What is a payment demand letter? In theory, it could be any written communication by anyone on behalf of the creditor to the debtor, wherein a demand for payment is made. However, that is not the type of demand letter that you want or the type of letter that will get you paid! In order for a demand letter to be an effective tool to enforce payment, it should be prepared by a lawyer who understands Texas construction law and sent to the debtor on law firm letterhead by certified mail. When done right, a payment demand letter can be an extremely effective tool to enforce payment and it is typically less expensive than filing a lien or a lawsuit. Additionally, it is less confrontational. Moreover, if you have missed the deadline for filing a lien, then this is your last opportunity to demand payment before filing a lawsuit or just walking away from collecting the debt all together. In some situations, a demand letter is the starting point to enforce payment. A demand letter can be sent independently, or in conjunction with any of the other enforcement methods described in this section.
A forceful demand letter should include the following information: (1) identification of the contractual provisions breached by the failure to pay; (2) a demand for immediate payment; (3) a representation that a lawsuit will be filed if payment is not made within a set number of days; (4) if applicable, a representation that a lien will be filed against the property if payment is not immediately made; (5) a brief description and notice of any potential statutory violations as a result of the failure to pay, such as Property Code Chapter 28 (the “Prompt Payment Act”) which imposes an annual 18% interest penalty on unpaid construction debts, Property Code Chapter 162 (the “Trust Fund Statute”) which imposes both civil and criminal penalties for diverting construction funds from a project, and Civil Practice and Remedies Code Section 38.001 (statutory right to attorneys’ fees); and (6) a representation that the principal amount owed, interest on that amount, attorneys’ fees, statutory penalties, and cost of court will be sought if payment is not immediately made and a lawsuit is filed.
A competent construction lawyer should be able to review the pertinent projects documents and prepare/serve the payment demand letter in approximately two to three hours. Click here to Send A Payment Demand Letter.