The Construction Debt Problem: Everyone Thinks They`re Right

We asked one of our longest serving debt recovery veterans, Tim Kulkalski, what the

most common client versus debtor situation is that he sees and, more importantly,

what could be done to prevent it.

His answer was immediate.

Construction debt.

Builders doing questionable jobs. Customers asking for loads of additional work and

then refusing to pay for it. Sometimes refusing to pay anything at all.

But according to Tim, it is not as simple as blaming the builders.

“They’re both as bad as each other,” he says. “We get just as many good builders

getting shafted by their customers as we do trying to negotiate with customers who

have legitimate questions about the quality of a builder’s work.”

And that is the problem with construction debt.

Every construction debt is messy.

There are often disagreements about what was originally agreed, what work was

included in the price, what work was added later, whether the work was completed

properly and, ultimately, how much is actually owed.

By the time a debt recovery company gets involved, both sides usually believe they

are completely in the right.

The builder says the customer has had the work and should pay for it.

The customer says the work was poor, incomplete or that they were charged for

things they never agreed to.

So, what is the answer?

Tim believes a lot of these disputes could be avoided by making payment

arrangements much simpler from the beginning:

“The only way I reckon you could straighten this out is to agree a price and have the

customer pay for it in equal instalments whilst the work is being carried out.”

For example, imagine a £6,000 driveway that will take four weeks to complete.

The builder provides a written quotation. The scope of work is agreed. A contract is

signed.

The customer then pays £1,500 per week as the work progresses.

Everyone knows where they stand.

The builder is not left waiting until the end of a four-week project before receiving

anything. The customer is not being asked to hand over the entire £6,000 before

seeing any work completed.

It also means that if there is a problem, it can be identified and dealt with at the time

rather than allowing a dispute to build up until the entire project and the entire

invoice becomes an argument.

Of course, no payment structure will completely eliminate construction disputes.

There will always be disagreements about workmanship, changes to specifications

and unexpected costs.

But clear quotations, written agreements, properly recorded variations and staged

payments can make a huge difference.

Because when it comes to construction debt, prevention is almost always easier than

trying to untangle the mess afterwards.

And believe us - by the time it reaches debt recovery, it is usually one hell of

a mess.

Tim Kulkalski is one of RFS`s longest serving debt recovery specialists and has

spent years dealing with commercial and consumer debt disputes across a wide

range of industries.