Service Area: Notice and Mechanic’s Lien Services

Pennsylvania Construction Notice Registry and the SCCM Number

Posted on January 13, 2020 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Pennsylvania State Construction Notice Registry: What is a SCCM Number and Why Does It Matter?

Pennsylvania has a State Construction Notices Directory, which houses filed notices for construction projects of $1,500,000 or more. These notices include Notices of Commencement, Notices of Furnishing, Notices of Non-Payment and Notices of Completion. Within the directory, each project is assigned a unique identifier, also known as a SCCM number.

SCCM 1

The SCCM number is often included within contracts and if you see this number listed within your contracts it is important to make NCS aware of the file number.

Why Should I Tell NCS?

The State Construction Notices Directory is a database that can be searched by keyword. Unfortunately, search engines can be frustrating and with seemingly limitless name variations, correctly identifying and linking to the project within the directory can be a challenge.

“Wait, what? What do you mean, name variations?”

Everyone identifies projects in a different manner. Any given project could easily go by a dozen different names. As an example, let’s say there are several parties working on an improvement here at NCS. The general contractor has recorded a Notice of Commencement which identifies the project as “NCS Front of Building Renovation.”

  • Party 1 calls the project “NCS”
  • Party 2 calls the project “Main Building Improvement NCSCredit”
  • Party 3 calls the project “729 Miner Road Improvement”
  • Party 4 calls the project “Portico Build Out / Miner”

Now, let’s say you are party 4 and identified “Portico Build Out /Miner.” If we search the directory with the information provided, we may not be able to match it to “NCS Front of Building Renovation.” If a match can’t be found in the directory or if a project is linked incorrectly, it may jeopardize your rights.

Providing NCS the SCCM number allows us to quickly and accurately identify the correct project within the State Construction Notices Directory, and then link to the correct document to protect your lien rights.

OK, How Do I Tell You the SCCM Number?

When you submit a preliminary notice request via NCS Online Services, the following prompt will appear followed by a blank space to enter the SCCM number.

If a Notice of Commencement has been posted on the SCND, please provide the Notice ID number, if available.

SCCM 2

Condominiums & Mechanic’s Liens, Be Sure to Answer this Critical Question

Posted on January 10, 2020 by - In Other Commercial Credit News, Mechanic's Liens & Bond Claims

Furnishing to the Construction or Improvement of a Condominium Project?

Here’s a Critical Question to Answer Before You File Your Mechanic’s Lien

There are important questions to answer before filing a mechanic’s lien. Where’s the project, who’s the owner, who’s your customer, what’s your claim amount, do you have back up documentation, etc. If you need to proceed with a mechanic’s lien on condominiums, there’s at least one more question to add to the list: Did you improve a unit or a common area?

Improving a Unit or Improving a Common Area?

Condominiums are comprised of two different parts: units & common areas. Units are typically individual housing spaces. Each unit is assigned its own distinct APN and is owned or leased exclusively by an individual owner. Common areas are any space except the individual units. Common areas may include hallways, elevators, a club house, landscaping and parking lots, and are typically owned by the condominium association.

A mechanic’s lien can only be filed against the property improved. Therefore, if you furnish to the improvement of a unit, and you are unpaid for furnishings, your lien should be filed on the individual unit.

Unlike individual units, the common elements of a condominium do not have APNs. Let’s say you provide carpeting for the building hallways, outside of the individual units. If you are unpaid for the carpeting, your lien won’t be filed against one unit; rather it will be filed against all.

How Do I Know If I Furnished to Units or Common Area?

Your records (purchase order, invoices, contract etc.) should indicate whether you are furnishing to individual units or a common area. As your work progresses, keep detailed notes regarding which units were improved — it will save you a great deal of time down the road!

Can’t I Just File a Lien on Everything?

Generally, no, as I mentioned before, your lien rights are limited to the spaces that were improved. But I did say “generally.”

Here’s commentary from R. Thomas Dunn from his article Condominium Mechanic’s Liens.

“Some states, including California, Virginia, and Colorado, provide a mechanism to afford a mechanic’s lien remedy to contractors improving common areas of condominiums.  Their approach, which is also recommended by the Uniform Construction Lien Act, is a blanket lien approach…. Apportionment of the value performed for common areas and the units is required.  If such a blanket lien is placed on the common areas, a unit owner may discharge the lien by paying the particular sum attributable to his unit. Cal. Civ. Code § 1369.

Similarly, under the Uniform Construction Lien Act; a claimant may file a blanket lien, which attaches to the individual units as opposed to the common elements… The blanket lien becomes a fractionalized lien against each unit for that unit’s proportional share of the cost.”

Liens Could Be Expensive & Take Time

A quick note. If you improved several individual units, and statute requires a separate lien for each unit, your typical lien fees won’t apply. There will likely be additional title work, notifications, and recording fees, plus it will probably take more time to prepare. Before you file a lien for a condominium project, seek a legal opinion. Don’t wait until the last minute & be sure to provide the attorney with all back up documentation.

Arkansas Mechanic’s Lien and Bond Claim Rights

Posted on December 16, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Here’s What You Should Know about Arkansas Mechanic’s Lien and Bond Claim Rights

Did you know that Arkansas is the home of Crater of Diamonds State Park and the park allows the general public to search for diamonds? Not only can you search for diamonds, but the park operates under the best playground rule ever: Finders. Keepers.

Unfortunately, mechanic’s liens and bond claims don’t operate under the “finders, keepers” rule, so be sure to familiarize yourself with the statutory requirements!

Arkansas Mechanic’s Liens

Arkansas has separate notice requirements for commercial and residential projects if the residential project is 4 or fewer units.

  • Commercial and Residential (with more than 4 units): Serve notice of non-payment upon the owner and prime contractor after last furnishing materials or services, but within 75 days from last furnishing materials or services.
  • Residential (with 4 or fewer units): Include notice in contract or serve residential notice upon the owner before first furnishing materials or services. (The notice may be served after furnishing, but the lien, when later filed, will only be effective from the date the notice was served.) A residential contractor who fails to give the notice may be fined up to $1,000.00 and is barred from bringing an action to enforce any provision of the residential contract.

For commercial & residential projects (with more than 4 units), the notice is not required if you are contracted directly with the owner. For residential projects with 4 or fewer units, the notice isn’t required if the notice is incorporated within your contract, the prime contractor or another lien claimant has served the notice upon the owner, the prime contractor furnishes a payment and performance bond, or you contract directly with the owner, to provide materials or services, but you are not a home improvement contractor or a residential building contractor.

Whether the project is commercial or residential, the mechanic’s lien deadline is the same. You should serve a notice of intent upon the owner at least 10 days prior to filing the lien. Then, file the lien after last furnishing but within 120 days from last furnishing. If the notice of intent cannot be served within the 10-day time frame, file the lien and suit to enforce the lien within 120 days from last furnishing materials or services, requesting both the lien and foreclosure.

In the event you need to proceed with suit to enforce your lien, you should file suit within 15 months from filing the lien.

Did You Know about Bond Claims on Private Projects?

Generally, payment bonds are required for religious or charitable organization construction contracts of $1,000.00 or more. If the payment bond is recorded, only the prime contractor shall have a lien on the property.

A.C.A. 18-44-504 Construction by religious or charitable organizations.

(a)  No contract in any sum exceeding one thousand dollars ($1,000) providing for the repair, alteration, or erection of any building, structure, or improvement shall be entered into by any church, religious organization, charitable institution, or by any agency of the foregoing, unless the contractor shall furnish to the party letting the contract a bond in a sum equal to the amount of the contract.

(b) 

(1)  The bond shall be filed in the office of the clerk of the circuit court in the county in which the property is situated.

(2)  Any person or his or her assigns to whom there is due any sum for labor or material furnished may bring an action on the bond for the recovery of the indebtedness. No action shall be brought after six (6) months from the completion of the church, hospital, orphanage, charitable institution, or benevolent institution.

(3)  If the bond is not filed as provided in this subsection, any person performing labor or furnishing material, except the principal contractor, shall have a lien upon the property for the unpaid amount of the claim.

It is recommended to serve notice upon the owner and prime contractor after last furnishing materials or services, but within 75 days from last furnishing materials or services. It is recommended to serve the bond claim in accordance with the terms of the bond; frequently a bond claim should be served within 90 days from last furnishing.

Arkansas Bond Claims

Payment bonds are typically required for general contracts exceeding $35,000, however, contracts executed by the Arkansas Department of Transportation are exempt from this bonding requirement.

A.C.A. 22-9-203 (G) Such other pertinent facts or information which to it may appear necessary or desirable.

(2)(A)(i) Every bid submitted on public construction contracts for any political subdivision of the state is void unless accompanied by a cashier’s check drawn upon a bank or trust company doing business in this state or by a corporate bid bond.

(ii) Every bid submitted on public construction contracts for the state or any agency or department of the state is void unless accompanied by a cashier’s check drawn upon a bank or trust company doing business in this state or by a corporate bid bond, except for projects under thirty-five thousand dollars ($35,000).

(iii) A bid bond is not required for public construction contracts for the state or any agency or department of the state under or equal to thirty-five thousand dollars ($35,000).

(B) This bid security shall indemnify the public against failure of the contractor to execute and deliver the contract and necessary bonds for faithful performance of the contract.

(C) The bid security shall provide that the contractor or surety must pay the damage, loss, cost, and expense subject to the amount of the bid security directly arising out of the contractor’s default in failing to execute and deliver the contract and bonds.

(D) Liability under this bid security shall be limited to five percent (5%) of the amount of the bid.

You should carefully review the terms of the bond to determine when the bond claim should be served & who should receive a copy of the claim. Frequently a bond claim is required within 90 days from last furnishing.  You should file suit to enforce the bond claim within 6 months from the date final payment is made on the contract (or 12 months from the date final payment is approved on Arkansas Building Authority projects).

Failed to Timely Serve West Virginia Notice Upon the Owner

Posted on December 9, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

If You Serve the West Virginia Notice Upon the Owner and It’s Late, You Will Lose Your Mechanic’s Lien Rights

What happens to your West Virginia mechanic’s lien if you fail to timely serve the lien upon the project owner? You guessed it; you’d lose your mechanic’s lien!

Securing Mechanic’s Lien Rights in West Virginia

For West Virginia private projects there is an optional preliminary notice that may be served prior to furnishing.

  • 38-2-20. Preliminary notice to owner; effect.

Any laborer or other person employed to do any work or furnish any materials… may, before doing any work or furnishing any material or machinery, give the owner of such building or other structure or improvement thereto notice in writing that if he is not paid therefor by the person employing him he will look to the owner for payment…

You should file the lien within 100 days from last furnishing.  Unless you contracted directly with the owner, you should also serve a copy of the lien upon the owner within 100 days from last furnishing.

  • 38-2-11. Notice and recordation of lien for supplies furnished to contractor or subcontractor.

For the purpose of perfecting and preserving his or her lien, every materialman or furnisher of machinery… within one hundred days after he or she has ceased to furnish the material or machinery or other equipment shall give to the owner or his or her authorized agent, by any of the methods provided by law for the service of a legal notice or summons, a notice of the lien. 

Statute is clear, if you fail timely record your lien, the lien will be discharged.

  • 38-2-14. Discharge of lien for failure to comply with article.

The failure of any person claiming a lien under this article to give such notice as is required… or the failure of any such claimant of any such lien to comply substantially with all of the requirements of this article for the perfecting and preservation of such lien, within the time provided therefor in this article, shall… operate as a complete discharge of such owner and of such property from all liens for claims and charges of any such contractor, subcontractor, materialman or laborer, for any work claimed to have been performed and for any materials, machinery or other necessary equipment claimed to have been furnished in connection with such work.

1 Day or 14 Days, a Late Lien is Still Late

In Worldwide Machinery LP v. Columbia Gas Transmission, LLC, Columbia Gas Transmission LLC (Columbia), the owner of the Mountaineer Express Pipeline Project, hired Welded Construction Inc., who in turn hired Worldwide Machinery LP (Worldwide) to provide equipment to the project. Worldwide furnished for several months and its last furnishing was October 31, 2018.

On February 22, 2019 Worldwide filed a mechanic’s lien in the amount of $55,028.58. Columbia filed a motion to have the lien discharged claiming Worldwide failed to file its lien timely. The court granted the motion.

The key here is the amount of time between the last furnishing date and the mechanic’s lien filing date. I’ll save you from the math and tell you that February 22, 2019 was 114 days after Worldwide’s last furnishing date of October 31, 2018. Based on the last furnishing date of October 31, 2018, the lien deadline was February 8, 2019, which means Worldwide’s lien was filed 14 days too late.

“This flaw is fatal to plaintiff’s mechanic’s lien claim” according to the court. Because even one day late is one day too many: “Discharge of a lien is required when a party misses the deadline for providing notice by even as little as one day.”

Don’t Be That Guy!

Never assume a court will lean (ha ha) your way. Always carefully track and calculate your deadlines, because missing a day could mean losing a lot!

Mechanic’s Lien & Bond Claim Rights in Kansas

Posted on December 2, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Click Your Heels Three Times for Mechanic’s Lien and Bond Claim Rights in Kansas

OK, maybe you can’t simply click your heels to file a lien in Kansas, but you can read today’s post to learn more about the steps to securing lien and bond claim rights!

Kansas Mechanic’s Liens

For private, commercial projects there is no statutory provision requiring a preliminary notice, however, we recommend serving a non-statutory notice as a best practice.

For private residential projects there is a statutory notice:

  • Residential Projects(residence intended for use by not more than two families):
    • New Construction: File a Notice of Intent to Perform no earlier than 18 months prior to filing a lien, but prior to title passing to the buyer.
    • Improvement: Serve warning statement upon the owner or obtain and retain a statement signed by the owner that states they were given a warning statement.

Whether furnishing to commercial or residential, the mechanic’s lien deadlines are as follows.

  • Subcontractors or Material Suppliers:
    • File the lien within 3 months from last furnishing materials or services and serve a copy of the lien on the owner, the prime contractor and the party with whom you contracted.
  • Prime Contractors:
    • File the lien within 4 months from last furnishing materials or services and serve a copy of the lien on the owner.

When furnishing to a commercial project, a Notice of Extension to file lien, which extends the time to file a lien to 5 months from last furnishing materials or services, may be filed within the above lien period. Serve a copy of the Notice of Extension on the general contractor or construction manager, and on the owner.

In the event the mechanic’s lien does not prompt payment, you should file suit to enforce the lien within 1 year from filing the lien or, if a promissory note was attached to the lien in lieu of a statement, within 1 year from the maturity date of the promissory note.

Bonus Tips

  • Kansas is a full balance lien state, which means the lien is enforceable for the full amount owed, regardless of payments made by the owner.
  • The contractor or owner may record a payment bond as security, preventing liens from attaching to the property or discharging any liens already filed.

Bond Claim for a Private Project? Yep!

Kansas statute provides that a properly recorded payment bond will prevent mechanic’s liens from attaching to the property. It is recommended to serve a bond claim upon the prime contractor within 90 days from last furnishing materials or services.

Kansas Bond Claims

Like commercial projects, the public Kansas statute does not provide for a preliminary notice & we recommend serving a non-statutory notice.

Generally, payment bonds are required for general contracts exceeding $100,000; you should always attempt to obtain a copy of the payment bond from the public entity. There are separate bond requirements for state highway projects & county road projects.

  • State Highway Projects: Generally, payment bonds are required on general contracts exceeding $1,000.00.
  • County Road Projects: Generally, payment bonds are required on general contracts exceeding $25,000.00.

You should serve the bond claim notice in accordance with the terms and conditions of the payment bond. Frequently a bond claim notice is required within 90 days from last furnishing.

For state highway projects, you should serve your bond claim within the terms of the bond, plus you should file an itemized statement of account with the Secretary of Transportation within 6 months from completion of the project.

Should you need to proceed with suit to enforce your bond claim, you should file suit within 6 months from completion of the project, unless it is a state highway project, where the deadline is within 1 year from completion of the contract.

The Retail Bankruptcy Apocalypse

Posted on November 15, 2019 by - In Other Commercial Credit News

Run! It’s the Retail Bankruptcy Apocalypse

“The Retail Bankruptcy Apocalypse!” A phrase you have likely heard or read in the news; perhaps written in scary font from a 1950’s horror movie. The consistent roll call of retail bankruptcies is wreaking havoc on ill-prepared suppliers. While apocalyptic may be a bit of an exaggeration, retail bankruptcies are, without question, harmful to creditors. What can you do to protect your business from retail bankruptcy?

Secured Transactions – Even on Consignment

Article 9 of the Uniform Commercial Code (UCC) provides an opportunity for trade creditors to secure their goods and/or accounts receivable by leveraging the personal property assets of their customer. Properly perfected security interests via UCC filings will mitigate (though not eliminate) risk.

In retail, creditors frequently engage in consignment sales. Creditors will tell us, “It’s alright, we sell on consignment, we’re protected.” But that’s not always the case **cough cough, Sports Authority, cough cough**.

How does a true consignment work? The consignor/owner retains title to the delivered goods, while the consignee/recipient holds and attempts to sell the goods. If/When those goods are sold, the owner’s security attaches to the proceeds of the sale. If the consignee is unable to sell the goods, they can simply return the goods to the owner. However, to maintain title to those goods, you must perfect a security interest via a UCC filing.

But Wait, There’s More!

In addition to filing UCCs, there are other steps you can take to protect yourself in the event your customer files for bankruptcy.  Here are some additional tips from Stephanie Wickouski’s article, Avoid a Catastrophic Loss from a Customer’s Bankruptcy – Five Tips. 

Up first? Recognize the warning signs of default or financial distress.

“These signs include increasing degrees of lateness in paying invoices and communication anomalies. Communications might be irregular in a variety of respects, ranging from uncharacteristic unresponsiveness to effusive assurances that all is well and “the check is in the mail.” A troubled customer may also try to appeal to the vendor’s sense of loyalty, in order to lull the vendor to continue to supply goods despite growing delinquencies.”

Next? Ensure you have established terms & conditions.

“Terms and conditions which provide for interest and legal fees if payments are delinquent, or damages if the conditions are violated, potentially increase the amount you can claim and recover in the event of a bankruptcy.”

And? Consider withholding shipments until the account is current.

“Once payments are delinquent, consider moving to COD (cash on delivery) for new orders, or declining to ship further goods until the account is brought current.”

Wickouski also mentions you may want to move to consignment terms. However, be aware that even consignments should be secured through a UCC filing.

Then? Watch deliveries & mind the 20-day clock.

“State law generally gives vendors a right to reclaim goods from an insolvent buyer within 20 days of delivery. If the buyer files bankruptcy, the reclamation period is extended to 45 days. Payment for goods delivered within 20 days of the bankruptcy may be entitled to a priority of payment.”

Lastly? Maintain communication.

“It’s always better to be communicating regularly with a customer. Even if things head south, vendors who are regularly in touch with a customer fare better in a bankruptcy than those who do not. Frequent communication with a customer will allow you to know more about the customer’s circumstances (and to know it earlier). This knowledge will allow you to make more informed decisions to manage the account.”

  Questions? NCS can help!

Fabricated Invoice Date Leads to Invalid Mechanic’s Lien

Posted on November 11, 2019 by - Mechanic's Liens & Bond Claims

Filing a Lien? Make Sure You Have Documentation to Backup Your Furnishing Dates.

As One Creditor Learned, Making Up a Fake Invoice Date Could Lead to Invalid Mechanic’s Lien

Thinking of changing an invoice date to extend a lien deadline? While it may be tempting to alter an invoice, don’t do it! As one contractor discovered, a fabricated invoice date may lead to an invalid mechanic’s lien.

Altered Invoices = Invalid Mechanic’s Lien

The State: Texas

The Case: Consolidated Reinforcement, LP v. Cheraif

The Parties:

  • Owner: Two Investors (Owner)
  • General Contractor: Cheraif

This relationship is a bit different than a typical owner/GC relationship. In this case, Cheraif and the investors contracted together under an investment contract. Ultimately, under the investment contract, Cheraif would live in the home being constructed. Cheraif was to be paid $50,000 as general contractor, provided he could “…present clear property title” to the house free of any liens within ten months after the date construction on the house began.”

  • Subcontractor: Russell Bankston (Bankston)
  • Material Supplier: Consolidated Reinforcement, LP (CRI)

The Payment Problem

Bankston was hired by Cheraif to pour foundation for the home. Bankston hired CRI to supply materials. Once the foundation was finished, Bankston was paid in full; however, Bankston didn’t pay its material supplier, CRI. Subsequently, CRI filed a mechanic’s lien.

The Key Dates

  • Bankston’s work was complete in June 2014.
  • CRI had an invoice with a ship date of July 2014.
  • CRI filed its mechanic’s lien October 2014.

The Problem with the Key Dates

The trial court determined this was a residential project. With the completion of Bankston’s work in June 2014, CRI should have provided notice of its unpaid claim by August 2014 and filed its mechanic’s lien by September 2014. However, CRI didn’t serve its notice until September 2014 and file its lien until October. CRI calculated its deadlines from the July invoice.

Now, I should note, there were many issues with this case. In fact, there were additional issues with this July invoice, aside from the obvious “it was issued after work was completed.” For example, there were discrepancies on what was furnished vs. what was invoiced, such as CRI invoiced for tensioning, but it wasn’t a tension slab/foundation.

The Court Ruled

The trial court ultimately determined CRI filed an invalid mechanic’s lien and caused additional financial loss to Cheraif (i.e. the $50,000 Cheraif was to be paid if the home maintained clear title).

“… intentionally and knowingly used the altered invoices in an attempt to send the above-referenced notices and file the Lien Affidavit within their respective statutorily prescribed deadlines. This was done in order to cause financial injury to Cheraif in an attempt to have him pay for material for which he would not be required to pay had those deadlines not been met, and furthermore to have him pay for material that was not provided on his project.”

As the saga continued, other issues were uncovered, such as the “lack of diligence” by CRI’s attorney to serve Cheraif with a copy of the notices.

Alas, the trial court deemed CRI’s lien invalid, wouldn’t permit a foreclosure of the lien, and awarded fees to Cheraif.

As you’d imagine, CRI was miffed that the trial court wouldn’t allow it to foreclose on the mechanic’s lien. But, as we know, it was an invalid mechanic’s lien — which means, foreclosing is obviously not an option. And, an award in fees can be expensive, so it’s not surprising that CRI argued the trial court erred in awarding fees. Much to CRI’s dismay, the appeals court agreed with the trial court on all counts.

  • The lien is invalid.
  • Foreclosure is not permitted.
  • Attorney’s fees awarded to Cheraif.

And all this craziness because CRI altered an invoice date so it would appear it timely served its notice and filed the lien.  Gosh, that got expensive!

The Moral

Tracking lien deadlines can be a challenge. Missing deadlines stinks. But fudging an invoice date so you can “extend” your lien deadline is just not worth the cost of the consequences.

What Information Should You Include In Lien Waivers?

Posted on November 8, 2019 by - In Other Commercial Credit News

Information You Should Include In Lien Waivers

What Information Should You Include In Lien Waivers?

Lien waivers; we can’t get enough of ‘em! A lien waiver is a signed document in which the lien claimant agrees to waive rights to its claim based on payment to be received or received. So, what information should be included in a lien waiver?

Lien Waivers Should Include

Every lien waiver should clearly identify the property name & project location, the debtor’s name (your customer), the invoice or purchase order number, the payment amount and the disputed claim amount. If the lien waiver is for partial payment, you should also include the payment period or a through date.

Conditional or Unconditional: Lien Waivers, Not Love

Unconditional love is great! Unconditional lien waivers, not so much. In the lien waiver world, conditional is always better.

  • Conditional Lien Waivers: A signed document agreeing to waive rights to a claim given conditioned upon receipt and clearance of a final payment. If the client does not get the final payment, the waiver does not waive their rights.
  • Unconditional Lien Waivers: A signed document agreeing to waive rights to a claim. The waiver is not conditioned upon clearance of a final payment. The client’s rights will be waived whether payment is received or cleared.

What Else Can Be Included in Lien Waivers?

This week we shared an article by Jason Lambert, Construction Lien Waiver Provisions Contractors Should Be Using. Lambert recommends that those who request lien waivers include the following in their waivers:

  • Lien waivers don’t have to waive lien rights only.

“…a lien waiver can also include releases of any claims against surety bonds, other statutory rights or claims, and at its broadest, claims against the paying party. One example of a provision that could help accomplish this is a release of ‘any right arising from a payment bond that complies with a state or federal statute, any common law payment bond right, any claim for payment, and any rights under any similar ordinance, rule, or statute related to claim or payment rights.’”

  • Confirmation that others have been paid.

“…contractors can include language requiring the company receiving payment to represent and warrant that all subcontractors of a lower tier have been paid or will be paid within a certain time frame using the funds provided and that these are material representations and inducements into providing payment.”

  • Make them a payment affidavit.

“…turn a lien waiver into a miniature payment affidavit and require the party receiving payment to swear that subcontractors have been paid or will be paid. They can also require that a list of unpaid subcontractors or material suppliers be listed on the affidavit to give them the ability to track a continuing lack of payments or to confirm that previously unpaid subcontractors have been paid as the project continues.”

Lambert also recommends including an indemnification provision.

“…include an indemnification provision requiring the party receiving payment to indemnify them (and maybe even the property owner) from payment claims made by lower tier subcontractors or material suppliers. This can provide another incentive to a payee to use the funds to pay downstream subcontractors if they know that failing to do so will subject them to additional liability.”

What’s in Your Lien Waiver?

Man, I wanted that to sound like the actor “What’s in your wallet?” Alas, I don’t do voice-overs, however I do recommend all lien waivers be reviewed by legal counsel PRIOR to executing the waivers. It’s imperative you remain protected.