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August 2019: Ask A Lawyer: Ross Perkal

In our thirteenth installment of “Ask a Lawyer” we featured questions from Ross Perkal.

[Albuquerque Journal: ‘Ask a Lawyer’ Talks to Ross Perkal]

Read it here

QUESTION: I read in a previous installment of Ask A Lawyer your advice on how to collect on a debt owed to your business once you have obtained a judgement in your favor. My question is how to ensure you win a judgement in the first place? Is there a process or protocol a business owner should follow that will makes them more likely to win a judgement should a client not pay their bill? I have heard horror stories where it has been very difficult for small business owners to win lawsuits regarding collections from clients who simply have not paid their bills.

ANSWER: In short, yes. There are many things a business owner can do from the get- go to improve their chances of a favorable outcome in the debt collection process. The most important tip is to start out on the right foot. Get a contract before you start work for any client- regardless of how small the transaction may be. Now when I say, get a contract, I don’t mean simply slap some words together on a piece of paper. Make sure your contract is enforceable. “Enforceable Contracts” have specific clauses in them, such as the specific amount of money you are owed for the goods and/or services you will be providing. Enforceable Contracts also contain a specific description as to what these services/goods are as well as what your duties are regarding the transaction, (if any). Enforceable Contracts are contracts that have been executed by both parties which means both you and your client have signed the contract. Further, Enforceable Contracts will contain wording that indicates if payment does not occur as outlined in the contract, you are able to sue for not only the amount owed to your business, but for any attorney and court fees you may have paid along the way. Without this precise language, you may only be eligible for reimbursement if your lawsuit involves a specific statute or law and you are able to demonstrate it has been breached. Specific contractual elements such as these, (and there are others to consider) illustrate why it is so important to have your business’s contracts drafted by a competent, experienced business attorney. Without the “right” wording in the “right” kind of contract, you may have real difficulty collecting on debts owed to your business. Now, this doesn’t mean you need to pay a lawyer to draw up a contract every time you take on a new client. What I am suggesting is you have an attorney produce a standard contract that you can use for all clients. While it may be a template for you to use, the wording will be specific to your business. A proper contract will protect your business and make the collection process much easier in the long run.

Another important tip is to always be nice and presume good faith. If 30 days have passed since the payment due date on an invoice, and you haven’t been paid, its time to reach out to your client and inquire as to when you can expect payment from them. Politely ask if they received your bill, if they have questions or if they are having issues paying for your services. Try to get a feeling for the level of commitment they have regarding paying their bill with your business. Failing successful attempts to collect payment on your own, you may, at this point, need to consider hiring an attorney to assist you in collection of the debt. An experienced business attorney will draft an articulate demand letter. Should the demand letter be ignored, it will be followed up by a lawsuit. Upon receiving the demand letter or notice of the lawsuit, the debtor has basically 2 options: pay or explain to a judge why they do not feel they need to pay your business for its service.

If the client that owes you money can’t pay the total amount due right away but will agree to pay off the debt over time, your attorney can write up either a “Promissory Note” (if the client agreed to do this before going to court) or a “Stipulated Judgment” (after a lawsuit has been filed). Both the promissory note and stipulated judgement are documents that describe the new payment plans and will be signed by the debtor to acknowledge their agreement to the terms. If the terms are not followed, that is they fail to make regular payments per this new agreement, your attorney will have the ability to cost-effectively pursue the matter. With the Stipulated Judgement, the debt is on record with the Court and allows you additional options in trying to collect on the debt.

Should the debtor not work with your attorney to settle the debt or indicate they have no intention of paying, you will most likely be looking at a court date. Having a solid, executed contract in hand is most likely what will make or break your day in court. As I discussed earlier, if the contract is vague, unsigned or doesn’t reflect accurate information, don’t anticipate a favorable ruling.

Keep in mind that throughout this process, professionalism and kindness is key. In fact, the Federal Fair Debt Collection Practices Act is set up to protect consumers and debtors from overly aggressive, abusive or illegal collection processes. The act itself lays out a protocol one must follow when trying to collect on a debt. This includes using the “correct” language in demand letters and in verbal interactions with those who owe your business money. Attorneys who write demand letters for a living will know what they can and cannot say or do in collections matters. Therefore, it is very important to use an attorney to draft demand letters; so, you can be assured the proper rules are being followed. Judges tend to not look favorably upon business owners who have harassed, stalked or verbally assaulted others, even if they are rightfully owed significant amounts of money.

QUESTION: I am getting ready to purchase some Commercial Real Estate. The Title Company has sent me their fees for the deal and they have included some “extra” policies that basically will remove the four standard exceptions to the Title Policy, Do I need to buy any one of the four (4) title insurance “EXTRA” coverages? If so, which ones? I mean, the deal is expensive enough without “extras”. Perhaps I can just add the “extras” at a later time?

ANSWER:Ah, yes- the famous standard exceptions to Title Policy which, for the benefit of the readers are:

  1. rights of parties in possession (this exception would include, for example, the rights of a tenant with an unexpired lease term)
  2. encroachments, boundary issues, and other matters that an accurate survey would disclose
  3. any easements not shown by the public records, and
  4. construction and worker’s compensation liens

If you are borrowing any funds to make this purchase, your lender will generally require that you purchase each of the four categories of “extra” title insurance coverage. The reasoning being that by removing any of the four exceptions from the Owner’s Title Insurance Policy, the same exceptions are simultaneously removed them from the Mortgagee Title Insurance Policy as well.

This purchase of “extra” insurance protects the bank’s investment in the real property in the unlikely event that you default on the loan. Should a foreclosure on the property take place, the bank would fully own the property. (This is known as “REO” or “real estate owned” in the mortgage world.) Since banks are lenders, and not landlords or realtors, they hate to be put in this scenario in the first place. As such, they generally do all they can at closing to make sure their position is optimal considering the possible REO situation that could arise.

If you are not borrowing any funds, then the choice is yours. However, your decision as to whether to purchase the insurance must be made prior to going to closing. Title Insurance is not like car or homeowner’s insurance where you can add or remove additional coverages throughout the life of the policy. The details of the Title Policy are determined the day of closing. So, you do not have the option to purchase the insurance later, not even the very next day after the closing.

When determining if you want to purchase the policies, I would urge you to consider the following: The extra cost for this insurance is minimal compared to what it would costs to fix a boo-boo in the title work or sue another party over an issue. I would recommend purchasing all four extra coverages to any of my clients who are acquiring commercial real estate. Make any potential errors the Title Company’s problem by simply paying what is relatively a small amount of monies. Really, what your doing is purchasing peace of mind- and that, as they say, is priceless.


Who is Ross Perkal?

Ross B Perkal is a longtime New Mexico attorney and member of the business community. With a bachelor’s degree in mechanical engineering and a master’s degree in civil engineering (Construction Management), Ross uses his technical background to represent a diverse range of business interests. Ross focuses on assisting a broad range of technology-based companies with their real estate, construction, corporate and business law needs, including proprietary protection, contracts, joint venture agreements and mergers and acquisitions and employment law issues. Most recently Ross has been pioneering a broad range of technology-based legal services. In his free time, Ross is an active volunteer for community service organizations in New Mexico.


In addition to Ross, Slingshot has an awesome team of legal professionals who can provide legal services across the United States including Larry Donahue, Donald Kochersberger, Timothy Mortimer, Alicia McConnell, Ian Alden, David Richter, Kallie Dixon, and many more. Our team is ready to answer questions that are important to you.

What is Ask A Lawyer?

Ask a Lawyer is a twice per month open to the public legal question and answer session with real lawyers. We want to be able to provide real people answers to real questions. We partnered with the Albuquerque Journal's Business Outlook to provide everyone a way to reach out and have their questions answered. Do you have a legal question you need to have answered? Email us at [email protected] to have your question answered. We review all the questions that come in and provide answers to the ones that are most important to you anonymously.

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We know that there are people out there who don't have a subscription to a newspaper or maybe you get all of your news online. That's why we provide paperless options to anyone who wants to read our previous articles.

[Read: Ask A Lawyer Archive]

You can also find the questions on the Albuquerque Journal's Website and if you want to subscribe to the Albuquerque Journal, here's a link to get a subscription.

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[Read our previous installment: July 2019: Ask A Lawyer: Special Edition – Ask an HR Professional]

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