Service Area: Collection Services

Check Out Our Top 10 Lien Waiver Questions

Posted on June 10, 2019 by - Credit Risk Management, Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

NCS Top 10 List: Lien Waiver Questions

Lien waivers are one of the most popular documents within construction credit. We’ve compiled a list of the top 10 lien waiver questions.

Let’s Dig In!

1. What Is a Lien Waiver?

A lien waiver is a signed document in which the would-be lien claimant agrees to waive rights to its claim based on payment received.

2. What Information Should Appear within the Waiver?

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.

3. Is a Lien Waiver the Same as a Release of Lien?

No, and this is a common misconception. A lien waiver acknowledges receipt of payment whereas a release of lien releases a previously recorded document.

4. Are Lien Waivers the Same in All States?

Most states do not require a specific lien waiver format. However, there are about a dozen states that do have specific lien waiver requirements, including Arizona, California, Colorado, Florida, Georgia, Massachusetts, Michigan, Mississippi, Missouri (residential projects), Nevada, Texas, Utah, and Wyoming.

Important Note: GA & MS allow for an Affidavit of Non-Payment to be recorded if a waiver has been executed and payment has not been received.  Watch the statutory time requirements!

5. Are There Different Types of Lien Waivers?

Yes! Lien waivers are either conditional or unconditional as well as partial or final.

  • Conditional: subject to requirements made or granted on certain terms
  • Unconditional: not subject to requirements; absolute
  • Partial: existing only in part; incomplete
  • Final: the last; end; termination or conclusion

  • Partial Conditional Lien Waiver: waives rights to a claim for a dollar amount or through a specified date, conditioned upon receipt and clearance of the partial payment.
  • Partial Unconditional Lien Waiver: waives rights to a claim for a dollar amount or through a specified date. The waiver is not conditioned upon clearance of a payment.  If the check is not received, or does not clear, the contractor/subcontractor/supplier will have waived their rights to that partial payment.
  • Final Conditional Lien Waiver: waives rights to a claim, conditioned upon receipt and clearance of a final payment. If the contractor/subcontractor/supplier does not get the final payment, or the payment does not clear, the waiver does not waive their rights.
  • Final Unconditional Lien Waiver: waives all rights to a claim. The waiver is not conditioned upon clearance of a final payment.  The contractor’s/subcontractor’s/supplier’s rights will be waived whether payment is received or cleared.

6. Can a Conditional Lien Waiver be an Unconditional Lien Waiver?

Yes, an unconditional lien waiver may be masquerading as a conditional lien waiver. It’s critical to review the entire document (don’t rely on the document title).

We frequently see two phrases within the “consideration clause” of the waiver, which indicate the waiver is unconditional and not conditional:

  • “the receipt whereof hereby acknowledged” and
  • “the receipt and sufficiency of which are hereby acknowledged”

These two phrases are legalese for “I have received the payment and the payment cleared.”

7. Which Waiver is Preferred?

Conditional lien waivers are preferred over unconditional lien waivers, because the “conditions” provide the creditor with leverage, in the event payment is not received or does not clear.

8. I Signed an Unconditional Waiver and the Check Didn’t Clear. Do I Lose My Lien Rights?

Yes, it is likely you would lose your lien rights if the waiver was a final unconditional lien waiver. However, depending on the circumstances in which the waiver was given there could be new causes of action in addition to receipt of bad check.

If you waived your rights and payment didn’t clear, seek legal guidance ASAP!

9. Does a Lien Waiver Waive My Right to Cause of Action for Lost Profits or Disputed Change Orders?

It is likely your right to cause of action will be waived, because frequently waivers will include language such as “all possible causes of action.” That said, it will depend on the specific language within the waiver you signed. You should have an attorney review the waiver and confirm.

Note: If the waiver provides for carve outs, it is recommended you enter the amounts remaining due in this section.

10. Can Payment (Legally) Be Withheld if a Lien Waiver Is Not Signed?

Yes, if a party is requiring an executed waiver in exchange for payment, the payment can be withheld until the signed waiver is received. You may be reluctant to sign a waiver without cleared payment, and I would be too!

In situations such as this, many of our clients will hire an attorney to facilitate the exchange of waiver for payment.  When you hire an attorney to facilitate the exchange, the attorney will hold both the funds and the signed document.

Essentially, the funds are held in escrow until payment has cleared. Once the payment has cleared, the attorney would remit funds to you and provide the signed waiver to the other party. If the funds do not clear, or payment is not made, the attorney will not release the signed waiver to the other party.

Any Other Waiver-Words-of-Wisdom?

Before you sign a waiver you should confirm the dollar amounts match (what you are waiving & the amount received), double check to ensure the document is properly dated and signed, carefully review the waiver language so you don’t inadvertently waive too much, and honestly, there is a lot at risk when executing lien waivers: seek a legal opinion.

Fiber Optic Networks: Can I File a Mechanic’s Lien?

Posted on June 7, 2019 by - In Other Commercial Credit News

Fiber Optic Networks: Can I File a Mechanic’s Lien?

Lienability. One of the many questions we are asked is “Can I file a mechanic’s lien on that?” Or, if we must relay the unfortunate news that an improvement isn’t lienable, we are then asked, “Why can’t I lien that?” Determining what is or isn’t lienable might be the only task that can be just as confusing as the lien laws themselves.

In early 2017 we discussed an Illinois case that left a subcontractor unpaid to the tune of $3M and without the remedy of a mechanic’s lien. In that case it was the construction of a wind turbine, which the court deemed as a trade fixture. and declared mechanic’s liens filed on the property as invalid.

Wind and solar farms are often questionable when it comes to rights under mechanic’s lien statutes, but they aren’t alone. Some electrical work, excavation for pipelines, and even installation of fiber optic technology, also face a questionable fate under mechanic’s lien statutes.

Fiber Optic Technology and Mechanic’s Liens (in Ohio)

Technology shows no sign of slowing down, in fact it will likely increase at the speed of fiber optic technology…

[Do you hear the echoes, see the lightning strikes, and me sporting dark sunglasses in a snappy black suit?!]

OK, so my humor is a bit lame, but, it’s an entertaining way to segue to whether the installation of fiber optic networks is lienable.

First, what do we know about the typical fiber optics network? They can be massive. Much like wind farms, solar farms, and pipelines, fiber optic networks cover multiple parcels – sometimes within multiple counties or even states.

“An optical network—a data communication network built with fiber optic technology—uses a series of optical fiber cables, placed on properties typically owned by someone other than the network provider and spread out over a large geographic area. An operator connects and operates this network from real property known as an exchange, which the provider typically owns or leases.” Nick Pieczonka, author of Mechanics’ Lien Law and Work Performed on Optical Networks

In his article, Pieczonka goes on to answer two critical questions: “Can a lien attach to the property owned or leased by the network provider, even though the contractor performed no physical labor at the property?” and “How are work orders treated and what impact does that have?” The second question is interesting, but I want to focus on the first: can a lien attach to the property.

According to Pieczonka, the answer is yes. Yes, a lien can attach to the property, because the work benefits the entire network. Here’s his answer:

“The end user, not the optical network provider, generally performs work on optical networks on property it owns. So can a lien attach to the optical network provider’s real property—which houses the network’s exchange—even though no work took place on that property? The answer appears to be yes. For example, Ohio’s Revised Code §1311.08 provides, in pertinent part:

[W]here work or labor has been performed or material has been furnished for improvements which are located on separate tracts or parcels of land but operated as an entire plant or concern, and erected under one general contract, the lien for the labor or work performed or material furnished attaches to all such improvements, together with the land upon, around, or in front of which such labor or work is performed or material is furnished…

As a result, because the contractor’s work benefits the entire network and the provider operates the network at an exchange it owns or leases, the lien may attach to the entire improvement, including the exchange itself…  Indeed, the network provider’s lease, ownership documents, or master contract with the contractor may describe the network and the land being improved (i.e., the entire network or the exchange), which would also support the proposition that the lien can attach to the network provider’s exchange…”

It’s important to note, Pieczonka is referring to Ohio statute – as we know, each state’s law is different. But wow – this is huge!

Fiber Optic? Take Note!

There are a few things to keep in mind, if you are providing services similar to those described above:

  • Be prepared for expensive title work (you may have to identify each parcel & the owner of each parcel)
  • Multiple liens may be required
  • You may encounter easements, which could lead to a question of lien priority
  • The lien may be limited to the leasehold interest (depending on the state statute)

Let’s Talk About Commercial Bankruptcy

Posted on June 3, 2019 by - Credit Risk Management, Mechanic's Liens & Bond Claims, UCC Financing Statements

Let’s Talk About Commercial Bankruptcy: The More You Know, the Greater Your Chance at Preserving Your Rights as a Secured Creditor

The more you understand about commercial bankruptcy and the bankruptcy process, the greater chance of preserving your rights as a secured creditor and ultimately receiving payment.

Refresher: What’s a Secured Creditor?

A secured creditor has a security interest over some or all of the assets of its debtor. This status can be achieved and maintained through a variety of credit tools such as Mechanic’s Liens, Bond Claims and UCC filings.

In the event of the debtor’s bankruptcy or default, secured creditors have payment priority over their unsecured counterparts, significantly improving the likelihood of getting paid.

The Breakdown: Chapter 7 vs. Chapter 11

In Chapter 7 bankruptcy, the debtor ceases operations, its assets are liquidated by an appointed Trustee, and the funds are used to pay the outstanding debt.

In Chapter 11 Bankruptcy, the debtor wants to continue operating. The debtor will undergo significant structural changes and arrange to pay its creditors over a set period of time.

The Bankruptcy Proof of Claim

As a creditor, it’s important you take the proper steps to protect your interest. Depending on the type of commercial bankruptcy your customer has filed, you may be required to file a Proof of Claim with the bankruptcy court by the specified date, also known as the bar date.

As per the United States Bankruptcy Court, a Proof of Claim is “a written statement and verifying documentation filed by a creditor that describes the reason the debtor owes the creditor money.” This document is critical because it provides proof to the court that your claim amount is valid and owed, as well as what class to associate your claim with.

Generally, this document will include:

  • Debtor name
  • Case number
  • Creditor information, including mailing address
  • Claim amount
  • Basis for the claim
  • Type of claim (secured or unsecured)
  • Supporting documentation

In the event of Chapter 7 bankruptcy, you must file a timely proof of claim in order to share in any distribution of funds. The bar date refers to a date, established by the bankruptcy court and based on a variety of factors, by which the proof of claim must be filed. Often, creditors fail to submit the document in time and suffer the consequence of an invalid claim. Whether your claim amount is secured or unsecured, be sure to meet the stated deadline to preserve your rights and maximize any potential distribution.

In a Chapter 11 proceeding, it’s typically unnecessary for a creditor to file a Proof of Claim. This is because the debtor is required to file a Schedule of Assets and Liabilities, which formally lists its creditors’ claim amounts. However, filing a Proof of Claim is recommended if:

  • The claim amount is listed incorrectly on the Schedule of Assets & Liabilities or,
  • The claim amount is defined as designated, unliquidated or contingent

In these cases, if a Proof of Claim is not filed, the bankruptcy court will deem the information on the Schedule of Assets & Liabilities as correct and distribute the funds accordingly.

If your debtor has recently filed for bankruptcy, it’s critical to act quickly and take the necessary steps to validate your claim amount. Immediately determine the type of bankruptcy preceding you’re dealing with and whether you should complete a Proof of Claim form. If filing, be sure the document is accurate and ON TIME.

We Can Help

Don’t risk an invalid claim and losing out on payment distribution. Let NCS assist in preparing, filing and monitoring your bankruptcy Proof of Claim today. Contact us for more information!

Arizona Preliminary Notice Changes Coming December 2019!

Posted on May 24, 2019 by - In Other Commercial Credit News, Preliminary Notices & Construction Credit

Arizona Preliminary Notice Changes Coming December 2019!

We are often asked, “Do I have to serve an amended notice if my contract amount increases?” and, “If so, how much does my contract have to increase to warrant another notice?” Generally, we recommend serving an amended notice when your contract amount increases by 20% or more. This recommendation is based on case law, attorney recommendations, and specific statute, e.g., Arizona.

In fact, Arizona’s current statute specifically states a claimant only needs to serve one preliminary notice, unless its contract amount increases by 20% or more, then the claimant should amend its notice.

“A person required by this section to give notice…need give only one notice…unless the actual estimated total price for the labor, professional services, materials, machinery, fixtures or tools furnished or to be furnished exceeds by twenty per cent or more the total price in any prior original or subsequent preliminary notice…”

Soon “30″ Will Be the New “20″ in Arizona!

Earlier this month the Governor of Arizona signed HB1304 which updates the requirement for when an amended notice is required. For any projects where first furnishing occurs on or after 12/31/19, an amended notice will only be required if the contract amount increases by 30% or more.

“Effective for any projects where furnishings are first commenced to be furnished from and after 12-31-19, an additional notice will be required if the estimated total price for the furnishings exceeds by 30% or more the total price in a prior notice under the same contract.” – Legislative Update from The National Lien Digest

What Does This Mean for You?

Currently, under Arizona statute, if your original contract amount is $100,000 and a change order is issued increasing your contract to $120,000 (increased by 20%), you are required to serve an amended preliminary notice.

Here’s what it will look like at the end of December:

Arizona statute as of 12/31/19

Once the new statute is in effect, you may notice a decrease in the number of required amended notices; saving you time & money.

Bond Claim Nitty-Gritties: The 5 W’s and 1 H

Posted on May 13, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Bond Claim Nitty-Gritties: the Who, What, Where, When, Why, and How of Bond Claims

Ahh, payment bonds and bond claims; a payment security often available for those furnishing to public and federal projects and even the occasional private construction projects. Before you can exercise your bond claim rights, you need to be familiar with the 5 W’s of bond claims.

I know the 5 W’s usually go in a certain order: who, what, when, where and why. I also know there is 1 H: how. But let’s shake it up and tackle the 5 W’s (and 1 H) in a different order: what, why, who, when, where, with some how’s throughout.

WHAT is a Payment Bond?

Before we head to bond claims, we need to understand payment bonds. After all, without a payment bond, a bond claim doesn’t exist.

Generally, public and federal construction projects require general contractors to obtain a payment bond. The payment bond is issued as assurance of payment to certain parties should the principal of the bond breach their construction contract.

WHO is a party to the Payment Bond?

There are three primary parties tied to a payment bond:

  1. Obligee: The party protected by a bond, the one who requires the bond to be furnished.
  2. Obligor aka Principal: An entity that has an obligation to pay a debt/the party required to furnish a payment bond.

Example: where the obligee is the owner, the principal is the prime contractor; where the obligee is the prime contractor, the principal is the subcontractor.

  1. Surety: One who agrees to answer for the debt or default of another, usually an insurance company that is compensated for the risk by charging a premium.

Wait, HOW do I know if a Payment Bond has been issued?

You may find it easiest to contact the project owner to confirm whether a payment bond was required and if one was required, ask to be provided with a copy. My advice? Make this request at the beginning of the project when everyone is happy — don’t wait until there are payment issues, because folks are less inclined to share.

How: As a best practice, include language requesting a copy of a payment bond within your preliminary notice. Here’s some sample wording

To Whom It May Concern:

We are writing to you in connection with the above project, where we have contracted with ABC Company to furnish materials (pieces, parts and thingamajigs). We ask that you please forward a copy of any payment bond(s) for this project to the undersigned. Thank you for your assistance.

Sincerely,

Me

WHAT are Payment Bond variations?

Each state has its own statute requiring payment bonds on public projects and the Miller Act applies to payment bonds required on federal construction projects. Some statutes may require the general contractor obtain a payment bond on every construction project, and other statutes may only require a payment bond when the total value of the construction project exceeds a certain threshold.

For federal projects, generally if the construction contract is less than $100,000 but more than $25,000, the contracting officer and prime contractor must agree to a payment protection of:

  • A payment bond
  • An irrevocable letter of credit
  • A tripartite escrow agreement (a federally insured financial institution distributes payments); or
  • A certificate of deposit

However, be aware these requirements may be waived on certain federal projects.

WHAT is a Bond Claim?

A Bond Claim is a written notice that the claimant (e.g. subcontractor, supplier or materialman) looks to the recipient for payment.

WHY serve a Bond Claim?

Why? Because it’s your right to be paid! There are laws (aka statutes) in place to protect your payment rights. Carefully comply with statute and serve a bond claim to recover your claim.

WHO should receive the Bond Claim?

Based on state statute, typically the bond claim must be served upon the general contractor and the surety, however, it is recommended to serve a copy of the bond claim on all parties involved. The more people that know you have not been paid, the more pressure these people will put on the appropriate party to encourage payment.

WHEN to serve a Bond Claim?

Frequently, a bond claim notice must be served within 90 days from last furnishing materials or services (e.g. Arizona). However, some state statutes, such as in Colorado, refer the claimant to the terms of the payment bond. (i.e. “Serve the bond claim notice in accordance with the terms and conditions of the payment bond.”)  Non-Statutory Bonds, such as those obtained by a subcontractor, also look to the terms of the payment bond.

HOW to serve the Bond Claim?

Check the statutory requirements to be certain. Typically, bond claims can be served via certified mail and as a best practice, request the return receipt. In cases where you are close to the deadline, consider also serving the claim via overnight service or personal server.

HOW about some best practice tips?

  • If a there is a payment bond on the project, attempt to obtain a copy of the bond at the time of contract.
  • Confirm the surety is on the Department of the Treasury’s Listing of Approved Sureties.
  • Review the payment bond, along with statute, to ensure you are covered as a potential claimant.
  • Serve applicable preliminary notices in accordance with statute.
  • If you remain unpaid, serve a copy of the bond claim upon all parties.
  • Keep all project documentation in a central location (e.g. invoices, delivery tickets, statement of account etc.)

Need more info on payment bonds or bond claims? Contact us!

Advantages of Construction Attorneys in Litigation

Posted on May 3, 2019 by - In Other Commercial Credit News

Why Hire a Construction Attorney for Construction Litigation?

Excellent question! In today’s post we’ll review a few key considerations when deciding whether you should hire a construction attorney for construction litigation.

Why use attorneys who are experts in construction litigation?

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

What are the advantages of having a local construction attorney?

Mechanic’s lien and bond claim laws can vary drastically from state to state, so having an experienced attorney local to the project is a tremendous benefit. The attorney will know the laws specific to that state and may be near the project and/or familiar with the parties involved.

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

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

But, That’s Not All!

At NCS, our focus is helping you get paid for materials or services provided. But construction is a massive field and in a recent article from Odin Feldman Pittleman PC, construction attorneys can assist with contract conflicts, alternative dispute resolution, bankruptcy, labor disputes, and insurance issues.

According to Odin Feldman Pittleman PC, this is when you should hire a construction attorney:

“Thanks to their extensive legal knowledge, construction attorneys can make any stage of the construction process easier. You may want to consider employing one at the beginning of a project, when you are applying for a permit or need government approval for a project. Construction attorneys can also help you adhere to local, state, federal, and environmental regulations, preventing easily-avoided disputes.

Contract review and preparation are also key areas in which a construction attorney can be a valuable ally. An attorney can assist in the project planning process, then translate your needs to make that project happen into a clear contract that protects your interests. They may also be able to compile other legal documents to supplement your project or protect it from lawsuits.

Finally, construction attorneys are well versed in labor laws and disputes. They can help you settle cases between employees and employers, whether through mediation, settlement, or litigation. Consider hiring a construction attorney if you are faced with a labor dispute of any kind.”

NCS Can Help!

NCS has a nationwide network of construction attorneys with decades of experience. Our attorneys understand that projects often have extenuating or more complicated circumstances (multiple parcels, multiple owners, complex title searches, condominiums, quasi private/public projects, oil and gas liens, etc.) and may be local to and familiar with these projects.

If you need assistance, contact us today!

Oklahoma’s Lien & Bond Claim Requirements

Posted on April 29, 2019 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Are You ‘OK’ with Oklahoma’s Mechanic’s Lien & Bond Claim Requirements?

Furnishing to a construction project in the Sooner State? Today’s quick read post is just for you! In this post we’ll review the steps needed to secure mechanic’s lien and bond claim rights in Oklahoma. Don’t worry, I know your busy, so I’ll make this easy!

Private Projects: Oklahoma Mechanic’s Liens

Oklahoma Private Project

Recap: Serve the Pre-Lien Notice upon the owner and prime contractor within 75 days from last furnishing materials or services. If contracting directly with the prime contractor or subcontractor, file the lien within 90 days from last furnishing. If contracting directly with the owner, file the lien within 4 months from last furnishing. File suit to enforce the lien within 1 year from filing the lien.

Bonus! Oklahoma statute dictates the information that should appear within the Pre-Lien Notice.

42-142.6. 4. The pre-lien notice shall be in writing and shall contain, but not be limited to, the following:

1. a statement that the notice is a pre-lien notice,

2. the complete name, address, and telephone number of the claimant, or the claimant’s representative,

3. the date of supply of material, services, labor, or equipment,

4. a description of the material, services, labor, or equipment,

5. the name and last-known address of the person who requested that the claimant provide the material, services, labor, or equipment,

6. the address, legal description, or location of the property to which the material, services, labor, or equipment has been supplied,

7. a statement of the dollar amount of the material, services, labor, or equipment furnished or to be furnished, and

8. the signature of the claimant, or the claimant’s representative.

Public Projects: Oklahoma Bond Claims

Oklahoma Public Project

Recap: There is no statutory provision requiring a preliminary notice. Serving a non-statutory notice is recommended. Generally, payment bonds are required for contracts exceeding $50,000. Serve the bond claim notice upon the prime contractor and surety within 90 days from last furnishing. No bond claim notice is required if you are contracting directly with the prime contractor. File suit to enforce the bond claim within 1 year from last furnishing.

Other Okie Lien & Bond Claim Facts

Oklahoma is a full balance lien state. In other words, the lien is enforceable for the full amount owed, regardless of payments made by the owner. (commercial projects)

A payment bond is required for contracts exceeding $50,000 when the construction or improvement is a private building on public real property.

In 2013, Oklahoma’s statute was updated to allow applicable profits and overhead costs, in addition to the costs for materials, equipment and labor, to be included in the total claim amount stated within the lien.

Remember, you can’t lien tribal lands. If a payment bond is issued, take time to review the bond carefully. (Check out No Miller Act Bond Claim Rights on Tribal Construction Project)

Oklahoma offers mineral liens as a separate remedy from the standard mechanic’s lien statute. (see §42-144)

I learned how to spell O-K-L-A-H-O-M-A by singing the theme from Oklahoma! the musical. Thank you, Rodgers & Hammerstein.

OK the last bit wasn’t about lien or bond claim rights, but it is true, nonetheless. Plus, I wanted to see if you were paying attention.

Questions about securing your Oklahoma lien or bond claim rights? Just ask!

Condominium Act Meets Construction Act in Ontario

Posted on April 26, 2019 by - In Other Commercial Credit News

Condominium Act Meets Construction Act in Ontario

Ontario’s Construction Act has been a prevalent topic throughout the last year, and with the second wave of amendments rolling out later this year, the conversation isn’t over! Let’s continue our Ontario conversation today with a quick review of the intersection of Ontario’s Condominium Act and its Construction Act.

In Condominium Construction in Ontario? Unique Challenges Ahead, authors Michael Swartz and Jeff Scorgie, explain how land is held under the Condominium Act and the difference between liening a single condominium unit versus a common area.

Ontario Has Condominium Corporations

Under Ontario’s Condominium Act, when a condominium corporation is registered, the property is comprised of two different types: units and common elements.

Units are typically the individual housing space, and according to authors may also include “…other non-residential types of “units” such as parking spaces or storage lockers. In either event, whether residential or non-residential, each “unit” is assigned its own distinct PIN and is owned or leased exclusively by an individual owner.”

Whereas common elements are any space except the individual units.

“…such as landscaped areas, parking lots, guest suites, recreational facilities, hallways, elevators and foyers… What is important to understand is that the “comment elements” of a condominium are “owned” by all of the units on an undivided share basis.”

Improving a Unit?

It’s imperative to only lien the property improved, therefore, if you furnished to the improvement of a unit, and you are unpaid for furnishings, your lien should be filed on the individual unit. Each unit is issued a parcel identification number (PIN), which identifies the parcel of land and its owner.

Improving a Common Element?

Unlike individual units, the common elements of a condominium do not have PINs. 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.

In fact, according to authors, “registering a lien against the common elements requires a lien claimant to list all of the units in the “Properties” section of the claim for lien—thereby liening each unit in the condominium for its proportionate share in the common elements.”

Who Will You Notify of the Lien?

When filing a lien against a single unit, you would notify the property owner. When filing a lien against a common element, you would notify the condominium corporation and ALL unit owners. In an example provided by authors, if the condominium has 200 units with 200 different owners, you must notify all 200 owners. This means you must identify the owners, which let’s face it, could be quite costly (massive title work!).

OK, so what happens if you lien the common elements and individuals want to pay you to have the lien removed from their units? I’ll defer to the experts:

“… under the new Construction Act, an individual unit owner (or an owner of a CEC) can make a motion to court to vacate the registration of the lien as against their unit…. it poses some interesting practical questions for the lien claimant and the other parties in the litigation.  Specifically, if many unit owners vacate a portion of the lien from their individual unit, it could become difficult to track who has paid what amounts into court to clear title.”

My Advice

If you are liening a common element, hire a construction-oriented attorney. You need a legal professional familiar with the law(s) and who can manage payments on your behalf. Don’t try to go it alone!