Service Area: Notice and Mechanic’s Lien Services

Texas Preliminary Notices Are for Non-Payment

Posted on August 12, 2025 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

unpaid invoice stamp and business person doing company credit finances

Understanding Texas Notice Cycles for Lien and Bond Rights

That’s an odd title, right? “Texas Preliminary Notices Are for Non-Payment.” It may sound odd, but for good reason. In most states, preliminary notices are proactive and the first step in the mechanic’s lien process, meaning you serve the notice before you begin furnishing or shortly after you start furnishing. But in Texas, the notice is reactive because you only serve the notice if you haven’t been paid, hence, the notices are for non-payment. It can be confusing, fortunately NCS Credit is here for you. In this post we’ll review the Texas notice cycle when you are furnishing to a commercial private project or public project.  

Notice of Non-Payment vs. Notice of Claim for Unpaid Labor or Materials

The key difference between a Notice of Non-Payment and a Notice of Claim for Unpaid Labor or Materials is in timing and formality. Under the old statute, claimants had to send second- and third-month Notices of Non-Payment without a required format. As of January 1, 2022, Texas law replaced that with a single, standardized notice that must be sent by the 15th day of the third month after labor or materials are provided, using the format outlined in the statute.

*Note: although the term Notice of Non-Payment has been replaced for private projects, it still applies to public projects.

What Is a Notice of Claim for Unpaid Labor or Materials?

A Notice of Claim for Unpaid Labor or Materials (Texas Property Code Sec. 53.056) is a notice sent to preserve mechanic’s lien rights, and it advises payment is due or past due. Generally, the notice should be served upon all parties in the ladder of supply and sent via certified mail return receipt requested.

What Is a Notice of Non-Payment?

A Notice of Non-Payment was an informal term used in Texas to describe the preliminary notices that subcontractors and suppliers were required to send to preserve their mechanic’s lien rights under the prior version of the Texas Property Code. Much like the Notice of Claim for Unpaid Labor or Materials, these notices were served to alert the property owner and original contractor that payment had not been received.

What Is a Prelien Notice?

A prelien notice is a general term for a written notice sent by subcontractors, suppliers, or others who provide labor or materials on a construction project. Its purpose is to inform the property owner, general contractor, or lender of their involvement and protect their right to file a mechanic’s lien if unpaid. However, the exact name, timing, content, and recipients of such notices are dictated by state statutes, so “prelien notice” is a broad, non‑state‑specific term. Each state may have different required notices with specific legal names and formats.

Texas Mechanic’s Lien Statute Changes

The 2021 statute changes apply to any general contract executed on or after 01/01/2022 for private commercial or residential projects (no changes were made for public projects). Likely, your rights align with the revised statute. Now, let’s address a few items from the 2021 changes to Texas statute.

Under the 2021 statute changes, the Notice of Non-Payment became the Notice of Claim for Unpaid Labor or Materials. Additionally, the Notice of Retainage became the Notice of Claim for Retainage. And, for our Texas-notice-veterans, you no longer need to serve a 2nd month notice on private projects. (Wondering what changed? You can download a comparison of the 2021 changes.)

Pros and Cons of the 2nd Month Notice

For those Texas-notice-veterans who (like us) find the 2nd month notice beneficial, you can certainly continue sending them. In our experience, serving the 2nd month Notice of Non-Payment, which was required under the previous version of Texas’ statute, is an excellent opportunity to notify parties that you haven’t been paid. It’s also a best practice to serve the notice if you are unsure when the general contract was executed, to ensure your rights are protected: It’s better to serve an extra notice than miss the required notice.

Now, there is a caveat here. Depending on who you’ve contracted with and their knowledge of the statute, you may irritate a party by serving the 2nd month notice because it’s no longer required. So, as a business, you’ll want to weigh your options (i.e., is it better to try and prompt payment because you’ve already gone 60ish days unpaid OR is it better to preserve the relationship and not ruffle any feathers).

Ultimately, if you are unsure when the general contract was signed or if you’ve found the 2nd month notice beneficial in collecting payment, go ahead and send the notice!

When Should a Notice of Claim for Unpaid Labor or Materials be Served?

For private commercial projects, you should serve the notice no later than the 15th day of the third month following each month in which materials or services were furnished.

Texas Notice Deadlines Fall on the 15th

Here’s the best and worst thing about securing mechanic’s lien or bond claim rights in Texas: notices, mechanic’s liens and bond claims are all due by the 15th of the month. It’s awesome! You’ll never miss a deadline because it will always be the 15th of the month, except… Well, Texas deadlines are also based on months not paid, in a rolling month format.

Here’s an Example

Let’s say you furnished materials in April. If you aren’t paid for what you supplied in April, then you must send a Notice of Claim for Unpaid Labor or Materials by July 15th.

Schedule for Notice of Claim for Unpaid Labor or Materials

Example for one month of furnishing

Month of Furnishing Third Month Notice Mechanic’s Lien*
January April May
February May June
March June July
April July August
May August September
June September October
July October November
August November December
September December January
October January February
November February March
December March April

Seems simple enough, right? It is, until we start adding in other months of furnishing.

So, now let’s say you furnished in April and May. You’ll still serve a Notice of Claim for Unpaid Labor or Materials by July 15th if you aren’t paid for your April furnishing, but now you also need to keep tabs on your May furnishing.

If you aren’t paid for what you supplied in May, then you’ll serve a Notice of Claim for Unpaid Labor or Materials by August 15th.

Schedule for Notice of Claim for Unpaid Labor or Materials

Example of two months furnishing

Month of Furnishing Third Month Notice Mechanic’s Lien*
January April May
February May June
March June July
April July August
May August September
June September October
July October November
August November December
September December January
October January February
November February March
December March April

It’s critical for you to send these notices for each month that you furnish materials or labor for which you remain unpaid.

Wait, Does that Mean I Have to File Multiple Mechanic’s Liens?

No, you do not need to file multiple mechanic’s liens. For commercial projects, your mechanic’s lien deadline will depend on whether you sold to the general contractor, subcontractor or material supplier.

  • Selling to the general contractor, you will file your lien no later than the 15th day of the fourth month from completion, termination, or abandonment of your contract.
  • Selling to a subcontractor or material supplier, you will file your lien no later than the 15th day of the fourth month after the last month you furnished.

So, if we go back to our earlier example (and we’re selling to a subcontractor or material supplier), our lien deadline based on April and May furnishings would be September 15th.

Serve a Notice of Non-Payment on Public Projects

Before we hit the high points, the notice served for public projects is called a Notice of Non-Payment (there weren’t any statute changes for public projects). Although the name (and text) is different, the overall concept is the same.

If you are selling to a subcontractor on a public project, you must serve a Notice of Non-Payment no later than the 15th day of the second month following each month in which materials or labor were furnished for which you remain unpaid. Then, serve the bond claim notice (aka Sworn Statement of Account in compliance with Texas Government Code Sec. 2253.041) no later than the 15th day of the third month following each month in which you furnished.

Let’s go back to the example from the private project above.

If you aren’t paid for your April furnishing, you must send the 2nd month Notice of Non-Payment by June 15th. Then, if July comes along, and you still haven’t been paid for the April furnishing, you must serve the bond claim (Sworn Statement of Account) by July 15th.

If you remain unpaid for May furnishings, a 2nd month notice will be due by July 15th, and a bond claim is due by August 15th. 

Note: unlike mechanic’s liens, bond claims must be served for each month that you remain unpaid.

Schedule for Notice of Non-Payment

Example of two months furnishing

Month of Furnishing Second Month Notice Bond Claim
(Sworn Statement of Account)
January April May
February May June
March June July
April July August
May August September
June September October
July October November
August November December
September December January
October January February
November February March
December March April

I’ve Been Paid. Do I Still Serve a Notice?

Regardless of project type (public or private), if you receive payment for a given month’s furnishing, prior to the notice deadline, you don’t need to serve the notice for those furnishings. Back to our example, if you are paid for April before the July notice deadline, then you can skip the notice in July.

Navigating Texas Notices Can Be Confusing – We Can Help

Understanding which notice to serve for each month’s furnishings, whether it’s a Texas notice of non-payment, a prelien notice, or a notice of intent to lien, can be quite confusing. Fortunately for you, our experts are Texas-savvy and ready to tackle the puzzle for you. Contact us today!

Lien Index Q2 2025

Posted on July 24, 2025 by - Lien Index

lien index gauge

Lien Index down 2 points to 58 from revised Q1 score of 60.

The Lien Index ended Q2 2025 at 58; an approximate 3% decline in activity from Q1 2025.

National Mechanic’s Lien Activity

Overall, lien activity remains high as contractors and suppliers grapple with bankruptcies, cash flow issues, rising costs, and project delays, using liens strategically to secure payments and manage risks amid economic uncertainty.

national mechanic's lien activity bar chart

Regional Mechanic’s Lien Activity

lien activity regional map

Lien activity in the South climbed 3% from 68* in Q1 to 70 in Q2. And, although activity declined in the Northeast (down 5% from 63* in Q1 to 60 in Q2), lien activity was well above average, signaling persistent payment issues. The West’s lien activity decreased 9% from 54* in Q1 to 49 in Q2 and the Midwest saw the steepest drop at 16% lower in Q2 (42) than Q1 (50*).

west and midwest lien activity bar charts
south and northeast lien activity bar chart

States with Highest Mechanic’s Lien Activity

lien activity state map

The top 5 states for lien activity were (in order of volume): Texas, Florida, California, Nevada and new to the top five this quarter is Georgia.

Top 3 States by Region

Looking Forward

The construction industry continues to face significant headwinds that strain both operations and finances. Labor shortages remain one of the biggest challenges, causing project delays, driving up costs, and making it difficult for contractors to keep projects on schedule. Even as material availability improves in some sectors, finding skilled workers remains a persistent obstacle, slowing productivity and increasing the cost of completing projects.

Compounding these pressures are rising borrowing costs, which squeeze cash flow for businesses already operating on thin margins. Price volatility for materials and equipment, project delays, and cost overruns are creating uncertainty and fueling more frequent disputes over contracts, change orders, and payment terms. Not to mention bankruptcies are adding risk, as suppliers and contractors face growing concerns about getting paid for completed work or delivered materials.

Extended credit terms, once a competitive necessity, are becoming increasingly risky, leaving suppliers and subcontractors vulnerable if payments stall. Meanwhile, shifting dynamics in commercial real estate, particularly in office and retail sectors, are influencing project funding and market confidence. While lien filings dipped slightly in Q2, the data reflects an industry operating cautiously, balancing the pursuit of new opportunities with the need to protect cash flow and manage growing financial risks.

We cannot stress this enough: serve preliminary notices and secure mechanic’s liens and bond claims on every construction project, and file UCCs on any customer with an open line of credit. While you can’t control the economic landscape, you can control how well you prepare for it. Taking these proactive steps is essential to protecting your business and ensuring you get paid, no matter what challenges arise.

Industry Experts

The AIA/Deltek Architecture Billings Index (ABI) ended Q2 at 46.8, with firms reporting a decrease in billing. “Inquiries into new projects increased for the second consecutive month and grew at the strongest pace since last fall with a score of 53.6, indicating clients are starting to send out RFPs and initiate conversations with architecture firms about potential projects after a lull since mid-winter. These inquiries do not necessarily translate into actual projects, as the value of newly signed design contracts declined for the 16th consecutive month in June. It is unlikely that firm billings will return to positive territory until the value of new design contracts also starts to increase again.” – AIA/Deltek Architecture Billings Index June Report

Associated Builders and Contractors (ABC) reported its Backlog Indicator rebounded by the end of Q2. “Despite a wide array of headwinds and disappointing construction spending data in recent months, backlog rebounded to 8.7 months in June, the same level as in April,” said ABC Chief Economist Anirban Basu. “In addition to longer backlog, contractors remain broadly optimistic, with 3 in 5 contractors expecting their sales to rise during the second half of 2025,” said Basu. “Notably, this survey predates the most recent trade policy announcements, and 1 in 5 contractors had a project interrupted or paused due to tariffs in June. With some of the newest import taxes putting upward pressure on construction input prices, profit margin expectations may face pressure in the months to come.” 

The Dodge Momentum Index grew throughout Q2. “Nonresidential planning steadily improved in June, alongside strength in warehouse, recreational, and data center planning,” stated Sarah Martin, Associate Director of Forecasting at Dodge Construction Network. “Planning momentum in other key sectors – like education, hotels, and retail stores – was more subdued. Expectations for weaker consumer spending and travel demand, as well as volatility around funding, are likely contributing to the weaker momentum of projects entering the planning queue for those sectors.”

Epiq Bankruptcy reported total bankruptcy filings increased 10% in the first half of 2025. “Elevated prices, increased borrowing costs and uncertain geopolitical events continue to add to the growing debt loads shouldered by financially distressed families and small businesses,” said ABI Executive Director Amy Quackenboss. *Nationwide, recording offices manage a backlog of requests. The Index data is adjusted and revised accordingly.

*Nationwide, recording offices manage a backlog of requests. The Index data is adjusted and revised accordingly.

Business Bankruptcies Are Rising; Time to Protect Your A/R

Posted on May 2, 2025 by - Credit Risk Management, Mechanic's Liens & Bond Claims, UCC Financing Statements

The Bankruptcy Wave Isn’t Coming… It’s Already Here.

According to Epiq AACER and the American Bankruptcy Institute, commercial Chapter 11 filings in March 2025 jumped 20% over the previous year. The trend has continued into 2025, with key sectors like retail, construction, and healthcare feeling the pressure.

Why the increase? Inflation. Interest rates. Unstable supply chains. And yes, tariffs. Financial pressure is mounting, and when a business collapses, creditors often end up with nothing but unpaid invoices.

If you’re a supplier, lender, contractor, subcontractor, or equipment lessor, it’s time to take control. Let’s review what’s happening, what it means, and how tools like UCC filings and mechanic’s liens offered by NCS Credit, can help you get paid in the event your customer defaults on payment terms or files for bankruptcy protection.

Understand How Chapters 7 & 11 Bankruptcy Work

If your customer files for bankruptcy protection, here’s what you need to know:

Chapter 7: Liquidation

  • The company shuts down, and a court-appointed trustee sells off its assets.
  • Creditors with secured claims (like those with a properly filed UCC or lien) are paid first.
  • Unsecured creditors? Often left with nothing.

If you’re not secured, Chapter 7 can leave you out in the cold.

Chapter 11: Reorganization

  • The business continues operating while restructuring its debts.
  • Debtor proposes a plan to restructure and repay creditors over time.
  • Secured creditors have a much stronger position at the table.

Bottom line, whether it’s Chapter 7 or 11, secured creditors are in a better spot to get paid, and you become a secured creditor by filing UCCs and mechanic’s liens.

Did You Know: Receiving $0.98 on the dollar, secured creditors recovered 77% more than unsecured creditors in 2024 Chapter 11 bankruptcies.

Payout Priority in Bankruptcy Cases

The bankruptcy code is specific, detailed and, well…it’s long – but here is the basic payout priority:

Payout Priority in Chapter 11 Bankruptcy

  1. Secured Creditors (i.e. creditors who have a perfected security interest)
  2. Administrative Expenses (i.e. costs associated with filing & processing the bankruptcy)
  3. Unsecured Creditors (i.e. creditors without a security interest)

Why Business Bankruptcies Are Increasing

From late 2023 through 2025, business insolvencies have steadily increased. Here’s what’s driving it:

  • Inflation continues to shrink already-tight margins.
  • Interest rate hikes are making it more expensive to borrow and refinance.
  • Shifting consumer behavior is hammering retailers and service providers.
  • Slow payments in construction and manufacturing are causing ripple effects throughout the supply chain.
  • New tariffs on imported goods are increasing costs across multiple industries.

When one business can’t pay, others downstream feel the impact. If you’re extending credit, you’re carrying the risk.

Industries Under Pressure

Here’s where we’re seeing some of the fallout:

  • Healthcare: Hospitals and medical suppliers are struggling with reimbursement cuts and labor shortages.
  • Automotive: Parts suppliers are facing reduced EV demand, tariff pressures, and rising material costs.
  • Casual Dining: Rising labor and food costs are squeezing margins as customer traffic drops.
  • Retail: Several national chains have filed for bankruptcy amid online competition and falling in-store sales.

How Tools Like UCC Filings and Mechanic’s Liens Can Protect Your Payment Rights

Here’s the good news: you have legal tools to protect your payment rights.

File a UCC-1 Financing Statement

If you’re financing equipment, inventory, or receivables – or even just extending credit – file a UCC.

Why it matters:

  • Puts the world on notice you have a security interest.
  • Establishes your priority if your customer files for bankruptcy.
  • Helps you recover your collateral or proceeds from its sale.

Pro Tip: First to file = first in line. Don’t wait.

Secure Your Mechanic’s Lien Rights

If you provide labor, materials, or equipment to a construction project, mechanic’s liens are your best friend.

Why use them:

  • Gives you a legal claim against the improved property.
  • Puts pressure on owners and GCs to resolve payment issues.
  • Protects your position in and outside of bankruptcy.

Pro Tip: Lien rights are time-sensitive and vary by state. Know your deadlines and send preliminary notices when required.

Do Secured Creditors Really Get Paid?

Yes, secured creditors really do get paid. Although every bankruptcy plan is different, here’s a chart of recent bankruptcy exits, and the amount recovered by secured creditors versus the unsecured creditors.

In review of commercial bankruptcies with plans effective 01/01/2023 – 10/01/2024. On average, secured creditors recovered 96% of allowed claims and unsecured creditors recovered 5.4% of allowed claims.

A Little Paperwork Now Beats a Big Loss Later

Bankruptcy doesn’t just affect the debtor; it sends financial shockwaves through the entire supply chain. A little paperwork up front, like filing a UCC or securing mechanic’s lien rights, can be the difference between getting paid and writing off a loss.

By understanding and using tools like UCC filings and mechanic’s liens, you can better navigate the complexities of the current economic landscape.

We Are Your Credit Ally

Whether you’re filing UCCs or mechanic’s liens, from a single request to a robust full-service program, we are your Credit Ally. With unparalleled industry expertise, we understand the complexities of commercial credit. Let us manage your secured transactions and save you time and money. Contact us today to learn more!

Be proactive. Be secured. And most importantly: get paid for the work you do.

Lien Index Q1 2025

Posted on April 23, 2025 by - Lien Index

NCS Credit’s Lien Index Ends Q1 2025 at 55, Down 8% from Q4

Lien Index down 5 points to 55 from revised Q4 score of 60*. Mechanic’s Lien activity has declined, but is forecasted to increase in coming quarters.

National Mechanic’s Lien Activity

The Lien Index ended Q1 2025 at 55; an approximate 8% decline in activity from Q4 2024 and 17% decline compared to Q1 2024. This is the lowest the Index has been in the last two years, with Q2 2023 also coming in at 55.

Thus far, 2025 has been marred by uncertainty. Chapter 11 bankruptcies are up 20% over 2024, and tariffs are front of mind, while the stock market tries to find footing. Fortunately, lien activity did decline in Q1, some of which is attributed to the cyclical nature of construction projects.

Regional Mechanic’s Lien Activity

The South and Northeast led the country in lien activity in Q1, with the Northeast experiencing a 9% increase in liens over the previous quarter. Activity in the South did decline 7%, though remains well above 50, as slow payments continue.

Lien activity in the Midwest has steadily declined over the last 3 quarters, down 4% over Q4 2024.

Rounding out national activity, the West dropped significantly, coming in 14% lower than last quarter. However, there is an anticipated increase as communities begin rebuilding from the tragic wildfires.

States with Highest Lien Activity

The top 5 states for lien activity were (in order of volume): Texas, Florida, California, Nevada and New York.

Top 3 States by Region

  • West: California, Nevada, Colorado
  • Midwest: Iowa, Ohio, Michigan
  • South: Texas, Florida, Georgia
  • Northeast: New York, Massachusetts, New Jersey

Looking Forward

As we progress through 2025, payment challenges will remain a significant concern for businesses across the supply chain, affecting everyone from material suppliers to contractors. We do expect lien filings to increase as material prices are anticipated to skyrocket, straining open credit terms and pinching cash reserves.

Cash flow disruptions and delayed payments are expected to persist, placing considerable financial strain on companies. The situation is worsened by slow-paying clients and creditors facing their own financial difficulties. In addition, the uncertainty surrounding tariffs and the broader global economic climate is fueling further instability, amplifying unpredictability across the industry.

In today’s uncertain environment, it’s essential for businesses to take proactive steps to protect their financial interests. Mechanic’s liens and UCC filings offer valuable legal recourse in the event of non-payment. These safeguards provide a clear path to securing payment for your work, even in turbulent times. Act now to fortify your business against the challenges that lie ahead.

Industry Experts

The Architecture Billings Index (ABI) experienced another quarter of declining billings. “Clients are increasingly cautious about starting projects due to uncertainty over future trends in interest rates and building materials costs, as well as the potential for an economic slowdown,” said Kermit Baker, PhD, Hon. AIA, AIA Chief Economist. “Unfortunately, this softness in firm billings is likely to continue as indicators of future work remain weak, however, the average project backlog at firms stands at a reasonably healthy 6.5 months, offering a bit of a buffer if future project work continues to remain soft.”

Associated Builders and Contractors (ABC) reported its Backlog Indicator ended Q1 at 8.5 months, however, this was prior to the tariff announcement. “Backlog increased in March and contractors remained optimistic regarding the future, but this largely reflects contractor activity and sentiment prior to April 2, when the most consequential economic policy in several decades was announced,” said ABC Chief Economist Anirban Basu. “Approximately 80% of ABC contractors surveyed indicate that suppliers have notified them of tariff-related materials price increases, and nearly 20% of contractors surveyed had projects paused or interrupted because of tariffs during March,” said Basu. “These tariffs have already materially diminished the outlook for construction activity in 2025. Many businesses are poised to delay or even cancel planned capital investments given the current business environment and daily market convulsions. Conditions will likely deteriorate further if elevated tariff rates remain in place for any meaningful length of time.”

The Dodge Momentum Index grew 6% in January and 1% in February, but declined 7% in March. “Increased uncertainty around material prices and fiscal policies may have begun to factor into planning decisions throughout March,” stated Sarah Martin, Associate Director of Forecasting at Dodge Construction Network. “While planning data has weakened across most nonresidential sectors this month, activity remains considerably higher than year-ago levels and still suggests steady construction activity in mid-2026.”

Epiq Bankruptcy reported Chapter 11 filings were up 20% in March from previous year. Michael Hunter, Vice President of Epiq AACER, stated “The 20 percent rise in commercial Chapter 11 filings to 733 in March 2025, up from 611 last year, signals persistent economic pressure…Meanwhile, credit card delinquencies have hit a near 10-year high, driven by rising interest rates and consumer debt burdens.” Further, ABI Executive Director Amy Quackenboss said, “Inflation, elevated interest rates, tighter lending terms and geopolitical tensions are creating more challenges for distressed consumers and businesses looking to alleviate their growing debt loads.”

*Nationwide, recording offices manage a backlog of requests. The Index data is adjusted and revised accordingly.

Construction Litigation Attorney

Posted on February 19, 2025 by - Preliminary Notices & Construction Credit

When to Use an Attorney Who Specializes in Construction Litigation

Selecting the right attorney has a substantial impact on your ability to secure your receivables. There are many considerations when weighing your options.

Why is it important to use attorneys who are experts in construction litigation for construction collection cases?

Companies can’t afford to rely on attorneys that “dabble” in construction law. There is too much at stake and the laws are too complex. Make sure your attorneys are experts in construction litigation.

What are the advantages of having your construction attorney local to the project?

Mechanic’s lien and bond claim laws can vary drastically from state to state, so having an experienced attorney local to the project is a tremendous benefit.

A construction litigation attorney will know the laws specific to that state and may be in close proximity to the project and/or familiar with the parties involved.

What are the consequences if an attorney files a mechanic’s lien in a state where they are not licensed?

Courts have ruled against construction litigation attorneys who have prepared, signed, filed and pursued mechanic’s liens in a state where they are not licensed to practice law. As a result, any related filing might be ruled invalid.

Should I use a large attorney firm for my construction collection needs?

The presumption by many is that using a large law firm will somehow guarantee better results. This is not necessarily the case. Larger law firms often charge high hourly rates and assign your case to a less experienced associate attorney. Working with a small or mid-sized firm may actually provide your organization with more legal expertise and a better overall value.

When hiring an attorney on an hourly basis, does the hourly rate tell the whole story in terms of cost?

Although the hourly attorney rate is important, the expertise of your attorney and method of billing is critical. Below are some questions to ask when evaluating a construction collection attorney:

  • Do I have a trusted relationship with this firm and/or attorney?
  • Is the hourly rate competitive for the region? (i.e. Hourly attorney fees in New York, NY will be higher than in Des Moines, IA).
  • What is the firm’s methodology for billing?

Consistency is the key!

Payment Protection Rights for Los Angeles Wildfires

Posted on February 17, 2025 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

California Mechanic’s Lien and Bond Claim Rights: Rebuilding After the Wildfires

To say the Los Angeles wildfires were devastating is an understatement. Businesses and homes lost, and the recovery efforts have been and will be nothing short of massive. Amid the devastation, construction crews work tirelessly to rebuild, from restoring homes to reestablishing vital infrastructure.

But for many material suppliers, subcontractors, and contractors, the rebuilding process isn’t just about rebuilding, it’s about ensuring they’re paid for their materials and services. Unfortunately, in the rush to get things back to normal, payments can get delayed, overlooked, or simply ignored. This is why protecting your construction mechanic’s lien and bond claim rights is not just important, it’s essential.

Los Angeles Wildfire Recovery: Payment Protection and Infrastructure Rebuilding Rights

Devastating events, like fires, earthquakes, and floods, skyrocket the demand for contractors, materials, and services. Projects are pushed through quickly, sometimes without proper funding in place (i.e., the insurance claims & issues), which can lead to payment delays or even disputes that make getting paid harder than it should be. Mechanic’s liens and bond claims are designed to give subcontractors and material suppliers a way to protect their interests and ensure you’re compensated, even if the payment chain starts to break down.

While the details outlined in California mechanic’s lien and bond claim statutes are specific and require strict compliance, here’s an at-a-glance look at the steps and timeframes to protect construction mechanic’s lien and bond claim rights.

California Mechanic’s Lien (Private Construction Projects)

California Bond Claim (Public Construction Projects)

Rebuilding after Los Angeles Wildfires: How to Protect Your Mechanic’s Lien and Bond Claim Rights

  • Serve Preliminary Notices – Always. California statute is quite clear, you should serve a preliminary notice, upon all parties, within 20 days from first furnishing. (You can learn more about California’s 20 Day Preliminary Notice here.) If you’ve missed the deadline, send the notice as soon as possible – you could still protect future furnishings.
  • Keep Close Tabs on Deadlines. Make sure you understand the deadlines and file on time, or you may lose your right to file. Our team and technology are here to track and easily manage your mechanic’s lien and bond claim deadlines for you, but if you’d prefer to do it on your own, keep California’s statute link handy.
  • Monitor Invoices. Keep up with open invoices and subsequent payments. Be aware of delays and change orders. If payments start to slow, don’t wait, file your California mechanic’s lien or bond claim – just because the deadline is “30 days from Completion” does not mean you have to wait that long to file.
  • Document Everything. Good documentation is key when filing a construction mechanic’s lien or bond claim. Keep detailed records of contracts, invoices, communications, work completed, and any payment issues. Having this documentation on hand will make it easier to prove your case if a payment dispute arises.
  • It’s More than Your Customer. Some parties in the ladder of supply may face financial difficulties — whether it’s contractors filing for bankruptcy, insurance claims getting delayed, or property owners struggling to pay. Complicated payment chains aren’t a new phenomenon in construction, especially when the contractual chain (i.e., general contractor, subcontractor, material supplier, distributor etc.) gets tangled. One missed payment can create a ripple effect, and soon everyone’s waiting to get paid. Try to keep a pulse on any party that lies between you and payment.
  • Use NCS Credit. The laws around construction mechanic’s liens and bond claims can be complex. NCS experts are here to help you understand the steps involved, file your paperwork correctly, and make sure you’re not missing anything. It’s always worth getting expert advice to avoid costly mistakes.

Your Work Is Invaluable – Ensure Your Right to Recovery

The fires that ravaged Los Angeles were a tragedy, and the rebuilding efforts are crucial for getting communities back on their feet. As subcontractors, material suppliers, and contractors, you’re on the front lines of that recovery. But just as you’re working hard to restore what was lost, you also need to protect your right to get paid. California mechanic’s liens and bond claims are powerful tools that help secure your right to payment, even when circumstances are chaotic.

We Are Your Credit Ally

At NCS Credit, we understand the challenges that subcontractors and material suppliers face when it comes to getting paid. Our team of experts can assist you in filing the necessary paperwork on time, ensuring all legal requirements are met and your rights are protected. We’ll help you monitor deadlines, send the required notices, and provide the guidance you need to secure your payment. With our support, you can focus on what you do best — getting the job done.

Lien Index Q4 2024

Posted on January 23, 2025 by - Lien Index

NCS Credit’s Lien Index Ends Q4 2024 at 57, Down 7% from Q3

Slow payments continue to plague the industry, as the Lien Index ended 2024 at 57. Upside: lien activity did slow in Q4, with 4 point drop from Q3.

National Mechanic’s Lien Activity

The Lien Index ended 2024 at 57. This is an approximate 7% decline in activity from Q3 2024 and 5% decline compared to Q4 2023. Even though activity has slowed, lien activity remains above 50, as payment issues persist on projects nationwide.

The Index is predicted to remain over 50 in 2025, as we brace for a likely increase in bankruptcy filings and potential changes in corporate taxes, tariffs, and infrastructure investments.

Regional Mechanic’s Lien Activity

The South consistently led the nation in lien activity throughout much of 2024. However, in Q4, lien activity dropped sharply by 15%, yet remained well above 50, as lien filings continue.

In the Northeast, lien activity decreased by 10%, while the Midwest saw a 4% decline. After a couple flat quarters, lien activity in the West jumped 6% over Q2/3 and a significant 13% over Q4 23.

States with Highest Lien Activity

The top 5 states for lien activity were (in order of volume): Texas, Florida, California, Nevada and New York.

Top 3 States by Region

  • West: California, Nevada, Colorado
  • Midwest: Iowa, Ohio, Illinois
  • South: Texas, Florida, Georgia
  • Northeast: New York, Massachusetts, New Jersey

Looking Forward

As we navigate 2025, payment issues will continue to impact businesses throughout the supply chain, from material suppliers to contractors. Delayed payments and cash flow shortages continue to create significant financial strain, with slow-paying customers and financially troubled creditors compounding the pressure. The ripple effect is spurring uncertainty across the industry.

That said, contractor confidence remains strong, driven by ongoing demand in construction and infrastructure. Unfortunately, the economic outlook is still volatile. Bankruptcy filings are projected to rise, which will only increase the risk of unpaid bills and potential losses. In addition, shifts in taxes, tariffs, and infrastructure policies could introduce new challenges, or opportunities, depending on how the landscape evolves.

In this environment, it’s critical for businesses to be proactive in protecting their financial interests. Mechanic’s liens and UCC filings are powerful tools that give you legal recourse in case of non-payment. These protections ensure, even in uncertain times, your business has a clear path to securing payment for the work you’ve done. Take action now to safeguard your business against the challenges ahead.

Industry Experts

The Architecture Billings Index (ABI) dropped significantly in December, despite better conditions earlier in the Q4. “Firm billings have now decreased for the majority of firms every month except two since October 2022. While not a full-fledged recession, this period of softness and uncertainty has been challenging for many firms. And prospects for future work remain soft as well. Although inquiries into new projects continued to increase at a relatively slow rate, the value of newly signed design contracts decreased further in December as clients remained hesitant to commit to new work. In one brighter spot, backlogs at firms remained steady and strong at 6.5 months in December, so many firms still have work in the pipeline for now.” – The December ABI report

Associated Builders and Contractors (ABC) reported its Backlog Indicator was down to 8.3 months in December. “While backlog inched lower in December, contractors broadly expect construction activity to pick up in the first half of this year,” said ABC Chief Economist Anirban Basu. “Contractor confidence remained extraordinarily elevated in December, with the share of contractors that expect their sales to increase over the next six months now at the highest level since early 2022. Despite that confidence, the path of interest rates will play a critical role in industry performance in 2025. If rates remain higher for longer, backlog may remain subdued, especially in the struggling commercial and institutional category.”

The Dodge Momentum Index ended 2024 with 10.2% growth in December. “Commercial activity rebounded strongly in December, thanks to a re-acceleration in data center and warehouse planning activity,” stated Sarah Martin, Associate Director of Forecasting at Dodge Construction Network. “Overall, the strong performance of the Momentum Index this past year is expected to support nonresidential construction spending throughout 2025.”

Epiq Bankruptcy reported a 20% increase in Chapter 11 filings in calendar year 2024. “The continued increase in bankruptcies over the past year reflects the growing list of economic challenges faced by consumers and businesses,” said ABI Executive Director Amy Quackenboss. “Rising interest rates, inflation, increasing geopolitical tensions and shifts in post-pandemic consumer spending have more struggling businesses and families turning to bankruptcy for a financial fresh start from their growing debt loads.”

Preliminary Notices 101: A Beginner’s Guide

Posted on January 15, 2025 by - Preliminary Notices & Construction Credit

A Beginner’s Guide to the Preliminary Notice

Generally, the first step in the mechanicʼs lien process is to serve preliminary notices to various parties within the ladder of supply. It’s important to note that a preliminary notice is not a mechanic’s lien, but rather a prerequisite to filing the lien that identifies you as a supplier of labor and/or materials to the construction project. It’s also not a legal document that will affect your customer’s creditworthiness, unlike a mechanic’s lien which is formally filed with the state and/or county.

A preliminary notice goes by different names depending on the state in which it’s served. Some alternative names include: notice to contractor, notice to owner, notice of furnishing and prelien notice. Be careful not to confuse a preliminary notice with a notice of intent to lien.

Know the Difference: Statutory vs. Non-Statutory

Statutory notices establish your right to lien in the event of non-payment. They are governed by state law and typically must be served upon the general contractor and/or project owner within the specified timeframe. However, it’s recommended you serve the notice upon all parties within the ladder of supply to increase transparency and prioritize your payment. In states where a preliminary notice is required, failure to send a notice or meet the stated deadline can invalidate your right to file a mechanic’s lien on the project.

Currently, 43 states in the U.S. and one province in Canada have provisions for a preliminary notice to be served prior to filing the lien. However, not all 43 states require a notice for every project type (private vs. public). Be sure to review the statutory requirements carefully.

Non-Statutory notices are not required by state law and are served upon all parties within the ladder of supply. This type of notice is strictly a precautionary measure intended to prompt timely payment. Failure to serve a non-statutory notice does not affect your mechanic’s lien rights.

Include Thorough & Accurate Job Info in Your Preliminary Notices

Collecting thorough and accurate job or project information is a critical part of the mechanic’s lien process. Job information is any and all detail pertaining to a given construction project. You should obtain this information prior to serving your notice to ensure it’s as complete as possible. It’s important to review the statute carefully, as missing or omitting required job information such as the furnishing dates, claim/contract amounts, party specifics, and material descriptions can leave you in an unfavorable position when it comes time to file a lien on the project.

Don’t Delay – Meet Your Deadlines!

As with many other aspects of the mechanic’s lien process, the deadline to serve your preliminary notice varies state by state. In most cases, your notice must be served within a set timeframe from when labor and/or materials are first furnished on the project. For example, a private project in the state of Ohio requires the preliminary notice to be served within 21 days from first furnishing, while a private project in Florida has a more lenient requirement of 45 days.

Some states, such as Texas and Louisiana, require a preliminary notice to be sent for every month that payment is not received. These states require greater management of deadlines which can slightly complicate the process.

Forget the Format? No Way!

Just as preliminary notices vary in name, type and deadline, each state has its own specific formatting requirements. Some states are particular about seemingly small details such as font size and bold/italic/underlined words or phrases. There have even been cases where companies lose their mechanic’s lien rights due to something as detailed as margin size. Review & re-review formatting requirements so you don’t lose your lien rights.

Make No Mistake – Serve Your Preliminary Notices Correctly

In most cases, preliminary notices must be sent by certified mail with return receipt requested or by registered mail. It’s important to save a copy of the notice and receipt so that if/when you file a mechanic’s lien on a project, you can prove compliance with the statute. Be aware, in several states, notices must be posted to an online registry.

Let’s Recap!   

  • A statutory preliminary notice establishes your right to lien in the event of non-payment
  • If serving a notice is not a statutory requirement, serve a non-statutory notice
  • Be sure your notice includes thorough & accurate job information
  • Be on time! Notice deadlines are critical
  • Make sure your notice meets any and all formatting requirements
  • Play it safe and send all notices by certified mail with return receipt requested, or as otherwise dictated by statute

Want more information on the mechanic’s lien process, or need assistance drafting & serving a preliminary notice? Contact NCS today!

Editor’s Note: This content was originally published in August 2019. It has since been updated and revised for 2025.