I am in the process of securing a floor refinish with a big name retailer based in Los Angeles for a new store here in West. Pa. They are taking over space in a big outlet center. We have arrived at a verbal agreement over the terms of the job and to a 50% deposit prior to start. We haven’t reached the signed contract stage yet. My concern is with collecting the other 50% after completion.
So far I have been in communication with at least 4 different people via Fax and phone but haven’t met anyone face to face and it doesn’t appear that I ever will. I don’t even know who makes the final decision. I brought this up at the last local builders meeting and an electrician stated that he did a job for another big clothing retailer based in the same outlet center and never got paid. He said that he gave up trying to collect when all he got was a big runaround from their corporate office.
I contacted the property management co. for the outlet center but they deal only with leasing and ground maintenance and don’t get involved with interior improvements.
I’m thinking that the only way to protect myself (since this company is 3000 miles away) is to insist that they deposit the final 50% payment to an escrow account with a local third (neutral) party, like a bank or lawyer. Does this sound unreasonable? This is a $7,000.00 job.
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Replies
"Escrow account" is simple in concept, but can be hideaously complex in practice. Under what terms does the escrow agent pay out, who bears the burden of proof, etc?
If it is a big retailer, they are familiar with letters of credit and have a bank which will issue them as a payement mechanism for their account.
You want a recognized bank (in Pgh, Mellon or PNC - I'd go with Mellon, they are better at L/Cs) to issue a standby letter of credit, for the retailer's account, in your favor as "beneficiary."
In the standby L/C, the bank will promise to you (undertake to you) that it will pay up to a specified amount of money to you upon your presentation of your statement "reading as follows: 'The work's been done in accordance with the terms of the contract dated xx/yy/zz between aaa and bbb and the amount drawn under Mellon Bank Letter of Credit 123454 is owed to the undersigned pursuant to the terms of that contract.'"
When you perform per the contract, you can then present the required statement and a draft to the issuing bank (or confirming bank, but that's a wrinkle) and if the statement conforms on it's face with the terms of the standby L/C, the bank will pay, without inquiry into the truthfulness of the statement or protests from the "account party" aka your customer, the retailer.
Thje amount involved is fairly small for a standby L/C, and there will be transactional costs, but it could well be the best way to go.
Feel free to contact me via email, I can probably put you in touch with some folks in Pgh who can help.
Here in Moscow, we just record a Preliminary Notice, and serve the same on the legal owner, be it a Big Box or a landlord of the Big Box. That gives you lien rights against the owner if and when you record a mechanics lien.
Boris
"Sir, I may be drunk, but you're crazy, and I'll be sober tomorrow" -- WC Fields, "Its a Gift" 1927