How an Economic Downturn May Affect Contractors
Markets rise, and markets fall. In the U.S., the economy is seldom stable for more than a few consecutive decades. That is why, like many of you, I am concerned that an economic retraction is looming.
Insurance and Equity as Recession Resources
However, I believe contractors performing real estate repairs today have a few distinct advantages compared to other industries in the event of a downturn. First, many restore properties after damage, and insurance policies can cover this work. Consequently, even if homeowners are feeling the pressure of the worsening economy, if they have maintained insurance coverage, there may still be money to pay for covered repairs.
Also, Colorado property values are currently extremely high. Depending on when a property was purchased, there is likely to be equity in it. Contractors have a powerful statutory right to file a mechanic’s lien and foreclose to recover unpaid amounts.
Legal Counsel Is Essential for Contractors
Unfortunately, these advantages can easily be lost if a contractor does not consult with legal counsel. A large insurance payment is an attractive thing for a homeowner to use to catch up on other debts. And the worse the economy gets, the more likely a customer might want to take the money for some other purpose. A strong contract can help mitigate this risk.
Mechanic’s liens, meanwhile, must be pursued properly and within a very short time, or they are lost forever. And, if they are executed incorrectly, the contractor risks losing the lien or, in some cases, having to pay the customer’s fees and costs!
A rock-solid legal foundation is essential to protecting your business. Here at Underhill Law, P.C., we have over 30 years of experience working with contractors. Take control of your legal services and your budget with our LegalPlan Contractor Edition.