What to Do When a Construction Client Doesn't Pay

A construction client hasn't paid. Most contractors sit on the invoice for a few weeks, send a couple of polite reminders, and then quietly write it off. That's the wrong move - and it's how the industry loses billions every year. Here's what to do instead, from the moment a payment is overdue to the moment you get your money. (Figures in USD where used - the model and the math are identical in any currency.)

This is also a conversation about construction arbitrage - the model where you hold the prime contract, licensed subbies do the work, and you keep the margin. When you run that model, you control the contract and the payment chain. You're in a far stronger recovery position than a tradesperson who turned up, worked, and left without paperwork. But even as the general contractor (main contractor in the UK), clients will test you. Here's how to handle it.

Stop work before the debt grows

The moment a payment is materially overdue, stop any open phase for that client. Every additional day you work is free credit to someone who has already shown they don't pay on time.

Before you leave site: photograph everything. Document the current stage of completion. Note what materials are on site. You need a clean record of what was delivered and at what stage - that evidence is worth money later.

One caveat: your right to suspend needs to be in the contract. In the UK, the Construction Act 1996 gives a statutory right to suspend performance after 7 days' written notice once a payment is overdue - regardless of the contract. In the USA, Canada, Australia, and New Zealand, check your contract for a suspension or termination clause. If it isn't there, stopping work without the right language can put you in breach. Fix this on every future job.

Send a formal letter before action within 7 days

Don't call and ask nicely. A phone call is easy to ignore. A written letter before action is a legal step - it shows you're serious and creates the paper trail you'll need if this goes to court or tribunal.

The letter should cover:

• The exact amount owed, invoice number, and the date it became due.
• A clear statement that payment is overdue and has not been received.
• A deadline - 7 or 14 days to pay in full.
• A statement that you will take legal action if payment is not received by that date.
• A note that statutory interest is accruing from the due date (this focuses the client's mind in most jurisdictions).

Send it by email AND recorded post (certified mail in the USA). You want proof of delivery. Keep everything.

Know your contract - these are the clauses that matter

A weak contract is an expensive problem when a client doesn't pay. Before you go near a court, pull the contract and check three things:

• Payment terms. What is the due date and what triggers it? Ideally: 14 days from invoice on milestone completion. If you agreed 60-day terms, that is what you are bound to.
• Suspension clause. Can you stop work for non-payment? If not, add it to every future contract.
• Retention. If the client is holding a retention sum, does the contract specify when it is released and what triggers the release? Ambiguous retention clauses are where contractors lose money they have already earned.

Your legal recovery options by country

The rules differ depending on where the project is. This is where knowing your jurisdiction pays off. The table below is a starting guide - verify current limits on your government's official court website before filing, as these figures change.

Key sources: US mechanics lien laws exist in all 50 states (verified). UK small claims track limit consistently reported at ~£10,000 (verify on gov.uk). Ontario small claims raised to $50,000 October 2025; Alberta $100,000 since August 2023. NZ Disputes Tribunal raised to NZ$60,000 under the Disputes Tribunal Amendment Act 2025, in force 24 January 2026 (DLA Piper). Always check the official court site for your jurisdiction before filing.

USA: the mechanics lien is your most powerful tool

All 50 states have mechanics lien laws. A mechanics lien is a claim against the property itself - not just the owner personally. Once it is recorded, the property cannot be sold or refinanced with a clean title until the debt is resolved. That is powerful: it doesn't just threaten the client, it threatens their ability to do anything with the property.

The process has three key steps: giving preliminary notice before or during the job (required in most states), filing the lien after the project is complete or abandoned, and enforcing it through foreclosure if the debt still isn't paid. In practice, most cases never reach foreclosure. The lien alone forces settlement.

The deadline is everything. Every state has strict time limits for filing a mechanics lien - often 60 to 90 days after the last day you worked or supplied materials. Miss the deadline and you lose the right entirely. If you are owed money on a US project, check your state's deadline now and file before it passes. A construction lawyer can file this for a few hundred dollars. It pays for itself fast.

UK: Construction Act adjudication is your fastest route

The Housing Grants, Construction and Regeneration Act 1996 gives contractors on qualifying contracts the right to adjudication at any time during or after the project. An adjudicator is appointed, the decision comes in 28 days, and the losing party must pay immediately. It's enforcement first, arguments later.

The principle is "pay now, argue later". The client can challenge the decision in court if they believe it is wrong - but they have to pay first. That makes adjudication fast and effective in a way that court proceedings rarely are.

For smaller UK debts below around £10,000, the small claims track in the County Court is straightforward and does not need a solicitor. The Late Payment of Commercial Debts (Interest) Act 1998 also lets you claim statutory interest at 8 percentage points above the Bank of England base rate from the date the payment was due - plus a fixed compensation sum of £40, £70, or £100 depending on the debt size. Claim it every time. Most contractors don't.

Five habits that stop non-payment happening again

Recovery takes time and costs money. Prevention costs a conversation before the job starts.

1. 01Take a deposit before mobilizing. 20% to 30% before a single material is ordered. Any client who refuses a deposit before the work starts is showing you exactly who they are before you've spent a penny.
2. 02Build stage payments into every contract. Tie payments to milestones: groundwork complete, frame up, first fix done, handover. Each stage is invoiced and paid before the next phase begins.
3. 03Use 14-day payment terms, not 30. 30-day terms became normal because large clients imposed them. You don't have to accept them. 14 days is reasonable and legally enforceable in every country on this list.
4. 04Run a basic check on new clients. For any job over $10,000, a company credit check takes five minutes. Look for dormant accounts, recent director changes, or a dissolved-and-reformed structure. These are warnings.
5. 05Invoice the day the milestone is hit. Every day between completion and invoice is free credit. Close that gap entirely.

The clients who don't pay are usually visible before the job starts. The signed contract, the deposit, the stage-payment schedule - these don't just protect you if something goes wrong. They filter out the clients who were always going to be a problem.

The construction arbitrage model sharpens all of this. When you hold the contract and subbies work under you, you control when materials are ordered and when work proceeds. That leverage is what the model actually gives you - not just margin, but control over the whole job.