Commercial clients not paying.

In line with the other discussion on clients not playing. We have a commercial clients who is doing the same.In August this year we took over new site a fairly large one at that. The previous contractors were Doing an appalling job. It might be worth noting, that's the maintenance firm were owned by the management company of the blocks in question.Residents were not happy with substandard work. So eventually we gained control of the sites.I wont name names, but the management company are known to be One of if not the largest management company in the UK.Anyway, we received the confirmation letter to start services in August. Since then we have not received a single payments.All of our work is commercial based. So we are used to clients taking two or three months to pay. But this one is different. But after two months we send out reminder notices of payments which are due. After three months we send a more formal letter or email stating that payments is long overdue and must be paid ASAP.In all cases previously, this has proved successful. We have never got to this point which is now 3 1/2 months after and not received payment.My policy was always to stop services until the bill is settled after three months. But if I do this will I get paid at all?The other day I sent the management company I strongly worded email. Their reply was stating that there were no funds available to pay my company. The agent stated that they were pursuing service charges and that's as soon as they had the funds are outstanding invoices would be settled.My argument is. If they did not have the money in place in the first place. Why the hell did they take on a contractor knowing there were no funds to pay? If there are no fans, they should not have employed us to maintain the sites!Your help would be appreciated. Where do we stand legally? And is there a possibility of going down amore legal route to recover the money owed?

The situation is, the residents have not paid for awhile because there is a amount of money missing from the residents association bank account.
Four example these figures are just an example by the way. The residents may have paid into the accounts £10,000, £5000 was previously used for maintenance etc. The amounts left should have been in the accounts for use on site. However the management company have said there is no money in the account despite the fact that If you do the maths there should be monies leftover.
Those figures were just an example
I have since learned That the residents are taking the management company to court. Because of the managements poor accounting.

The problem is, if we stop work on site I don't think we will ever get our money. And also I believe this is what's the management company wants, because if we stop service on site they will bring in their own company once again.

In terms of who is liable? If we went down a more legal route, would the management company be liable or the residents association? Or both?

The residents are aware of the situation. They know we are now getting annoyed with the situation. And I have warned that if it is not sorted this month then I will be looking at other possibilities. This includes stopping the service.
We have obviously invested a lot of time and more importantly money in this site. This includes paying staff, waste, petrol, diesel, insurance, and many more items I can't think of. At the minute to put it bluntly we are well out of pocket!

Replies

James Dixon November 9, 2012 at 9:13am

This does not sound very good. I could be painful if you have invested in staff and equipment for a particular contract.

Is it worth arranging a meeting with the company to sound out how you can make this arrangement work in the future? It is easy to lie in an e-mail but you may be able to pick up clues through body language when discussing face to face when they have to look you in the eye. You could frame the conversation in terms that your company doesn’t want to see the quality of their grounds deteriorate because that might generate bad publicity (remember they won’t want bad publicity either especially if they are seen to be in the wrong!)

If this behaviour is likely to go on it may be best to cut your losses. This poor cash flow/ management may be signs of greater trouble to come. It might be worth checking them out with credit rating agencies just in case they are at risk of going belly up.
David-County Grounds Maintenance November 9, 2012 at 9:19am

My view is that the managing agents have acted illegally by instructing you knowing that there are no funds. This is shameful and they ought to be named so other members can avoid them.
They should now be taking legal action against those residents who have not paid their service charges. Where do you stand on the list of unpaid contractors, have the managing agents paid them selves their fees?
I would cease work with immediate effect so not to add to debt, normally the site would quickly look shabby and then residents might start paying although this time of year does not help.
I have come across this once before and kept the communication channel very open and calm and eventually got paid a year later.
Best of luck
David Cox November 9, 2012 at 9:29am

Could it be worth a few informal chats with residents? Sound out if the management company is lying or not? If they are ring fencing each contract, and have not been paid yet - they are likely to dig their heels in, whereas if you can point out they're lying you may embarrass them into paying - either way I'd walk from this one as soon as I've got the money - the company is duplicitous at best, and about to go bust at worst!
Paul McNulty November 9, 2012 at 9:36am

Is there a resident's association? You say the maintenance was changed after complaints by the residents, so perhaps they could be in the best position to put pressure on the management company?

What do you put in your terms about action in the event that invoices aren't paid? I've not got this in mine as I deal with smaller companies and it's more personal, but if it's a faceless accounts department somewhere it might be worth including a condition that you will cease work on the site if any invoice is more than XX days overdue? Again, I'd liase with the RA about this, rather than just walk off site and upset the residents. With it being late in the season they might be hoping the residents don't notice your absense so much.

I agree that the company's failure to get money from residents has no bearing on them settling your invoices. I've had this with let properties where the tenant is behind with the rent, but it's up to the agent to deal with that and not for me to finance them. If there is money due from residents, but not collected, it's the management comapny's problem and they have to pay you out of their own pocket.
PRO

Brian www.mibservices.co.uk November 9, 2012 at 9:47am

Steve, I would cease work on the site and arrange a visit to their office. If that is not given, then write to them and tell them you are stopping works on the site. I would also draft a letter for the residents informing them of the situation and hand deliver it round each flat, the chances are you going to bump into a few of them and you could get information from them as to whether they have been paying the factor fees. Pressure from the residents may well push them into paying up, IF the resident have indeed been paying their bills.
If every option fails, name them publicly and raise a small claims action and threaten CCJ on them. Good luck with it.
Steve Sonic Grounds Maintenance November 9, 2012 at 9:50am

Believe me David I would love to name and shame them. But I would not want to put myself in a position where I am looked upon badly by any potential clients that looks on the sites. Perhaps feel could advise on this?

David-County Grounds Maintenance said:
My view is that the managing agents have acted illegally by instructing you knowing that there are no funds. This is shameful and they ought to be named so other members can avoid them.
They should now be taking legal action against those residents who have not paid their service charges. Where do you stand on the list of unpaid contractors, have the managing agents paid them selves their fees?
I would cease work with immediate effect so not to add to debt, normally the site would quickly look shabby and then residents might start paying although this time of year does not help.
I have come across this once before and kept the communication channel very open and calm and eventually got paid a year later.
Best of luck
Steve Sonic Grounds Maintenance November 9, 2012 at 10:01am

The situation is, the residents have not paid for awhile because there is a amount of money missing from the residents association bank account.
Four example these figures are just an example by the way. The residents may have paid into the accounts £10,000, £5000 was previously used for maintenance etc. The amounts left should have been in the accounts for use on site. However the management company have said there is no money in the account despite the fact that If you do the maths there should be monies leftover.
Those figures were just an example
I have since learned That the residents are taking the management company to court. Because of the managements poor accounting.

The problem is, if we stop work on site I don't think we will ever get our money. And also I believe this is what's the management company wants, because if we stop service on site they will bring in their own company once again.

In terms of who is liable? If we went down a more legal route, would the management company be liable or the residents association? Or both?

The residents are aware of the situation. They know we are now getting annoyed with the situation. And I have warned that if it is not sorted this month then I will be looking at other possibilities. This includes stopping the service.
We have obviously invested a lot of time and more importantly money in this site. This includes paying staff, waste, petrol, diesel, insurance, and many more items I can't think of. At the minute to put it bluntly we are well out of pocket!
Steve Sonic Grounds Maintenance November 9, 2012 at 10:05am

Sorry David. My predicted text is playing up.
What I meant to say was, perhaps Phil could I advise on this?

Steve Sonic Grounds Maintenance said:
Believe me David I would love to name and shame them. But I would not want to put myself in a position where I am looked upon badly by any potential clients that looks on the sites. Perhaps feel could advise on this?

David-County Grounds Maintenance said:
My view is that the managing agents have acted illegally by instructing you knowing that there are no funds. This is shameful and they ought to be named so other members can avoid them.
They should now be taking legal action against those residents who have not paid their service charges. Where do you stand on the list of unpaid contractors, have the managing agents paid them selves their fees?
I would cease work with immediate effect so not to add to debt, normally the site would quickly look shabby and then residents might start paying although this time of year does not help.
I have come across this once before and kept the communication channel very open and calm and eventually got paid a year later.
Best of luck
PRO

Brian www.mibservices.co.uk November 9, 2012 at 10:18am

Not good. As I said cease visits to site and dont increase the debt owed. Its going to get messy if the residents are taking legal action too. Difficult one Steve, but I would definately pull off site. To be honest this could cost you even more than what it has so far, pull out and phone the FSB legal help desk (if your a member).
Whatever you decide, its a no brainer, stop the maintenace visits, you will only end up being owed more money which you may never see. You are legally entitled to stop visits if they have not paid you for 3 months.
Personally in my business (after being hung out to dry for £30k 2 years ago) NOBODY gets their sites serviced untill the invoice is paid in full after 30 days. Once payment for the previous months work is paid, then and only then does the next visit get done. Harsh .....? maybe, but all my customers know how I work and thankfully have little late payers. Tight credit control is a must nowadays Im afraid.
Paul McNulty November 9, 2012 at 10:55am

So long as there's a contract with the management company there's no reason you shouldn't take legal action against them, and so long as you've given reasonable written warning Brian's right that you should not forego any money owed if you cease the visits. Copy everything to the resident's association, as from the sounds of it the management company might be changed if they are taking them to court and refusing to pay their charges. Keep the residents happy is the no. 1 priority IMO.

Again, as long as it's all in writing, and you give the notice you put in the contract, whether you stop visiting under protest, or they bring their old company back, it shouldn't affect your claim for the work you have invoiced for already.

I would never name and shame on a public forum, or even a closed one as usually they can easily be accessed, as it might well jeopardise any claim in the future. Ignore people who go on about "free speech", lawyers, the taxman, the police, plenty of agencies do monitor forums and you can get in to dodgy territory if you even give info that could easily lead others to guess the name of the company.