Service Area: Notice and Mechanic’s Lien Services

No Lien Rights for Rental Equipment Companies in Pennsylvania

Posted on January 3, 2024 by Kristin Alford - Mechanic's Liens & Bond Claims, UCC Financing Statements

No Mechanic’s Lien Rights for Rental Equipment in Pennsylvania; Companies Should Consider UCC Filings

Originally published in the Credit Research Foundation’s publication, Perspective by CRF (Q4 2023)

The Pennsylvania Superior Court released a crushing decision, wiping out mechanic’s lien rights for those who provide rental equipment to construction projects. Fortunately, mechanic’s liens aren’t the only form of security available to the equipment rental industry. In today’s post, we’ll review this recent Pennsylvania legal decision and how UCC filings are poised to be the payment leverage rental equipment companies need.

The Case at a Glance

The Case: RA GREIG EQUIPMENT COMPANY v. MARK ERIE HOSPITALITY, LLC, 2023 PA Super 206 – Pa: Superior Court 2023

The Result: Mechanic’s lien rights do not extend to rental equipment providers. Rental equipment isn’t incorporated into the improvement; therefore, it isn’t classified as ‘materials’ under Pennsylvania’s statute.

Background

R.A. Greig Equipment Company (Greig) leased a Telehandler-2019 Haulotte LT 9055 SN#2065360 to Mark Erie Hospitality, LLC (Mark Erie) for the improvement of a hotel lot and a second vacant lot.

In March 2022, Greig filed a mechanic’s lien to recover $56,392 in unpaid rental charges and $135,311 in equipment replacement costs (the equipment was allegedly damaged on site).

Mark Erie objected to Greig’s mechanic’s lien, and the Trial Court sustained the objection when it concluded the equipment and rental payments weren’t “materials” as defined under Pennsylvania’s statute. Fast forward, Greig appealed the Trial Court’s decision and here we are in front of the Superior Court.

Superior Court’s Decision: No Lien Rights for Rental Equipment

The Superior Court sought to answer several questions in its review of the case, but the one we are most interested in is whether Greig’s rental equipment and rental payments are considered “materials” and lienable under Pennsylvania’s mechanic’s lien law.

Under Pennsylvania’s mechanic’s lien law, Title 49 P.S. 1201 (7) “’Materials’ means building materials and supplies of all kinds, and also includes fixtures, machinery and equipment reasonably necessary to and incorporated into the improvement.”

The Superior Court had to dig into the archives for other cases that addressed materials and uncovered a case from 1923. In that case, a lumber company supplied lumber for temporary use and “no part of the lumber so used [became] a permanent part of the building.” The lumber company filed a lien, but its lien was removed because “no recovery could be had for materials not actually used in the building and that [the] defendant was not responsible for lumber . . . which did not and was not intended to become part of the structure.” Essentially, the lumber company’s lumber was not incorporated into the construction.

Based on the decision in the 1923 case, Pennsylvania’s Superior Court affirmed the Trial Court’s decision: Greig’s rental equipment and rental payments were not incorporated into the improvement, thus not lienable. Because the statute clearly states “…machinery and equipment reasonably necessary to and incorporated into the improvement.” (emphasis added).

No Mechanic’s Lien Rights? File a UCC!

This is an excellent (albeit unfortunate for Greig) example of how UCC filings are just as vital to ensuring payment on construction projects as mechanic’s liens. We work with construction companies throughout the country, and many will file both UCCs and mechanic’s liens depending on the state in which the project is located and what materials or services they are providing to their customer.

In this case, Greig could have protected itself if it had filed a Blanket UCC filing to secure its accounts receivable. Under UCC Article 9, a Blanket filing is a security interest in all assets of your customer on a non-priority basis, eliminating potential conflict with your customer’s primary lender. Think of it as a blanket that lays down over all customer assets.

What You Should Know about UCC Filings

Here are a few key things you should know about UCC filings.

UCCs should be filed as soon as you have the signed agreement.
- The Technical: Deadlines are determined by the filing type. Blankets should be recorded prior to lending or shipping, PMSI in Equipment should be recorded within 20 days of when the debtor receives possession of the collateral, and PMSI in Inventory must be recorded and authenticated notification letters must be sent before the debtor receives possession of the collateral.

Watch out for Preference: Let’s say you discover your customer is intending to file bankruptcy in the next month. Unfortunately, it’s too late to file the UCC as security because there is a 90-day preference period regarding all security interest filings and bankruptcy. Any security interest filed within 90 days of the bankruptcy filing will be dismissed as a preference and not considered part of the bankruptcy proceedings, leaving you as an unsecured party.

UCC filings are consensual. This means, your customer your customer signs an agreement agreeing to the filing. The agreement (e.g., the security agreement which can be built right into your contract) includes language granting you a security interest in certain goods and/or services.
- The Technical: In compliance with Article 9-102, a Security Agreement is an authenticated agreement that creates or provides a security interest. The agreement must include the date, debtor’s legal name and address, authentication, granting clause, collateral description and default terms.

UCC filings do not impact your customer’s credit rating.
- The Technical: UCCs will appear in a credit report, but simply to provide confirmation that another creditor has a secured position or that you pledged collateral for trade credit.

UCCs are a simple security solution (especially when you let NCS handle the details!) when mechanic’s liens or credit insurance just won’t cut it.
- The Technical: UCCs do require strict compliance with Article 9. Time and again we see creditors lose their security because they failed to comply with sections like UCC 9-503(a) which dictates how to correctly identify your customer on the Financing Statement or UCC 9-108 which outlines how the collateral should be identified.

Remember, material and equipment suppliers aren’t limited to the mercy of mechanic’s lien rights. UCC filings are a simple, low-cost solution, to protect your receivables.

Changes to Florida’s Lien and Bond Claim Laws

Posted on October 11, 2023 by Kristin Alford - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

As of 10/01/2023, Changes Are in Effect for Florida’s Mechanic’s Lien and Bond Claim Laws

After several amendments and readings, Florida passed House Bill 331 (effective 10/01/2023) which revised mechanic’s lien and bond laws; including provisions relating to the definition of a contractor, when notices must be served, notarizing forms, and more.

Highlights from Florida House Bill 331

Florida House Bill 331 was introduced in January 2023. This bill was sponsored by the Regulatory Reform & Economic Development Subcommittee, the Civil Justice Subcommittee, and Tobin Rogers Overdorf (R-85). Upon review of the introduced bill, the Regulatory Reform & Economic Development Subcommittee made this comment regarding the direct economic impact on private sector:

“The bill may cause more subcontractors, laborers, and material suppliers to receive compensation for the labor, services, or materials they supply for construction projects, which may have a positive indeterminate impact on the private sector. However, the bill may have a negative indeterminate impact on the private sector by making it costlier to transfer a lien to a payment bond, and an indeterminate impact on the private sector by eliminating and replacing certain alternative forms of security that a contractor working on public project may file in lieu of a payment bond.”

Here are some highlights of the changes.

Definition of “Contractor” (713.01): The term “contractor” now includes those who provide construction management services, “…which include scheduling and coordinating preconstruction and construction phases for the construction project, or who provides program management services, which include schedule control, cost control, and coordinating the provision or procurement of planning, design, and construction for the construction project.”

Notice of Commencement (NOC) (713.13): The person signing the NOC may use an online notary and the NOC must be filed for contracts greater than $5,000 (previously $2,500).

Notice of Termination of Notice of Commencement (NOT) (713.132): The owner must serve a copy of the NOT upon “…each lienor who has a direct contract with the owner and on each lienor who has timely and properly served a notice to owner… If properly served before recording in accordance with this subsection, the notice of termination terminates the period of effectiveness of the notice of commencement 30 days after the notice of termination is recorded in the official records.”

Computation of Time (713.011): In the event a deadline falls on a weekend or holiday, the deadline will roll to the following business day. And, if the clerk’s office is closed in response to an emergency, deadlines are tolled by the number of days the clerk’s office is closed. For example, if there were a catastrophic event and the clerk’s office was closed for 4 days, those 4 days do not count against the calculation of your deadline.

Manner of Serving Documents (713.18): Documents must be served “(a) By hand delivery to the person to be served… (b) By common carrier delivery service or by registered, Global Express Guaranteed, or certified mail to the person to be served, with postage or shipping paid by the sender and with evidence of delivery, which may be in an electronic format. (c) By posting on the site of the improvement if service as provided by paragraph (a) or paragraph (b) cannot be accomplished.” This section also clarifies the Notice to Owner is effective as of the date of mailing, if the notice is mailed within 40 days after the date the lienor first furnishes labor, services, or materials.

Release of Lien (713.21): A release of lien must include the lienor’s notarized signature, the official record’s reference number, and the recording date of the lien.

Notices of Nonpayment / Bond Claim (713.23): the notice should be served upon contractor and a “copy of the notice of nonpayment upon the surety.”

Mechanic’s Lien and Bond Claim Rights in Florida

From The National Lien Digest©, here’s a refresher on the key steps to securing mechanic’s lien and bond claim rights on Florida projects.

Private Projects | Mechanic’s Lien

Notice: You should serve the preliminary notice within 45 days from first furnishing (the date you begin supplying materials or labor to the project). If you are supplying specially fabricated materials, you should serve the notice prior to or within 45 days from the date fabrication begins. (**The preliminary notice must be received within the 45-day period!)
Mechanic’s Lien: You should file your lien within 90 days of your last furnishing (the date you last supplied materials or labor to the project) and serve a copy of the lien to the owner within 15 days of filing the lien.
Suit: In the unlikely event you must foreclose your lien, you should do so within 1 year of the date you filed the lien.

Private Projects | Bond Claim

Yes, there’s specific statute for payment bonds on private projects!

Notice: You should serve the preliminary notice within 45 days of first furnishing and the notice must be received by the deadline. (Just like you would for mechanic’s lien rights.)
Bond Claim aka Notice of Non-Payment: Serve the bond claim within 90 days from last furnishing.
Suit: You should file suit to enforce your bond claim within 1 year from your last furnishing.

Public Projects

Notice: Yes, you guessed it – just like private projects, you should serve the preliminary notice within 45 days of first furnishing and the notice must be received by the deadline.
Bond Claim aka Notice of Non-Payment: Serve the bond claim after 45 days from first furnishing, but within 90 days from last furnishing.
Suit: You should file suit to enforce your bond claim within 1 year from your last furnishing.

NCS Credit’s Experts Are Here for You

Florida is a stickler when it comes to following its laws to the letter. Don’t risk losing your security – let our experts help you with your preliminary notices, mechanic’s liens, bond claims, and suit filings. Contact us today!

Serve the Preliminary Notice Upon the Construction Lender

Posted on July 24, 2023 by Kristin Alford - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

In Some States, You Should Serve the Lender with the Preliminary Notice to Protect Your Mechanic’s Lien and Bond Claim Rights

The infamous first step to protecting mechanic’s lien and bond claim rights: serve the statutory preliminary notice. State statute not only dictates when your notice should be served and what information should be included in the notice, it also dictates who should receive a copy of the notice. Frequently, the project owner and/or the general contractor (GC) are required to receive a copy of the preliminary notice. But did you know a couple states require the lender also receive a copy of the preliminary notice?

Definitely Serve the Lender with the Notice in These 2 States

Two states require serving the notice upon the lender and indicate serving the lender may improve the priority of your mechanic’s lien.

First up, Arizona and California. These states’ statutes explicitly identify the construction lender as a required party (emphasis added):

Ariz. Rev. Stat. Ann. 33-992.01 B. Except for a person performing actual labor for wages, every person who furnishes labor, professional services, materials, machinery, fixtures or tools for which a lien otherwise may be claimed under this article shall, as a necessary prerequisite to the validity of any claim of lien, serve the owner or reputed owner, the original contractor or reputed contractor, the construction lender, if any, or reputed construction lender, if any, and the person with whom the claimant has contracted for the purchase of those items with a written preliminary twenty day notice as prescribed by this section.

California statute says:

CA Civ Code 8200 (a) Except as otherwise provided by statute, before recording a lien claim, giving a stop payment notice, or asserting a claim against a payment bond, a claimant shall give preliminary notice to the following persons:

(1) The owner or reputed owner.

(2) The direct contractor or reputed direct contractor to which the claimant provides work, either directly or through one or more subcontractors.

(3) The construction lender or reputed construction lender, if any.

Consider Serving the Lender with the Notice in These 3 States

Then there’s Alabama, Florida, and Oregon.

There is case law in Alabama which supports serving the lender with the notice, though statute doesn’t specifically identify it as a requirement.

“The building industry today is operated on the basis of borrowed money, i.e., construction financing. Practically every corporation or would-be home owner must borrow. The practice in the industry has typically been that the construction loan funds will not be distributed in a lump sum. Rather, the funds are advanced from time to time as construction progresses, upon the lender’s ascertainment (by the use of monitoring procedures such as vouchers and on-site inspections) that the work is indeed being completed or the supplies being furnished. This procedure allows the lender to actually corroborate the expenditures.

Because of the practices in the construction industry, we hold that from this day forward, public policy dictates that the same written notice that is required to be given to the owner must also be given simultaneously to the construction lender, if the lender’s identity can reasonably be obtained. We note that it would not be that difficult to obtain the identity of the construction lender, because the lender’s mortgage would be on record in the office of the judge of probate. This notice would give the construction lender, as well as the owner, the opportunity to insure that the mechanics and materialmen are paid out of the remaining contract funds, that any potential liens are satisfied, and that the property is not encumbered.” – Bailey Mortg. Co. v. Gobble-Fite Lumber Co.

In Florida, if the lender is listed on the Notice of Commencement, you should consider sending them a copy of the preliminary notice.

F.S. Title 40, Section 713.06 (d) A notice to an owner served on a lender must be in writing, must be served in accordance with s. 713.18, and shall be addressed to the persons designated, if any, and to the place and address designated in the notice of commencement. Any lender who, after receiving a notice provided under this subsection, pays a contractor on behalf of the owner for an improvement shall make proper payments as provided in paragraph (3)(c) as to each such notice received by the lender. The failure of a lender to comply with this paragraph renders the lender liable to the owner for all damages sustained by the owner as a result of that failure…

Regardless of where that party falls in the contractual chain, if they appear on the Notice of Commencement, it’s in your best interest to serve them with a copy of the preliminary notice.

Oregon’s statute doesn’t say the lender is required; however, if you serve the lender your mechanic’s lien may have greater priority.

ORS 87.025 (3) No lien for materials or supplies shall have priority over any recorded mortgage or trust deed on either the land or improvement unless the person furnishing the material or supplies, not later than eight days, not including Saturdays, Sundays and other holidays as defined in ORS 187.010, after the date of delivery of material or supplies for which a lien may be claimed delivers to the mortgagee either a copy of the notice given to the owner under ORS 87.021 to protect the right to claim a lien on the material or supplies or a notice in any form that provides substantially the same information as the form set forth in ORS 87.023.

Best Practice: Serve All Parties with the Notice, even if the Notice Isn’t Required

We are firm believers in serving the preliminary notice upon all parties within the contractual chain. Why? Glad you asked – let’s take a look.

Ensure Compliance with Statute

Mistakes happen. One of the most common obstacles in securing lien and bond claim rights is knowing which parties are actually in the contractual chain; gathering job information is tough.

How many times have you reviewed project information and discovered you only have information for the project location and your customer? Your customer tells you “I’m a contractor on the project” – are they the GC or are they a subcontractor (sub)? If you think they’re a sub and opt to not send the preliminary notice, then later find out they were the GC and required to receive a copy of the notice. An easy way to avoid “Oops, I didn’t know I needed to serve the lender” is if you serve everyone in the contractual chain.

Become a Payment Priority

Preliminary notices are harmless (unless, of course, you don’t send them) and an excellent way to promote transparency while establishing your place as a payment priority. By notifying everyone of your involvement, parties know your company name, how to get in touch with you, and what you are furnishing to the project.

Think of it this way: what if something goes awry with the GC and the owner begins remitting payment direct to subcontractors and various suppliers. Don’t you want to be front of mind for the owner? Wouldn’t it be nice if the owner had a notice from you (which includes your contact information) and they could speak with you directly to make payment arrangements?

Just think of all the subcontractors and suppliers the owner doesn’t know about – how quickly are those folks going to get paid? Not only are they unlikely to get paid, but it’s also more likely they will have to proceed with a mechanic’s lien or bond claim.

Serve the Notice, Every Time

If I had to choose between the cost of a preliminary notice or the cost of lost lien rights, I would choose the preliminary notice. Every. Single. Time.

Not sure who the lender is? We can help. Our experts are knowledgeable and ready to handle lender searches for you – contact us today!

Serve the Lender with the Notice

Posted on July 5, 2023 by wpengine - Mechanic's Liens & Bond Claims

When Should the Lender Receive a Copy of the Preliminary Notice?

When you need to secure mechanic’s lien or bond claim rights, serving a preliminary notice upon the required parties is just as important as ensuring the proper notice is served in the correct manner.

Did You Know? 72.55% of states have either a required or optional preliminary notice that should be served on commercial projects in order to preserve mechanic’s lien rights. 19 states require a preliminary notice be served in order to secure claim rights for public projects.

The Owner & The General

The majority of states with a preliminary notice requirement, request the notice be served upon the owner and/or the general contractor. But sometimes, a state’s statute may also require that the lender receive a copy of the notice.

What is a Lender?

A lender is the party (or parties) funding the project. Often the lender is a financial institution, but sometimes, especially in the case of P3s, the lender may be a corporation or other entity.

Arizona statute 33-992.01, defines the Construction Lender as “any mortgagee or beneficiary under a deed of trust lending funds all or a portion of which are used to defray the cost of the construction, alteration, repair or improvement, or any assignee or successor in interest of either.”

Which States Indicate the Lender be Served with a Copy of the Notice?

Required:

Arizona – In Arizona, on private projects, claimants should serve notice upon the owner, prime contractor and construction lender within 20 days from first furnishing materials or services.
California – In California, on private projects, serve notice upon the owner, prime contractor and lender within 20 days from first furnishing materials or services.

Recommended:

Alabama – In Alabama, on private projects, claimants should serve the notice upon the owner and construction lender prior to first furnishing materials or services.
Oregon – Serving the lender with the preliminary notice in Oregon may provide you greater priority when a lien is later filed.

What Happens if I Don’t Serve the Lender?

In the event you do not serve the lender (or any required party for that matter) and the validity of your notice is called into question, it will ultimately be up to the legal jurisdiction. In my case law research, courts frequently interpret the statute liberally to protect the parties supplying to a project, but there are some courts that have upheld the statute word for word.

(Some states, like Minnesota, are VERY particular about notice requirements)

Best Practice

Serve all parties within the contractual chain, even if they aren’t required to receive a copy of the notice. It is best for everyone to know that your company is furnishing to the project, and that all parties know you intend to be paid for the services you provide!

*Editor’s Note: This content was originally published in October 2015. It has since been updated and revised for statute changes effective 2023.

Bankruptcy Proof of Claim: Don’t Forget!

Posted on June 15, 2023 by wpengine - Credit Risk Management, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit, UCC Financing Statements

Bankruptcies Are on the Rise; Remember Your Bankruptcy Proof of Claim

It’s “officially” unofficial, we may be heading into another recession. Think back to 2008 and you’re sure to remember the painful increase in debtor defaults and bankruptcies; virtually no creditor’s AR escaped unscathed. With bankruptcies on the rise, it is increasingly likely you will need to complete a bankruptcy proof of claim either as a secured or unsecured creditor.

The Secured Creditor Ideal

In the event of a debtor’s bankruptcy, you will ideally be a secured creditor who properly filed a mechanic’s lien, bond claim or UCC. Secured transactions are proven to put creditors in the best possible position to get paid, though there are additional securities available such as a Corporate Guarantee or Personal Guarantee.

What is a Bankruptcy Proof of Claim?

A proof of claim is a document filed within the bankruptcy court that alerts the court, debtor, Trustee, and other interested parties that a creditor wishes to register a claim against the assets of the bankruptcy estate. This document is important because it provides proof that the claim is valid and owed, and notifies the Trustee of the creditor’s claim as well as to what class the claim should be associated.

What Information is Included in the Bankruptcy Proof of Claim?

The U.S. Bankruptcy Court’s official form includes fields for various pieces of information such as creditor name and location, the amount of the claim, the basis of the claim, whether the claim is secured, if the claim is based on a lease, and whether the claim is subject to right of setoff.

A Class to Associate the Claim?

Yes, in bankruptcy proceedings, creditors are put into various classes. The bankruptcy code is specific, detailed and, well…it’s long – but here is the basic payout priority:

Payout Priority in Chapter 11 Bankruptcy

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

Here’s an example of the class breakdown in the recent bankruptcy plan for Fred’s, Inc.

And here’s the Summary of Estimated Recoveries for Claims and Interests:

I’ll take this opportunity to point out that secured creditors often fair far better than unsecured creditors. In this bankruptcy, it is estimated that secured creditors will recover 100% of their claims, while unsecured creditors will receive between 4%-8.8% of their claims.

A Bar Date? Like a Date at a Bar?

Bar date and date at a bar are most definitely two different things, though it’s possible they have the same level of fun & excitement. Depending on the bankruptcy, a Bar Date may be set by the court. This date is a deadline by which all creditors must file their proof of claims within the bankruptcy court. It is critical that the proof of claim is filed correctly and timely, whether it’s secured or unsecured, to ensure creditors’ rights are preserved and to maximize any possible distribution.

What You Should Do

When a creditor receives notice that their debtor has filed bankruptcy, the notice should be reviewed to determine if a proof of claim needs to be filed.

Be on Time: Too often, creditors miss the bar date to file.
Know your Claim: Include all amounts owed for all accounts and affiliates.
Secured or Unsecured: Know whether you are a secured creditor and file properly.

Note, a creditor can have a secured & unsecured claim in the same bankruptcy.

Need Help?

Let us prepare, file, and monitor for a recorded proof of claim! For more information on how NCS Credit can assist in filing your bankruptcy proof of claim, contact us today.

Statute Changes for New Mexico Mechanic’s Liens

Posted on April 21, 2023 by Kristin Alford - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Filing a Mechanic’s Lien in New Mexico? Under the New Statute Changes, Make Sure You Serve the Project Owner with a Recorded Copy

New Mexico House Bill 179, related to mechanic’s liens, was signed by the Governor March 30, 2023, and goes into effect June 16, 2023. What changed? In order to recover costs and attorney fees, you will need to serve a copy of the recorded mechanic’s lien upon the owner. Let’s take a look.

New Mexico – HB 179 (Final Version)

Under HB 179, Section 48-2-6 Time for Filing Lien Claim–Contents–Notice of Lien, has been amended to include the following (emphasis added):

B. A person filing a claim for a lien with a county clerk pursuant to Subsection A of this section shall mail, email, send by certified mail with return receipt requested or hand deliver a copy of the filed claim for a lien to the owner or reputed owner, if known, stated in the claim within fifteen days of filing the claim with the county clerk. The copy of the filed claim for a lien shall be sent or delivered to the owner or reputed owner at the owner or reputed owner’s last known address. If the owner or reputed owner’s address is not known, the copy of the filed claim for a lien shall be sent to the address of the owner of the property as listed in the county assessor’s files. The failure of the claimant to serve the notice may preclude the recovery of interest, attorney’s fees or costs.

Essentially, if you are filing a mechanic’s lien, you should serve a copy of the recorded lien upon the owner within 15 days of filing the lien. Serving a recorded copy of the lien upon the owner will allow you to recover costs and fees (e.g., court costs, attorney’s fees, interest, etc.).

Now, what happens if you don’t serve a copy of the recorded lien upon the owner? Based on the last sentence within the amendment, if you don’t serve the owner, your mechanic’s lien won’t be invalidated, but you won’t be entitled to recover costs.

Serving the owner is a small task to help you recover fees, especially fees that are often hefty.

New Mexico Mechanic’s Lien Rights

If you are furnishing to a private project in New Mexico, you should serve the preliminary notice upon the owner or prime contractor (aka GC) within 60 days from your first furnishing. Although the statute says it’s OK if either party is served, we recommend serving both parties.

Miss your notice deadline? It’s OK, all hope is not lost. A late notice may be served, but your mechanic’s lien will only be effective for materials or services provided 30 days prior to serving the notice and going forward.

There are instances where a preliminary notice may not be required (e.g., if you are contracted directly with the owner or prime contractor, if the lien amount is for $5000 or less, or the property is residential with 4 units or less), however, we recommend you always serve a preliminary notice. Frequently, serving the notice, even when it’s not required, is enough to prompt payment.

Need to file a lien? If you contracted with the prime contractor or subcontractor, you should file your mechanic’s lien within 90 days from project completion. If you contracted with the owner, you should file the lien within 120 days from project completion. Note: completion means completion of the entire project, not just the completion of your portion of the project.

OH! And don’t forget to serve the owner with a copy of the recorded mechanic’s lien within 15 days from filing the lien – then you can recover costs and fees.

Questions about lien rights in New Mexico? Not sure if you can file a mechanic’s lien? Contact NCS Credit today!

New Mexico Lien and Bond Claim Rights

Posted on April 20, 2023 by wpengine - In Other Commercial Credit News, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

New Mexico Mechanic’s Lien and Bond Claim Rights

Curious about mechanic’s lien & bond claim rights in New Mexico? Today’s post is for you because we’re in a New Mexico state of mind!

Mechanic’s Lien Rights in New Mexico

If you are furnishing to a private project in New Mexico, statute requires that you serve a preliminary notice upon the owner or the prime contractor within 60 days from first furnishing materials or services.

As a best practice, serve both the owner and the prime contractor with the notice.

If you missed the notice deadline, you can serve a late notice. However, the lien, when later filed, will only be effective for materials and services provided 30 days prior to serving the notice and thereafter.

The preliminary notice may not be required if: contracting directly with the owner, contracting directly with the prime contractor, the lien amount is for $5,000.00 or less, or the property is residential, with 4 units or less.

The notice may not be required, but you should always serve a preliminary notice. Serving preliminary notices reduces the need for a lien by 97%!

If you do need to proceed with a mechanic’s lien and you have contracted directly with the owner, the lien deadline is 120 days from completion of the project. If you contracted with the prime contractor or subcontractor, your lien deadline is shortened to 90 days from completion of the project. Regardless of who you contracted with, you should serve a copy of the recorded lien upon the owner within 15 days of filing the lien.*

Bond Claim Rights in New Mexico

Furnishing to public projects in New Mexico is a bit different than private projects. Public projects don’t have a required notice.

“But, wait, you JUST said to serve a notice even if it’s not required!”

You’re right, and there is a notice that could be served: a non-statutory notice.

Unlike private projects, there is no statute requiring a notice on public projects. A non-statutory notice is not required by law, but serving the notice alerts all parties to your involvement on the project & that may be key to getting paid!

New Mexico is one of the few states that has payment bond requirements for both general contracts and subcontracts. Generally, payment bonds are required:

for general contracts exceeding $25,000.00.
for subcontracts of $125,000.00 or more.

Do Contractors Have to be Licensed in New Mexico?

Yes, according to a post written by Sonya R. Burke of Modrall Sperling. And if you don’t have a license, you don’t have lien rights.

“New Mexico requires contractors to maintain proper licensure through the state and to furnish and maintain evidence of financial responsibility. NMSA 1978, § 60-13-1, et seq… Contractors that are not licensed in New Mexico may not file a claim of lien or maintain suit for payment for unlicensed work. See NMSA 1978, § 60-13-30; Reule Sun Corp. v. Valles, et al., 226 P.3d 611 (N.M. 2009).”

To learn more about building codes, permitting, insurance, and construction contracts, take a look at Burke’s article: “Construction Law in New Mexico.”

Questions about lien & bond claim rights? Contact NCS Credit today!

*Editor’s Note: This content was originally published in February 2019. It has since been updated and revised for statute changes effective 2023.

What Happens to Bond Claim Rights When a Notice is Served but Not Received

Posted on April 3, 2023 by wpengine - Preliminary Notices & Construction Credit

What Happens to Bond Claim Rights When a Notice is Served but Not Received?

What happens to payment bond rights when the required preliminary notice is served but never received? In Wyandotte Electric Supply Company V. Electric Technology Systems, Inc., the claimant was able to retain their rights to a claim against the payment bond, even though the general contractor never received the preliminary notice.

The Ladder of Supply

General contractor, KEO & Associates, Inc. (KEO), hired subcontractor, Electrical Technology Systems, Inc. (ETS) and ETS hired sub-subcontractor, Wyandotte Electric Supply Company (Wyandotte), for the improvement to the Detroit Public Library, a public project in Michigan.

Because of the contract amount, KEO was required to obtain a payment bond and satisfied that requirement through Westfield Insurance Company.

Statute: Few Facts for Public Projects in Michigan

Generally, a payment bond is required when a general contract exceeds $50,000.
A preliminary notice should be served within 30 days from first furnishing materials or services.
A bond claim should be served within 90 days from last furnishing materials or services.
Suit should be filed after 90 days from last furnishing materials or services, but within one year from the date on which final payment was made to the prime contractor.

What Happened?

ETS failed to pay Wyandotte in full, so Wyandotte sought recovery from the surety via a bond claim. Unfortunately, Westfield denied Wyandotte’s claim based on “lack of liability”, which led Wyandotte to file suit against ETS, KEO & Westfield. During the suit phase, KEO contested the validity of Wyandotte’s bond claim.

But They Served the Notice

According to the supreme court review, Wyandotte served the required preliminary notice upon all parties, via certified mail. However, KEO did not receive a copy of that notice.

“…Wyandotte sent KEO a 30-day “Notice of Furnishing” in accordance with MCL 129.207, explaining that it was one of ETS’s suppliers. Wyandotte also sent copies of the letter to Westfield, the library, and ETS. As specified by MCL 129.207, Wyandotte sent these notices by certified mail. Additionally, Wyandotte sent the notices with return receipts requested. The notices to Westfield, ETS, and the library were all received. It is unclear what happened to the notice sent to KEO—United States Postal Service tracking indicated that it was at the Detroit Post Office on March 13, 2010, but it apparently never reached its destination. KEO states that it never received the 30-day notice.”

Because KEO claimed it did not receive the preliminary notice, it argued that Wyandotte did not comply with statutory requirements, making Wyandotte’s bond claim invalid. Fortunately, the court’s decision was in Wyandotte’s favor, stating the law does not specify the notice has to be “received” by the party, only “served” by the claimant.

“…MCL 129.207 specifies that “notice shall be served by mailing the same by certified mail, postage prepaid…” To accept defendants’ argument would render that phrase nugatory. In order to give effect to this phrase, we must conclude that service is accomplished when a complainant mails the required information to the proper destination by certified mail within the required time frame.”

It’s a Fine Line

Actually, the line isn’t that fine. Courts often interpret statute for just the words as they appear on the page. In this case, the words on the page said the notice had to be served, not received. Be aware, if this had happened in another state, the outcome could have been different, as some statutes require actual receipt of the notice.

This has gone in Wyandotte’s favor, though Wyandotte could have taken an extra precaution to eliminate KEO’s argument. Had Wyandotte monitored the USPS tracking, it would have noticed that KEO’s document was not delivered and Wyandotte could have resent the document. Lucky for Wyandotte, serving the notice was enough!

Editor’s Note: This content was originally published in 2016. It has since been updated and revised for 2023.