26:55+00:00\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:site\" content=\"@adviseconsult\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\"},\"headline\":\"Construction Due Diligence: Sooner is Always Better than Later\",\"datePublished\":\"2016-04-13T16:26:55+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\"},\"wordCount\":724,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"keywords\":[\"construction\",\"Due Diligence\",\"Mechanics Lien Rights\",\"Third-Party Rights\"],\"articleSection\":[\"Construction\",\"Mechanics Lien Rights\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\",\"name\":\"Construction Due Diligence: Sooner is Always Better than Later - Advise & Consult, Inc.\",\"isPartOf\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\"},\"datePublished\":\"2016-04-13T16:26:55+00:00\",\"description\":\"The first step in the due diligence process is the determination of the creditworthiness of the customer\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/\"]}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#website\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"name\":\"Advise & Consult, Inc.\",\"description\":\"Construction Expert Witnesses\",\"publisher\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#organization\",\"name\":\"Advise & Consult\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"contentUrl\":\"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png\",\"width\":162,\"height\":75,\"caption\":\"Advise & Consult\"},\"image\":{\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/\"},\"sameAs\":[\"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/\",\"https:\/\/x.com\/adviseconsult\",\"https:\/\/www.linkedin.com\/company-beta\/204526\/\",\"https:\/\/www.youtube.com\/user\/MrConstructionExpert\"]},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7\",\"name\":\"admin\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg\",\"caption\":\"admin\"},\"sameAs\":[\"http:\/\/www.expertwitnessinconstruction.com\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Construction Due Diligence: Sooner is Always Better than Later - Advise & Consult, Inc.","description":"The first step in the due diligence process is the determination of the creditworthiness of the customer","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/","og_locale":"en_US","og_type":"article","og_title":"Construction Due Diligence: Sooner is Always Better than Later - Advise & Consult, Inc.","og_description":"The first step in the due diligence process is the determination of the creditworthiness of the customer","og_url":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/","og_site_name":"Advise & Consult, Inc.","article_publisher":"https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","article_published_time":"2016-04-13T16:26:55+00:00","author":"admin","twitter_card":"summary_large_image","twitter_creator":"@adviseconsult","twitter_site":"@adviseconsult","twitter_misc":{"Written by":"admin","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/#article","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/"},"author":{"name":"admin","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7"},"headline":"Construction Due Diligence: Sooner is Always Better than Later","datePublished":"2016-04-13T16:26:55+00:00","mainEntityOfPage":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/"},"wordCount":724,"commentCount":0,"publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"keywords":["construction","Due Diligence","Mechanics Lien Rights","Third-Party Rights"],"articleSection":["Construction","Mechanics Lien Rights"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/","name":"Construction Due Diligence: Sooner is Always Better than Later - Advise & Consult, Inc.","isPartOf":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website"},"datePublished":"2016-04-13T16:26:55+00:00","description":"The first step in the due diligence process is the determination of the creditworthiness of the customer","inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.myconstructionexpert.com\/blog\/construction-due-diligence-sooner-is-always-better-than-later\/"]}]},{"@type":"WebSite","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#website","url":"https:\/\/www.myconstructionexpert.com\/blog\/","name":"Advise & Consult, Inc.","description":"Construction Expert Witnesses","publisher":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.myconstructionexpert.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#organization","name":"Advise & Consult","url":"https:\/\/www.myconstructionexpert.com\/blog\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/","url":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","contentUrl":"https:\/\/www.myconstructionexpert.com\/blog\/wp-content\/uploads\/2015\/11\/AC-Red-Logo.png","width":162,"height":75,"caption":"Advise & Consult"},"image":{"@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/Advise-Consult-Inc-126949043996790\/","https:\/\/x.com\/adviseconsult","https:\/\/www.linkedin.com\/company-beta\/204526\/","https:\/\/www.youtube.com\/user\/MrConstructionExpert"]},{"@type":"Person","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/0a11abe008083d5fb19c2b0feefe7bd7","name":"admin","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.myconstructionexpert.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/b01e71b7acadd7657af782b7ad1a30cc?s=96&d=mm&r=pg","caption":"admin"},"sameAs":["http:\/\/www.expertwitnessinconstruction.com"]}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p2ztG6-3J3k","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/888170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=888170"}],"version-history":[{"count":1,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/888170\/revisions"}],"predecessor-version":[{"id":888171,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/posts\/888170\/revisions\/888171"}],"wp:attachment":[{"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=888170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=888170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myconstructionexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=888170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}