Building Profits: Protect Your Construction Rights with SunRay's Ariela Wagner

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ℹ ABOUT THIS EPISODE

In this episode of The Contractor Success Forum, Wade Carpenter and Stephen Brown are joined once again by Ariela Wagner of Sunray Construction Solutions. They discuss the challenges contractors face when it comes to lien laws, contracts, and protecting their profits. 

Ariela shares valuable insights on how to secure lien and bond claim rights, the importance of proper documentation, and the role of a strong credit and collections policy. Learn key strategies to avoid common pitfalls that could cost your business and ensure you're well-protected in every state. Don't miss this essential guide to maintaining your financial health in the construction industry.

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⌚️ In this episode:

• 00:16 Meet Ariela Wagner from SunRay Construction Solutions
• 03:09 Importance of Contracts in Construction
• 07:37 Credit and Collections Policies
• 23:19 Navigating State-Specific Lien Laws
• 28:05 Conclusion and Contact Information

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

Wade Carpenter: [00:00:00] In construction, it's rarely the job you did wrong that cost you the most. It's the job you did right, but forgot to protect. One unsigned contract, one mis waiver, one delay in filing, and poof, there goes your Profit. This is the Contractor Success Forum.

I'm Wade Carpenter with Carpenter Company CPAs. Alongside my co-host Stephen Brown with McDaniel Whitley Bonding and Insurance, and today we're bringing back a fan favorite Ariela Wagner from SunRay Notice and it's been almost three years since she joined us, but the lien laws didn't get any kinder, and the paperwork didn't file itself.

So if you're still treating lien waivers like an afterthought, you're gonna want to buckle in for some great information. Stephen, you want to kick us off on this?

Stephen Brown: Yeah, Ariela, thanks for coming back on the podcast today. We are thrilled to have you and it's hard to believe it's three years. The first time we talked, Wade and I were just so impressed with Sunray and what you're doing.

I want you to tell our listeners a little bit about Sunray and what you do. [00:01:00] You operate across the country in every state, and you help contractors with their liens and you help them with their collections. We could talk and we've had so many podcasts, we talk all the time about what you sign and what the laws are in your state, where you're contracting. And how to file a lien when you're not getting paid, what the laws say to you to protect you.

We're all paddling with the same set of oars here, about preaching this to our listeners and that is: pay attention to what you sign and know what the law says.

Ariela Wagner: Thank you so much. I'm absolutely thrilled to be here. I enjoy the podcast with you gentlemen and certainly love educating our audience. Yes. 

It actually just seems to be getting a little bit more challenging. I give the analogy of what's happening with antibiotics.

People are taking antibiotics for five days thinking that the bacteria will disappear with that antibiotic, but it just becomes [00:02:00] stronger and stronger. So if you don't have a strong credit and collections policy, you'll be left behind. 

Again, thank you and I'm thrilled to be here. A little bit of background for those who are hearing for the first time. My name is Ariela Wagner. I'm the founder of SunRay Construction Solutions. We secure $10 billion annually for general contractors, subcontractors, and suppliers throughout the United States. 

We have an extraordinary online platform that helps people with their deadlines, their waivers and releases. And we have a wonderful, and I like to say, an extraordinary research department that researches these documents.

So, yeah, I would love to get started on, some really critical pieces on what has to happen to make sure, if you guys can believe it, we're almost halfway through this year. And what the audience out there can do to really secure their lien and bond claim [00:03:00] rights, but a really healthy process for their companies. Whether you are a small business owner, a mom and pop shop, or you're a billion dollar business. 

So I think the first thing I tell everyone is really contracts.

The first thing about a contract is that, this is really the construction attorney's areas of expertise, but I think it's an area that we could touch on the 101s. You do not need a contract in order to file a lawsuit. Back in the olden days, you would shake a hand and you would say, okay, well that's it. We're good.

The terms of a contract can be verbal. It's just offer, acceptance, and consideration. But unfortunately today, we have so many issues that can arise from going back all the way to COVID with material price escalation to present day, what we had just recently with the potential increase in tariffs. What do you do?

So, first and foremost having a contract. Not all lawyers are created [00:04:00] equal. And what do I mean by that? You're not gonna go see a dermatologist if you need to see the ophthalmologist.

In every state there are construction attorneys that you can work with. On our website at sunraynotice.com, we have attorneys that we work with that are truly spectacular. And I just want everyone to know, SunRay doesn't get a kickback from me saying that. I have built relationships with really incredible construction attorneys.

So the first thing is getting your contracts and key points to those contracts are again, pay when paid, stop pay stop work, having clauses in there like that. Making sure that when you're signing those contracts, especially those big contracts, that you look very carefully at the waivers as well.

Remember most of the time the contracts are going to be written for the general contractor, not you. Material price escalation. Making sure that you're not gonna put yourself in a position where you give a quote [00:05:00] and then you lose all your profits because you didn't have that simple contract term. But because I'm not an attorney credit and collections is really my expertise.

Again, I strongly, strongly, strongly recommend speaking with an attorney in your state. Making sure that you have the correct venue. If, God forbid, you do get into a situation. And what does that mean? If you are in hypothetically Broward County, Florida, and you're doing work in another state that you have a venue, meaning you wanna make sure the lawsuit is brought closer to you, not to, if they have a section, well, you know what, we're gonna argue this in The Bahamas. So little key, very important terms that you should always have an attorney look at.

So, I'll bring it back to you guys as the accounting experts. What do you think?

Stephen Brown: Well, no, Ariela as far as your comment about getting a construction oriented attorney, we always preach on our podcast about your board of directors. You wanna get the best you can. [00:06:00] Best construction oriented CPA, the best insurance agent, the best bonding agent, the best banker that knows something about construction, and the best construction attorney. And the best lien protection waiver rights advocate in Sunray. Yeah. Add that to your board of directors.

Ariela Wagner: Thank you. Yeah, that is an area we could definitely touch on. But the waivers is a podcast that we could probably spend two hours on. The biggest thing about waivers is not just signing it. At Sunray we have conditional language on all of the waivers so that if customers do end up signing something, it's always conditioned upon payment.

Because all too often, unfortunately, people, whether they mean to or they don't, they can give away their lien rights. And that's one of the first things attorneys actually will look at in lien foreclosure cases. They'll look immediately at the waivers and releases, but that's definitely a two hour podcast.

Stephen Brown: [00:07:00] They're holding your retainage hostage till you sign what they want you to sign.

Ariela Wagner: Yeah, and unfortunately as the attorneys will say, who has the gold rules? So you have to be very careful with your cash flow. Make sure that you don't put yourself in a position where you were waiting on that 10% retainage and that could have been your profit. It's a big one for many, many, many subcontractors and suppliers out there.

Wade Carpenter: I'd like to pivot to some things like the credit and collection policies that contractors don't really think about. Would you say it's fair that most contractors extend more credit than their local bank and they do less due diligence on it?

Ariela Wagner: Absolutely. I think what happens are several factors. The first is how do we, most importantly help the audience that's listening? It's really sitting down, if someone put me out in the field, I think I'd be fired in a matter of 45 seconds. Unfortunately, I would love to be able to build a building, but it's just not my expertise.

But what's [00:08:00] essential is going into your office, taking a podcast like this one and documenting it. So for the audience that's listening, there are some key points that we could help you with. And I think the first one is clear credit application and job information gathering.

Why does it matter? So without a complete and accurate project details, you can't secure your lien rights properly and vet your customers. You should require a credit application. Now for the GCs out there who are working directly for the owners, one of the most critical pieces of the credit application or not even the, pardon me for the GCs that are signing contracts.

Before we go into the credit, I do wanna say this, you definitely always wanna have the husband and the wife sign the agreements. The main reason you want both husband and wife to sign if they're a married couple is because if it ever comes down to it and you ever get a judgment there's ways of playing [00:09:00] games where you can only go after the husband or you can only go after the wife.

So you always wanna make sure you have the husband and the wife signing your credit applications. But really it's the subcontractors, the suppliers that need to be smarter about what they're giving away. When you have your credit applications, again, you have it signed, job specific details.

So you wanna make sure you know who's upstream. All too often I'm seeing a lot of companies where, okay, well, I have an agreement with a sub to a sub, but they don't know who the prime is, who's working directly for the owner of the property?

Now remember, everyone. The money trickles down. The owner pays the GC, the GC pays the sub, subs pay to the supplier. So knowing who is upstream is very important. Whether you use a service like Sunray or you do it in house. And why it's critical is everything like a marriage is magnificent in the beginning, but when you get towards the end, sometimes things fall [00:10:00] apart. So you wanna have all of your ducks in a row.

Again, you wanna know if they're on the notice of commencement states? Is there an NOC? If I'm on a project, is the project bonded? And include your terms and your conditions that support your lien rights, personal guarantees, and recovering legal fees in your credit applications.

Stephen Brown: Yeah, that makes perfect sense. And so many times you'll be a lower tier on a contract. And you don't know what, for example, the general Contractor you're working for has agreed to with the owner and they pass that conditions right on down to you, and it's in your contract that they want you to sign and you don't know what it is.

For example, one of the things that pops up all the time is just, liquidated damages. You're liable for any liquidated damages that the general contractors agreed to, and you don't know what those are. Do you see that too?

Ariela Wagner: I think there's little issues for GCs that are different for subcontractors and suppliers. [00:11:00] The smaller general contractors need to address is first and foremost, making sure they do have all of their i's dotted and their t's crossed with a really rock solid agreement with the owners.

Another issue is making sure that, I always try to explain it this way, if I had to explain a painting to a blind person and you had to explain a painting to a blind person, how would that drawing come out? Would it come out the same exact way?

And I don't think that would happen. So I think really documenting what you're gonna do for your customer and showing them, and most importantly, signing off on it.

Here's a simple one. Someone wants a paint, a specific paint. It's their first time choosing a paint color and they love blue. Their home may look like a fantastic Greek restaurant. What they didn't realize is they meant to use a baby blue.

It's really important [00:12:00] to document what the customer's looking for and communicate. Not only communicate it, demonstrate it in writing, demonstrate it in pictures. And when you are done, take the pictures and confirm with the customer that they are in fact happy.

So that when things are done at the very end the customer cannot come back and say, and these are for GCs working for owners of properties. Making sure, again, and it sounds simple. It is simple, but you take that extra, oh my goodness, maximum three minutes of your day at the end, take a picture, have the owner sign, yes, I'm happy with what happened, so that when you get to the end of the project, everything, the communication is stellar and you don't have any issues. So again, that should be in your contract, but you wanna have it documented on a daily or weekly basis with the owner.

But I do wanna go back to what we were talking about. So subcontractors extending, it's really the people that extend a lot of that credit are the [00:13:00] suppliers. And if you are extending credit as subcontractors, just remember, you are not a bank. And generally speaking, there are very specific statutes that you can only receive, I'm pretty sure, so my apologies, don't quote me on this, but very specific states where you can only earn a certain amount per month of interest on the contract if you don't have it in writing.

You're not a bank, you're not gonna earn. Right now you could probably earn 8% on your money. So if you want it to be a bank, just call yourself Bank of General Contractors or a Bank of Subcontractors. You do wanna be very careful 'cause you're never gonna earn that interest back.

Not only they're using your services, they're also using your money. So, you wanna be very careful with who you are, your credit applications. But what do I mean by being careful, again, when you're giving a credit application, you're asking for specific, you're not only giving them your name, you're finding the credit worthiness.

You're [00:14:00] asking for references as well. Do they pay? How often do you have three or four people, they put their names down. You need to call those people. You need to confirm that they're actually good at paying their bills. I see this all the time.

The credit and collections department says the salespeople, guys, it is irrelevant that you sell the product and service. Everyone wants something for free. Once it's in the bank, then the job is really complete at that point. You can have as much revenue as you want, but if you can't collect on it, it doesn't matter.

Wade Carpenter: Yeah, that's a great point. And sometimes even the smallest mistakes can lead to some really big lost money. But what's the smallest mistake you've ever seen a contractor make that costs them the most money? Give us a case study.

Ariela Wagner: Yeah, I think, it's so interesting 'cause the first thing that comes into mind, and I'm part of this problem, but that's because God made me a woman and I have estrogen. So I think it's emotions. [00:15:00] What, and you could say, wait a second, emotions? What does that have to do with construction? It has everything to do with construction.

If you do not have a well-documented process, you'll allow things to occur such as waiving your lien rights and states that require a preliminary notice if you are working directly for the GC or if you're working for anyone other than the owner of the project, you're required to send a preliminary notice.

If you are afraid of giving a contract 'cause you're gonna lose the job, you'll lose the job anyways. Then you don't want to be in the job.

I think the biggest issue I've seen in my 19 years is emotion. Do not allow emotion to supersede intelligence. I love how I've once heard this and I think it's true: God, put your head above your heart for a reason. Use your head, not your heart.[00:16:00] 

Because if you make those emotional decisions, you will not have a successful credit collections department in your company. I would say again, what are those mistakes? Not having a contract in place, not sending preliminary notices when you should be not liening projects, when you should be liening the projects.

Because they'll run off with the money. But what about you? The gc, the subcontractor, and the supplier?

Wade Carpenter: Leading into that, what would you say is the number one blind spot from successful contractors that think they've got these kind of things covered? 'cause I see it all the time.

Ariela Wagner: It comes down to most importantly, creating an internal policy. Now you're gonna have situations where you have extraordinary relationships with the owners. You have extraordinary relationships if you're subs to the GCs where you're working on three or four projects and they're, okay, what we'll pay you X, Y, and Z, please continue.

I think that the best thing for all of the listeners [00:17:00] out here is to take a moment, go into your office and document your internal policies for your credit and your collections. We have a plethora of information, forms on our website to help customers that go, where do I start? This is so much information, I'm so overwhelmed.

How do I begin? It's very simple. I don't really like the expression, how do you eat an elephant? One bite at a time. 'cause I happen to love elephants. But the truth is there's so many pieces to this. Where do you start? And that's what we were talking about. The first thing is getting a good attorney, making sure you have your contracts, that's number one.

And then number two, making sure that you have a good process in place for your collections. What do you do there? You have to make sure 30, 60, 90. What does that mean? That means if they're past due 30 days, what do you do? What do you have your collections department do? And as business owners, you're running around like [00:18:00] chickens with your heads cut off.

But take the 15 minutes once a week, call it Thursday morning at 8:00 AM to do an AR check-in. See what's going on, because all too often I also see unfortunately, such a turnover where people have, oh my gosh, we didn't notice this project. Or worse, one of the girls in the office, they left the company.

They didn't secure the lien rights, and the customer doesn't have any rights. They have to sue on the contract, but that ammunition of a lien. It's really powerful. When you go to foreclose on a property, not only can you sue, like on the contract, you have a lien or a claim against the pond, which is so powerful for us in the construction industry, a lot of industries don't have anything like this. A lien being placed on a property to get to expedite payment, it slows down. The lenders will not fund projects, if there's a claim against the bond. But, we could talk about this ad nauseam, but I wanna make sure I answer some of the other questions [00:19:00] for you.

Stephen Brown: Ariela you were talking about also literally stopping a project when you're not getting paid. You alluded to that, and I can just say I get that kind of conversation all the time as a surety bonding agent is, I'm not getting paid. What do I do with this affect my bonding, and I always tell them, if you have documented everything properly and you have a good contract and they're not paying you then talk to your attorney immediately and stop the job. Stop working, stop financing something you're not getting paid for.

Ariela Wagner: Have to be careful with that one.

Stephen Brown: I know. You have everybody's tiptoeing around that subject.

Ariela Wagner: And I don't blame them. Everyone I think is born good. Everyone wants to finish the projects. Everyone wants to also get paid. Things happen. It could be a city or county and everyone on this, our audience that's listening, they know that's there's slow payers. Sometimes there's issues with waivers that you're not getting it back in time or customers not sending invoices timely that create [00:20:00] slow payment.

There are a number of factors that could occur, but one of the most important things the audience needs to remember is if that's the case, I think in the majority of the states, if you do not have that clause in your contract, you may have to continue the job. It's terrible. That is a big deal.

And again, that's why I was saying yes, you don't need a contract, but you absolutely should have that clause in your contract. If you're not getting paid, you are gonna keep sending your people out there still having materials? No, absolutely not. So you need to have that clause in your contract. It's a stop work clause.

Stephen Brown: Yeah. You remember I was telling you, Ariela, I heard a guy say, knowledge is reading the fine print and experience is when you don't.

Ariela Wagner: Yeah, absolutely. I know we were having that conversation, I could tell you again, it's the mistakes. It's what you do wrong, not what you do right. And all it takes, I [00:21:00] explain this to my staff and I explain this to people I'm close to. It can take 10 years to build this incredible building. 10 seconds for the dynamite to blow it up. So for the extra 10 seconds, you wanna be really smart about your business. Again, it's not just about building, it's about the back end of it.

For those who like music and I think the audience, everyone loves music. It's like going to a show, it's not just the singer at the front or the guitarist or the drummer. It's everything in the background that makes that show. It's the lights, the costume changes. It's the sound technician. And why do I see that? You might be building the building or painting, or the roads, whatever it might be. But you have to remember the other side of it. Your contracts, your crediting collections policies. That's what all makes it work.

Wade Carpenter: I see it too all the time that my contractors are [00:22:00] crossing state lines all the time, and they just see this big opportunity in another state and think that, hey, all these lien laws have to be mostly the same across all the states. And I know, you know that's not true and that's why I say, a service like yours that knows these things and can protect you is well worth the cost of it as well as just the same thing as we say about construction, CPAs, bond agents, attorneys, having somebody specializing in this, if you don't have the back office to do this, it can take a lot of effort especially when you're crossing state lines. What's your thoughts about that?

Ariela Wagner: I think that's such an amazing question. So I'm located in the state of Florida. And what we saw over the last five years that transpired is it's actually amazing on some levels and horrific on others. And what do I mean by that? First of all. You do need specific licenses. They're working on potentially making some changes in our laws, but regardless at the moment, you still need those licenses [00:23:00] depending on what you're doing.

I have people all the time say, oh we don't do that in our state. Well, it's the owners in the state of Florida are the ones that are required to record. But GCs do it on behalf of the owners. Notice of commencements. It's a critical piece of the lien process in the state of Florida. GCs, they don't know our rules.

Yes, you're a hundred percent correct. We're seeing a lot of it. You do wanna make sure you have the right license. You do wanna make sure that you know your deadlines in the event that you are not paid. It's also for the people in the state who have to work with people that are coming from out of state.

We do things differently in Florida, that you do differently in Maryland, that you do differently in Texas and California. We have different cultures and the way we do business. Not everything is just black and white with crediting collections. It's also building relationships and knowing how to work with Texans versus Floridians versus people from California when you're crossing those [00:24:00] borders.

Stephen Brown: I really appreciate you saying that and trying to understand that expression of perfecting a lien, a kind of a legal expression, but to me I think of that as making your lien perfect. And I think a lot of our listeners might understand about the timing involved with perfecting your lien.

Ariela Wagner: So, in most states if you're not working directly for the owner of the property on bonded projects, it's slightly different. Again, you can go onto our website, sunraynotice.com, click on 50 states lien laws, and you could see all the lien laws, but to give just simple numbers.

So if you're not working for the owner, otherwise, if you're not imp privity with the owner and you're crossing lines and you're a specialty subcontractor. You have only 40 days from first furnishing labor and material to send what's called a notice to owner in the state of Florida. And a lot of companies out there actually hurt customers because they have it as 45 days.

[00:25:00] Now, here's a trick, a little trick. A notice to owner in the state of Florida has to be received by the 45th day. Not sent and stamped by the post office. So when we speak about perfecting lien rights, that's a little issue that can transpire if you don't know the rules.

Okay? And then you have 90 days from last furnishing labor material to file your lien. Now what does that mean? It's very simple. It has to be recorded in the county in which the company's doing work in has to be served by certified mail to the appropriate parties. And then what?

Then perfecting it. So when the attorneys receive a preliminary notice or a lien that they have the ammunition to really foreclose. As I said, maybe 400 sentences ago, not only foreclosing the property, but also file a lawsuit on the contract that they have.

So, perfecting your lien rights, you know a lot of people, oh, I could just file a lien. I'm from [00:26:00] Oklahoma. I'm doing work in Florida. I'm a subcontractor, by the way. Totally different laws, totally different processes. And if you go in, think you're gonna do that, your trip to Florida, I hope was a wonderful vacation because you may not get paid.

Stephen Brown: Yeah. Right. Wow. I mean, we've talked about the hidden way that our listeners may be financing project, but we also talk about credit worthiness when you're extended credit and we talk about what to do when you're not getting paid. We talked about what services you provide, how would people get in touch with you, and what generally do you do when someone wants your services?

Ariela Wagner: Well, first and foremost when someone wants our services, what I really wanna make sure of is that they understand the processes that we discussed on this call. It's not just doing it one time. I. It's developing an internal process in your company, so our customer service [00:27:00] managers will make sure that and we don't charge for this. It's part of just the Sunray experience.

It's very economical to pay as you go service. They can find us online at sunraynotice.com. They can reach me. My email is ariela@sunraynotice.com. I don't believe that there is any question that is silly or stupid because when you don't know something you need to ask.

Now if you ask it three or four times and you're still don't understand it, maybe at that point maybe it's silly, but there really isn't a silly or stupid question. You need to know what your rights are. If you're not getting paid, it's a scary feeling. I know when I was younger, I had some cash flow, I had some issues.

It's not a good feeling when you're married with children and you're a small business owner and you're working on a project and you're owed, whether it's $6,000, that could mean the difference of paying your mortgage or [00:28:00] food or electricity. It's not things that we should ever take for granted.

So to help a small business owner or even a credit manager who's frustrated, who's listening, or a business owner who's taking his or her company from, 10 million to 15 million, you have to have these checks and balances in your company. But yeah, they could find us through sunraynotice.com, ariela@sunraynotice.com, and I'm happy to help anybody.

Wade Carpenter: Okay, that's great. And I think of this like all the people think of they've got their spouse or significant other doing their books and it's okay, well it's just I'm saving money. But one of those missed deadlines, somebody keeping up for you, that is well worth the price of doing that if your spouse or significant other, those kind of things get missed. I think yours is a great service and we really appreciate you coming back on and talking with our listeners today. We'll put [00:29:00] Ariella's contact information in the show notes and we'd love to have you back on sometime soon. If our listeners have any questions, please put them in the comments below.

We'd love to hear some feedback and I'm sure we could probably get her to chime in on too as, as well on YouTube or wherever you're posting it, but we appreciate you listening to us. This has been The Contractor Success Forum. We do this every single week, and we appreciate you being here. If you would, please share, subscribe, do all that stuff, it helps us out, and we will see you on the next show.