Service Area: Notice and Mechanic’s Lien Services

What is a Public Private Partnership (P3)?

Posted on March 1, 2016 by - Preliminary Notices & Construction Credit

What is a Public Private Partnership?

By now it is quite likely you are familiar with, or at least heard of, public-private partnerships; also known as “P3” or “PPP”. These projects are rapidly growing, throughout the country, and over 30 states provide separate mechanic’s lien statute specific to P3 projects.

The National Council for Public-Private Partnerships defines Public-Private Partnerships as a “contractual arrangement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.”

The U.S. Department of Transportation defines Public-Private Partnerships similarly, with the exception that it specifically calls out transportation projects.

“Public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects.”

P3s Can Save Money

Essentially: a P3 is a way to assist public entities with improving public infrastructure by teaming up with a private entity for funding.

More states are partnering with private entities for improvements to public infrastructure; the costs can be much lower for the public entity, and the private entity can profit from their involvement.

P3 Legislation

Each state has individual specifications for what qualifies as a public private partnership; therefore it is important to review each project individually. (I would recommend seeking legal counsel!)

As mentioned above, over 30 states have adopted some form of P3 legislation. Within the last year, D.C., Georgia & Maryland enacted P3 laws, states like Ohio & Alabama updated their statute to provide further clarification, and Arkansas & California have legislation pending*.

For the last few years, The American Subcontractors Association (ASA), in partnership with the National Association of Surety Bond Producers (NASBP) and The Surety & Fidelity Association of America (SFAA), has released a helpful reference guide “Public-Private Partnership Laws in the States, including Surety Bond Requirements.”

Be Cautious: Carefully review P3 legislation, as it may not mandate that the private entity, contracting for the public project, should obtain a payment bond.

It’s Going International

As an aside, the idea of public entities partnering with private entities for improvements to public infrastructure is not just a national phenomenon. It is international. Countries all over the world have adopted similar concepts: South Korea, France, United Kingdom, Brazil & Chile to name a few.

Canada also has its own version of a P3. Per PPP Canada, a P3 is a “…long-term performance-based approach to procuring public infrastructure where the private sector assumes a major share of the risks in terms of financing and construction and ensuring effective performance of the infrastructure, from design and planning, to long-term maintenance.”

PPP Canada expands a little further on defining P3s:

  • Governments do not pay for the asset until it is built;
  • A substantial portion of the cost is paid over the life of the asset and only if it is properly maintained and performs according to specifications; and
  • The costs are known upfront and span the life-cycle of the asset, meaning that taxpayers are not on the financial hook for cost overruns, delays or any performance issues over the asset’s life.

*the legislation is pending as of the date this article was written, 12.15.15

Gootee Construction v. Atkins Could Impact Your Bond Claims

Posted on February 22, 2016 by - Mechanic's Liens & Bond Claims

Decision in Louisiana Court Could Impact Your Bond Claim Deadline

Because the claim was filed before the filing of the notice of completion, it was deemed premature and the claim was subsequently invalidated – this was the ruling from a Louisiana Appeals Court in late 2015.

The Case: Gootee Construction, Inc. v. Dale N. Atkins, et al.

A subcontractor, LandCoast Insulation, Inc. (“Land”), contracted with Gootee Construction, Inc. (“Gootee”) for the improvements to a public project.

There were some disagreements about work completed per the contract, etc. Ultimately, Land filed a Statement of Amount Due (aka bond claim/public improvement lien) because they were not paid for services rendered.

Gootee contested the filing, saying owner had not yet released funds because the project was not complete, therefore no money was actually due to Land, which meant that Land had no right to file a claim.

The Decision

The Court of Appeals agreed with Gootee. The court advised that Land did, in fact, file their claim too early. Here’s the court’s interpretation of statute:

“The statute does not state that the claim must be filed within forty-five days “of” acceptance, but rather, within forty-five days “after” the acceptance.”

When Land proceeded with their claim, they interpreted statute to mean that as long as they filed within 45 days of acceptance, they would be secured.

Land is not the only party to interpret statute this way – previously cited cases, Levingston Supply Co. v. American Employers’ Company and VVP AM., Inc. v. Design Build Dev. Servs., shared Land’s interpretation.

From VVP Am., Inc. v. Design Build Dev. Servs. “…the court reasoned that the statutes do not require an acceptance as a condition precedent to demand for payment or a lien. Thus, a lien can be filed before the 45-day period is activated”

Actual Statute: §2242. B. Any claimant may after the maturity of his claim and within forty-five days after the recordation of acceptance of the work by the governing authority or of notice of default of the contractor or subcontractor, file a sworn statement of the amount due him with the governing authority having the work done and record it in the office of the recorder of mortgages for the parish in which the work is done.

Case Law: Please remember, this is case law, and it can vary by court, or it could be overturned at any time!

Mechanic’s Liens: Understanding Ship and Delivery Dates

Posted on February 15, 2016 by - Preliminary Notices & Construction Credit

Should You Use the Ship Date or Delivery Date When Calculating Mechanic’s Lien and Bond Claim Deadlines?

We are often asked “Should I use my ship date or delivery date to calculate my lien deadlines?” Furnishing dates can make or break your rights to file a mechanic’s lien or serve a bond claim. In fact, your first furnishing and last furnishing dates are two of the 5 key pieces of information needed to determine whether you are within your rights to properly secure your claim.

Need a refresher on the other key pieces?

  • the project type
  • who you sold to in the ladder of supply
  • the state in which the project is located
  • first and
  • last furnishing dates

This information, at a bare minimum, typically provides the framework for calculating preliminary notice, mechanic’s lien, bond claim & suit/foreclosure deadlines.

We’ve previously discussed what constitutes a furnishing date, and we talked about those instances where a notice should be served after you begin furnishing and when mechanics lien and bond claim deadlines are based on completion.

Today, let’s answer this question:

“Should I use my ship date or delivery date to calculate my deadlines?”

I would love to make an easy blanket statement that it doesn’t matter… but you and I both know that would be a lie! Each state, as with everything else as it pertains to lien rights, has its own definition of what a furnishing date is.

Now, I will say that we always recommend calculating deadlines conservatively (in most cases it’s better to be a wee bit early than a wee bit late) and using the earlier ship date for furnishing would be more conservative than using the delivery date.

Examples: New Jersey & Ohio

In New Jersey, “furnishing” is defined as the “date you furnish” which could be strongly argued to mean the date you shipped to your customer or jobsite vs. the date the materials actually arrived on the jobsite.

Further, your contract may dictate whether or not the ship date or a delivery date should be used as your furnishing date.  If you are responsible for the freight charges or delivery of the materials, the delivery date can be used – I like to think of it as the date the materials left your hands.

If you are not responsible for shipment (for example, the materials are being shipped F.O.B. by common carrier) the ship date should be used (again, think of it as the date the materials left your hands).

In Ohio, our attorney has advised that first furnishing is based upon when the materials shipped to the jobsite and not when they arrived.  This can be crucial in calculating the timeliness of the preliminary notice or mechanic’s lien.

Invoice Dates vs. Furnishing Dates

Another factor to consider is whether you are basing your deadlines on invoice dates instead of actual shipping or delivery dates. Be careful with invoice dates, be sure that the date you are using is not later than your ship date or, in the case of services, the date the services were actually provided.

Oh no!  What do I do?!

When calculating deadlines, it is always best to be conservative. Be sure to list the earlier of the dates, which will most likely be the actual ship date.

Expected Payment and Expiring Lien Deadlines

Posted on February 2, 2016 by - Preliminary Notices & Construction Credit

“I’m not going to file a mechanic’s lien, my customer says he is going to pay me by the end of the week.”

Time and time again, I hear some version of the same story: “I’m not going to file a mechanic’s lien, my customer says he is going to pay me by the end of the week.” 

And the “end of the week” becomes the end of next week or the end of next month. The lien deadline creeps up, statute is unforgiving, and days before the last possible moment…

“I’m going to wait, there was a mishap with payments, but my customer said he has it squared away and I will see payment soon. You can let the mechanic’s lien deadline expire.”

And then it happens. Bam! Lien deadline has passed, no payment was made, it is the proverbial “up a creek without a paddle”. This is precisely what has happened (and is ongoing) to several construction companies in Connecticut.

The “BackStory”

You may or may not be familiar with Back9Network Inc. “…golf’s premier lifestyle and entertainment destination… Back9Network joins ESPN, NBC Sports and YES Network in Connecticut, which is quickly becoming the sports media capital of the world.” And, you may or may not be aware that Back9Network filed for bankruptcy protection at the end of 2015.

The bankruptcy petition indicates Back9Network has assets and liabilities between $10M-$50M. To be more precise, the company has assets of approximately $15.7 million and unsecured creditors (i.e. those that did not file UCCs or mechanic’s liens) are owed approximately $14.8 million – this is of course, absent those that have secured claims, like the State of Connecticut, who secured over $4.7 million with a UCC filing, which means the liabilities outweigh their assets.

Needless to say, basic math tells me there won’t be enough money to pay the unsecured creditors in full. With that in mind, let’s circle back to the construction companies I mentioned above.

To Lien or Not to Lien

Back9Network was a new venture and required a studio for their production. Back9Network hired contractors, who in turn hired subcontractors and material suppliers, to build their studio in Hartford, CT. Steel beams, drywall and architectural designs are just a few of the contributions that would go unpaid.

Back9Network hit the financial skids, obviously, and were unable to pay the contractors, subs & material suppliers. Fortunately, these parties supplying materials and labor took steps to secure their rights to a mechanic’s lien, right? Well… no – as in no, the parties did not file mechanic’s liens.

But, why? Why wouldn’t these parties secure their lien rights? Especially when working capital is crucial to the construction industry:

“Construction is all about cash flow,” Salamone said. “Cash is king… If you don’t get $50,000 in, that’s a big nut. That’s a weekly payroll. That’s a yearly salary for one of our guys.” – Glenn Salamone, QSR Steel Corporation

If “cash is king”, why wouldn’t you protect your mechanic’s lien rights? Because filing a lien will “rock the boat”.

Do as I Say, NOT as I Do?

Allegedly, the general contractor, Associated Construction, “encouraged” its subs and material suppliers to not file mechanic’s liens.

In an interview with WNPR, Glenn Salamone of QSR Steel a subcontractor, said Associated Construction, asked him not to file a mechanic’s lien:

“He said to me, if we do that, it’s going to scare the investors away,” Salamone said. “It’s going to rock the boat, and chances are nobody’s going to get paid.”

Out of curiosity, I ran a query through LienFinder™ and discovered two parties did, in fact, file mechanic’s liens on this project. As you may have guessed, Associated Construction did not heed their own “advice”, and filed a mechanic’s lien in February 2015 with a claim amount over $400,000.

This quote from Mr. Salamone sums up the frustration “He essentially covered his ass,” Salamone said of the leadership at Associated Construction.” – courtesy of WNPR

Despite this “advice” from the general contractor, the subcontractors & material suppliers should have taken steps to protect their mechanic’s lien rights. As you know, the mechanic’s lien encumbers the physical property that is being improved, and is not necessarily tied to the assets of an entity (although, to disclaim: in this case, the studio was leased by Back9Network, so there are lien/leasehold situations that may arise).

Lesson Learned: Back 2 Basics

It’s scary. Too often, companies are led to believe that by protecting their rights to get paid, they will jeopardize projects and relationships. Companies fear that sending preliminary/prelien notices and securing mechanic’s liens, will somehow align stars so that the world implodes. OK, that may be an exaggeration, but the fear is real and it shouldn’t be.

Mechanic’s Lien and Bond Claim laws are there to protect parties supplying to construction projects. If you take the steps to secure rights and get paid without having to enforce those steps, then no harm no foul, but if you don’t take steps and don’t get paid – well, you find you’re up that creek without a paddle.

All parties supplying materials or labor to a construction project should take the appropriate steps to secure their mechanic’s lien and bond claim rights – all parties, all projects, all the time, no exceptions.

California Lender Search: a Best Practice

Posted on January 25, 2016 by - Preliminary Notices & Construction Credit

California Lender Search: a Best Practice

A customer contacted NCS with the following conundrum:

“I have an $800,000.00 private project in California. My customer returned the completed Job Information Sheet and the lender spot was marked with “no lender-owner financed”.  I know the lender has to receive a copy of the preliminary notice, is this proof that there is no lender?”

Since the client took steps to obtain the project information, including the ladder of supply, is the job information sheet “proof” that he performed the due diligence necessary to secure lien rights?

As you know, I am not an attorney, so I sought a legal opinion from an attorney in our national network:

“… as of right now, there is no case law as to whether or not you can assume the information you are provided is correct as to there being no lender on a project.  Creditors should always perform a search to confirm whether or not there is a construction loan on the project.”

The attorney added that prior to the July 2012 revisions to the California statute, case law indicated that due diligence for obtaining lender information included checking the building permit and checking for a construction loan.

However, current statute says lack of information on the building permit does not relieve the requirement to serve the lender, and also, even though a loan may not be labeled as a construction trust deed, you still have to notify the lender.

NCS Best Practice

Perform formal searches on any party required to receive a copy of a notice. (This goes for liens/bond claims too – you should always confirm the parties within the ladder of supply.) Many attorneys & organizations, like NCS, provide research/investigative services – in fact, we offer a Lender Search specifically.

Not interested in paying a provider to obtain the information for you?

The DIY Best Practice

Contact the GC. According to California statute, the information should be provided in the contract and the GC must provide the name and address for the owner and lender:

"8170. (a) A written direct contract shall provide a space for the owner to enter the following information: (1) The owner's name, address, and place of business, if any. (2) The name and address of the construction lender, if any. This paragraph does not apply to a home improvement contract or swimming pool contract subject to Article 10 (commencing with Section 7150) of Chapter 9 of Division 3 of the Business and Professions Code. (b) A written contract entered into between a direct contractor and subcontractor, or between subcontractors, shall provide a space for the name and address of the owner, direct contractor, and construction lender, if any. 8208. A direct contractor shall make available to any person seeking to give preliminary notice the following information: (a) The name and address of the owner. (b) The name and address of the construction lender, if any."

Bottom Line: Seek legal guidance and always perform the search – better safe than sorry!

2016 Changes for Securing Pennsylvania Lien Rights

Posted on January 11, 2016 by - Mechanic's Liens & Bond Claims

Changes for Securing Lien Rights in Pennsylvania Coming 2016

New Notice procedures in Pennsylvania become effective for qualifying projects commenced on or after the date the online Construction Notices Directory become operational (scheduled for December 31, 2016).

What are the changes and how does it affect those contracting for work in Pennsylvania?

There are several changes that are taking place.  Under current law, there is only one notice requirement – the Formal Notice.

In October, 2014, Act No. 142 was enacted amending the Pennsylvania Mechanic’s Lien Law to create a more structured notice procedure for owners and subcontractors to abide by, on commercial contracts which are $1.5 MIL or greater.

The act provides for:

  • the filing of a Notice of Commencement,
  • a Notice of Furnishing,
  • a Notice of Completion and
  • a Notice of Non-Payment.

The new law is modeled after Utah’s State Construction Registry which was implemented in 2005. The purpose of the law is to protect commercial property owners from double paying and to avoid subcontractor liens. By registering the project through the construction registry, the owner can identify the subcontractors working on the project, to ensure that all subcontractors have been paid before making final payment to the general contractor.

Who must file the Notice of Commencement on the construction registry and what is the deadline?

A Notice of Commencement must be filed by the owner prior to the start of the construction project and must contain

  • the full name, address and email address of the contractor;
  • the full name and location of where the work is being performed;
  • the county in which the project is located;
  • a legal description of the property, including the tax identification number of each parcel and,
  • the full name, address and email address of the project owner
  • if applicable, the full name, address and email address of the surety for the performance and payment bond along with the bond numbers

In addition to posting the Notice of Commencement on the construction registry, it must also be posted on the jobsite until the project is complete.  If the Notice of Commencement is not timely filed, subcontractors are relieved from an obligation to file a timely Notice of Furnishing.

What is the requirement for the Notice of Furnishing?

A Notice of Furnishing must be filed in the construction registry by all first- or second-tier subcontractors or suppliers within 45 days from first furnishing labor or materials. The notice must contain

  • a general description of the labor and/or materials to be furnished
  • the full name and address of the person supplying the labor and/or material
  • the full name and address of the person contracting for the labor and/or material; and
  • a description sufficient to identify the project, based on the description in the Notice of Commencement

What is the Notice of Completion and how does it affect me?

The owner may file a Notice of Completion, for informational purposes, to inform all parties that the project has been completed and accepted by the owner.  The notice will be submitted by the construction registry to all subcontractors who have filed a Notice of Furnishing.

Are there any other notices of which we should be aware?

Subcontractors who have not received full payment for their materials or services, may file a Notice of Nonpayment in the directory for informational purposes.

What actions should we be taking now to prepare us for the new changes in the law?

Members of the construction industry should begin now to familiarize themselves with the changes to the lien law to determine how to change their business practices to meet the new requirements. Utah’s state law and precedent can be a useful tool to help owners and subcontractors begin to understand the process.

Do you have any questions about Pennsylvania’s statute? Contact NCS today!

California 20 Day Notice

Posted on December 7, 2015 by - Mechanic's Liens & Bond Claims

20 Facts About California’s 20 Day Preliminary Notice

Need to serve a preliminary notice in California? (aka CA 20 Day Prelim) The general rule, when supplying materials or services to a construction project in California, is to serve the preliminary notice within 20 days from first furnishing. However, there are nuances based on who you sold to within the ladder of supply and whether you are supplying to private project or public project.

Are you supplying to a California Private Project?

If you are supplying to a private project and want to secure mechanic’s lien or stop notice rights, you should:

1. When contracting directly with the owner, serve the notice upon the lender within 20 days from first furnishing materials or services.

2. When contracting with all others, serve the notice upon the owner, prime contractor and lender within 20 days from first furnishing materials or services.

“What if My Notice Is Late?”

3. You may serve a late notice, but the lien will only be effective for materials and services provided 20 days prior to serving the notice and thereafter.

Are you supplying to a California Public Project?

If you are supplying to a public project and want to secure bond claim or stop notice rights, you should:

4. When contracting directly with the prime contractor, no notice is required

5. When contracting with all others, serve notice upon the prime contractor and the public entity within 20 days from first furnishing materials or services.

“What if My Notice is Late?”

6. A late notice may be served, but the bond claim, when later served, will only be effective for materials and services provided 20 days prior to serving the notice and thereafter.

“Wait, the Notice isn’t Required?!”

7. Correct, there may be circumstances when the preliminary notice may not be required. But, just because you don’t have to do something, doesn’t mean you shouldn’t. A great best practice is to serve a notice, regardless of your position in the ladder of supply (well, except… see #8) – it’s better for everyone to know you are supplying to the project.

8. Serving the notice upon all parties is a good idea, but if you are contracting with the owner on a public project, you do not have bond claim or stop notice rights.

What Information Should Appear within the California 20 Day Notice?

According to California Civil Code (Title 1, Chapter 2 Notice 8100-8118), the following information should be included in the notice:

9. The name and address of the owner (or reputed owner)

10. The name and address of the direct contractor

11. The name and address of the construction lender

12. The name and address of the claimant (the entity serving the notice)

13. Identify where the claimant falls within the ladder of supply

14. Identify the claimant’s customer

15. The project address:

“A description of the site sufficient for identification, including the street address of the site, if any. If a sufficient legal description of the site is given, the effectiveness of the notice is not affected by the fact that the street address is erroneous or is omitted.” – (8102.4)

16. A general description of the materials or services being provided

17. The contract amount

18. The claim amount

Serve the 20 Day Notice

Don’t just throw a stamp on the envelope & drop it in the mail!

19. In California, the notice should be served via “…registered or certified mail, express mail, or overnight delivery by an express service carrier.” – (8110)

Completion BONUS!

Conservatively, NCS recommends you calculate your mechanic’s lien/stop notice deadlines based on your last furnishing date. In California, statute dictates these deadlines are calculated based on the date of Completion or the date a Notice of Completion is filed, unfortunately, not all project owners file this notice when the project is completed.

The owner must notify the prime contractor and any claimant who has served a 20-day notice that a notice of completion or cessation has been filed within 10 days of its filing (commercial projects). The mechanic’s lien/ private stop notice period will not be shortened by the filing of the notice of completion or cessation if the owner fails to notify you.

Are you supplying to a California Federal Project?

Then these rules don’t apply to you!

20. When supplying materials or services to a federal project, regardless of the state in which the project is located, there is no required preliminary notice.

This is not an exhaustive list of the “do’s & don’ts” or the “should’s & shouldn’ts”, it’s just a simple overview of the preliminary notice in California.

If you have questions about the mechanic’s lien/bond claim process in California, or anywhere in the U.S. & Canada, contact us today!

NTO-Phobia: the Fear of the Preliminary Notice

Posted on December 1, 2015 by - Preliminary Notices & Construction Credit

NTO-Phobia: the Fear of the Preliminary Notice

The Fear: A common fear expressed by contractors, subcontractors and material suppliers everywhere is “My customer will get upset if I send a preliminary notice”. A preliminary notice (sometimes referred to as a Notice to Owner (NTO) or Notice to Customer), shouldn’t upset anyone, especially if the intent of the document is properly explained.

What is a Preliminary Notice?

A preliminary notice is a document, written to comply with statute, sent to the owner and/or prime contractor as a precondition to filing a mechanic’s lien or serving a bond claim. This document notifies the owner that their property is being improved by the goods and/or services your company is providing.

All too frequently, the owner of the property is unaware that a supplier has provided goods and/or services, until the preliminary notice is served.  A preliminary notice does not indicate there is any current payment problem; in fact, the preliminary notice is an aid in retaining rights in the event a payment problem arises.

Yes, the service of a preliminary notice is the first step in the mechanic’s lien filing process, but it is not a mechanic’s lien.

Common Courtesy

A preliminary notice can be considered a courtesy, advising the owner of the supplier’s involvement in providing quality products and services. The purpose of the notice is to benefit the owner so that they may obtain lien waivers from all subcontractors and suppliers as the project progresses, so that the owner’s interests are also protected.

Did You Know

In the state of Florida the preliminary notice is titled “Notice to Owner;” in the states of Ohio, Georgia and Michigan, the preliminary notice is titled “Notice of Furnishing.” Combine these titles to define the notice: “THE NOTICE OF FURNISHING TO THE OWNER”.

At the End of the Day

The service of a preliminary notice is simply a legal tool for you to use to secure your receivables.  Your goal is to ensure payment from your customers in a timely fashion; the mechanic’s lien process was created to protect you and help you reach your goal.

By the Way

Remember, the time frames for serving your notice vary on a state-by-state basis. Be sure to have current information regarding timetables and information requirements. Serve your preliminary notice; it will serve you well.