Service Area: Notice and Mechanic’s Lien Services

Liens on Funds, Stop Notices, and Public Improvement Liens

Posted on August 12, 2014 by - Mechanic's Liens & Bond Claims

What Are Liens on Funds, Stop Notices, and Public Improvement Liens?

A Lien on Funds (in some states referred to as a stop notice or public improvement lien) is a tool available in certain states to help stop the flow of funds on a project until it can be shown that you have been paid.

Serving a lien on funds may halt payment to your debtor or to the general contractor, and in some cases can even require the lender to withhold money.

Though the laws vary by state, one thing does tend to be consistent – the lien on funds will likely bring attention to your non-payment situation.

At first, this may seem counterproductive.  You want money to flow down to you, so why would you do something to stop that from happening?

Unfortunately, not all funds continue to flow as they should – especially to those further down the contractual chain.  A lien on funds can make an owner or general contractor aware that your customer hasn’t paid you.

Bringing the issue of non-payment to their attention may be what is needed to shake things up in the chain of supply.

Lien on Funds and Public Improvement Lien

These two are similar – lien on funds and public improvement lien. Typically, it’s a lien against the money owed by the Project Owner under contract with the Prime Contractor.

Stop Notice

A stop notice is a notice to party paying for work of improvement of money due, which can obligate that party to withhold sufficient funds to cover noticed amounts.

Here’s a quick look at which states offer this type of security!

Understanding Furnishing Dates and Lien Deadlines

Posted on July 8, 2014 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Understanding Furnishing Dates and Lien Deadlines: First, Last, and Completion

When securing your receivables through the Mechanics Lien & Bond Claim process, most often, statutory deadlines are dictated by your first & last furnishing dates and/or completion of the entire project. Typically, the first furnishing date will dictate the deadline for the Notice, whereas the last furnishing date will dictate the Mechanics Lien/Bond Claim and Suit.

Let’s Define these Important Furnishing Dates

First Furnishing is the date on which the claimant first provides materials or performs services on a project. Here are some typical examples of first furnishing:

  • if you are providing only materials, the date the materials first arrive on the job site
  • if you are providing only labor to the project, the date you first arrive on location
  • if you are providing materials and labor to the project, the first date either materials or labor are provided to the job site

Last Furnishing is the date on which the claimant last substantially furnishes materials or performs services on a project. Here are some examples of questionable last furnishing dates:

  • punch list work
  • warranty
  • remediation

The key to last furnishing is that it needs to be substantial.

Completion is the date of fulfillment of prime contract for work of improvement. Completion is typically when the general contract is complete, not necessarily the date your contract is complete. Acceptance is an official act where entry is made in the government records that a public work under contract is completed and accepted.

Let’s See these Dates in Action

In our example, we are furnishing materials to a public project in Arizona. We are shipping our materials over time beginning August 1, 2021 and we anticipate our last furnishing to be October 1, 2021.

Based on our first furnishing date, our Preliminary Notice will be due August 20th, because in Arizona we need to serve the notice upon the prime contractor within 20 days from first furnishing materials or services.

If we aren’t paid in a timely fashion, we may decide to proceed with the Bond Claim and in Arizona, the bond claim should be serve the bond claim upon the prime contractor within 90 days from last furnishing materials or services. Based on our last furnishing date of October 1st, our Bond Claim should be served by December 30th.

In the event the Bond Claim doesn’t prompt payment, we need to file suit to enforce the bond claim after 90 days from last furnishing materials or services, but within 1 year from last furnishing materials or services, which means we would need to proceed with suit by September 30, 2022.

Know Your Dates: Never Miss a Deadline

Securing your Mechanics Lien and Bond Claim rights begins the moment you enter into a contract to supply materials and/or labor to a project. Make sure you are familiar with the state statute and make sure you know what deadlines lay ahead. Missing a deadline could mean missing your opportunity to protect and collect.

Critical Role of Preliminary Notice in Mechanics Liens

Posted on June 24, 2014 by - Mechanic's Liens & Bond Claims

Oklahoma Case: Lack of Preliminary Notice Leads to Invalidated Mechanics Lien

Mechanics Lien laws are rarely straightforward and courts across the nation generally require strict compliance to these often complex statutes. The case of Mel Stevenson & Associates, Inc. v. Giles, 2004 OK CIV APP. 96, 103 P.3d 631 (2004), illustrates how a simple mistake, due to confusing language in statute, can lead to losing your mechanic’s lien rights.

In Mel Stevenson, the defendant, Roy Giles, owned and occupied a Newcastle, Oklahoma residence which was completely destroyed by a fire. Giles elected to rebuild the home in the same location and engaged Wes-Star Construction, Inc. to act as contractor. Giles lived in another location while the home was being reconstructed, but kept his mailing address and phone number. Once the home became habitable, Giles promptly moved back.

Giles learned of a special type of roofing offered by Mel Stevenson & Associates, doing business as Spec Building Materials, herein referred to as Spec.

Giles consulted with Spec about their roofing materials and explained to the company the situation with the fire and the reconstruction of his home. Spec provided the roofing materials and windows to the project on account with Wes-Star. During this time, the County Assessor removed the property from the improved tax rolls due to the fire.

Then Spec Wasn’t Paid

Later, a dispute arose between Spec and Wes-Star.  Spec was not paid for the materials it had supplied. It filed a materialman’s lien but did not provide preliminary notice to Giles as required under 42 O.S.2001, § 142.1.2.

In court, Giles claimed Spec’s lien was invalid due to lack of notice.  Spec, on the other hand, urged that notice was not required under Oklahoma law because Giles was not occupying the dwelling.

The court turned to the statutory language of 42 O.S.2001, § 142.1.2. Under this provision, no lien which affects property presently occupied by an owner is enforceable unless written notice was provided prior to furnishing of the materials. The statute sets out the language which the notice must include.

The question then became whether Spec was required to send notice to owner to Giles because he was not currently occupying the home. The court looked to prior case law on the issue and found much dissention on the subject.

Was the Preliminary Notice Really Required?

The court ultimately found the issue turned on whether Giles had begun occupying the property before construction, and therefore his absence was merely temporary, or whether he was deemed to have first occupied the property upon his taking of possession once it was habitable.

The court found that under the circumstances, Giles absence was temporary because he never intended to leave the property permanently.  Thus, it reasoned, Giles was entitled to notice.

The court also found persuasive the fact that Giles stated he was unaware Spec could file a lien against his property in the event of nonpayment by the contractor.  After addressing all issues, the appellate court held Spec’s mechanics lien to be invalid.

In Mel Stevenson, the Oklahoma law concerning the notice to owner was far from clear, given the circumstances of the absent owner and destroyed home.

Best Practice: Better Safe than Sorry!

We recommend serving a copy of the preliminary notice upon all parties within the contractual chain, even when it appears no notice is required. The old adage is true: “better safe than sorry!”

Notice to Commence Suit and Summons & Complaint

Posted on June 2, 2014 by - Preliminary Notices & Construction Credit

You’ve Received a Notice to Commence Suit and Summons & Complaint

Congratulations! You have taken the proper steps to secure your receivables through the mechanic’s lien process.  You’ve checked The National Lien Digest© to confirm you completed the necessary steps within the state specific time frame.  You properly served your preliminary notice and unfortunately had to proceed with the mechanic’s lien, because you weren’t paid.

While you wait for the mechanic’s lien to prompt payment, you recheck The National Lien Digest, just one more time, to confirm what the deadline is for proceeding with Suit to Enforce the Mechanic’s Lien.
Then… you receive an official document which indicates the deadline to proceed with Suit is different than the deadline you see in The National Lien Digest!

What is going on?!

In many states, the statute provides a remedy for an owner to shorten the deadline for a lien claimant to file suit: the owner can file a Notice to Commence Suit. When properly notified by an owner or the court, any lien claimant who receives a Notice to Commence Suit must proceed with suit by the deadline stated, or they will lose their lien rights. This process allows the owner to “thin out” those who may not have a valid claim.

Another action that can change your suit deadline is when another claimant files suit to foreclose on the property. When filing suit, the plaintiff must notify all other parties with an interest in the property that an action to foreclose is being filed. This filed document is often referred to as a Summons and Complaint.

At first glance, the Summons and Complaint may cause the unwary to believe they are being sued. In actuality, the Summons and Complaint is a legal action which requires all lien claimants to join in the foreclosure action within a specific time frame, by submitting an Answer and Cross Claim.

Frequently an Answer and Cross Claim is required in as little as 20 days from receipt of the Summons and Complaint. If a lien claimant does not respond by the deadline, lien rights may be lost.

When a Notice to Commence Suit or a Summons and Complaint is received by your office, in response to a lien that was filed on your behalf, we recommend taking immediate steps to retain the services of an attorney to protect your rights.

Complexities of Preliminary Notice Service in Construction

Posted on May 20, 2014 by - Preliminary Notices & Construction Credit

Overnight Delivery, Registered Mail, Certified Mail! Oh My!

Contractors, subcontractors, material suppliers & laborers throughout the U.S. & Canada understand the Preliminary Notice is often the foundation for securing Mechanic’s Lien & Bond Claim rights.

Mechanic’s Lien & Bond Claim statutes are quite particular when it comes to preserving your rights. The various deadlines, parties to be served, document wording & even font size can vary by statute.

However, there is one fundamental step that if overlooked, could render your mechanic’s lien or bond claim unenforceable: proper service of the preliminary notice.

Let’s take a quick look at a case that came before the California Court of Appeals.

In IGA Aluminum Products, Inc. V. Manufacturers Bank, 130 Cal.App.3d 699, 181 Cal. Rptr. 859, IGA Aluminum furnished materials & labor to Welch Construction Company.  In an effort to preserve its mechanic’s lien rights, IGA sent Welch a preliminary 20-day notice, as required under California’s Civil Code section 3097.

However, IGA sent the preliminary notice via first class mail.  Civil Code section 3097, subdivision (f), required the preliminary notice be delivered by personal service, certified or registered mail.

The court had to determine whether or not the notice requirement of section 3097 had been met when written notice was delivered by first class mail.  The court found the substantial compliance doctrine to be inapplicable in the case.

It reasoned that when the statutory language is clear, there is no room for construction of the statute.  Section 3097 unambiguously required notice be delivered in one of these ways: by personal service or by registered or certified mail.

Accordingly, under the plain language of the statute, IGA’s preliminary notice was fatally defective.

If IGA had served their preliminary notice as statute dictated, it is quite possible they would have been afforded the opportunity to enforce their mechanic’s lien.

Don’t get caught in technicalities – closely follow the statutorily required methods of service in each state where notices are required.

How to Avoid Invalidating Your Lien with Proper Notices

Posted on April 22, 2014 by - Mechanic's Liens & Bond Claims

Learn Mechanic’s Lien Rights by Example

The Case: Consolidated Pipe & Supply Company v. Genoa Construction Services Inc., 690 S.E.2d 894, 302 Ga.App. 255 (Ga. App., 2010) 

The Parties:

  • Owner: St. James United Methodist Church, Inc.
  • General Contractor: Genoa Construction Services (“Genoa”)
  • Surety for General Contractor: Westfield Insurance Company (“Westfield”)
  • Subcontractor: Red-Hawk Construction, LLC (“Red-Hawk”)
  • Material Supplier aka Lien Claimant: Consolidated Pipe & Supply Company (“Consolidated”)

The Mistake:

Omission of required information in the Georgia Notice to Contractor

The Consequences:

A claim amount of $109,654.22 and an unenforceable mechanic’s lien

Let’s Dive In

Red-Hawk ordered $109,654.22 worth of construction materials from Consolidated. Unfortunately, Red-Hawk filed for bankruptcy and never paid Consolidated for its materials.

Consolidated filed a mechanic’s lien on the project for the value of its materials plus interest. Westfield, as surety for Genoa, issued a payment bond for the project, as well as a mechanic’s lien release bond to discharge Consolidated’s claim of lien. Consolidated demanded payment from Genoa and Westfield. Genoa and Westfield failed to pay, so Consolidated filed suit.

Genoa and Westfield moved for summary judgment, urging that Consolidated’s Notice to Contractor failed to include certain information required under Georgia law.

Specifically, OCGA §§ 10-7-31(a) and 44-14-351.5(c), require that the Notice to Contractor set forth the name and address of each person at whose instance the materials are being furnished and the name and location of the project. Consolidated listed the debtor & project names, but did not list the debtor’s address or project location.

Consolidated claimed the omissions were immaterial because the contractor knew the location of the project and knew Red-Hawk was working on that project. The Georgia district and appellate courts, however, found the omission to be fatal to Consolidated’s mechanic’s lien. The court held the statute was clear and shall be applied according to its terms.

“…Given that the statutory provisions at issue explicitly stated that the location of the construction project and the address of the entity be set forth in the Notice to Contractor, they are matters of substance; thus, the statutory requirements to include the information may not be disregarded as mere technicalities.18 Because Consolidated’s Notice to Contractor wholly omitted the cited information, it failed to comply with either OCGA §§ 10-7-31(a) or 44-14-361.5(c)”

A mechanic’s lien must comply with the jurisdiction’s lien statutes. Each state has a very specific procedure for perfecting a mechanic’s lien, with numerous deadlines and required forms. Statutes generally set out the language that must appear in your preliminary notice, notice to contractor or notice of commencement, and the notice or claim of lien. Failing to follow the state’s statutes can result in the loss of your ability to use the remedy of a mechanic’s lien. Unfortunately for Consolidated, Georgia requires strict compliance with statutory lien laws.

Don’t lose your rights for failing to meet the state’s technical requirements.