Service Area: Notice and Mechanic’s Lien Services

Bankruptcy Proof of Claim Is Late

Posted on May 9, 2022 by - Credit Risk Management, In Other Commercial Credit News

error illustration

“Judge, My Bankruptcy Proof of Claim is Late, But I Have a Good Reason!”

And What’s the Reason? “Um, I Forgot My Password.”

We’ve discussed bankruptcy proofs of claim before and the importance of filing them timely (i.e., don’t miss the bar date!). And when this case crossed my desk, I couldn’t help but share it with you. Why? Because it’s a $53 million example of the bankruptcy courts not messing around. When the bar date is set, you’d better have a darn good excuse for missing it, because a deadline is a deadline – you miss it, you lose it. What’s a good excuse? Well, I’ll give you a hint, waiting until the last minute and forgetting your password is not a good excuse, as one attorney discovered.

Briefly, 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 it notifies the Trustee of the creditor’s claim as well as to what class the claim should be associated.

The Bar Date is a Deadline, Don’t Miss It

The Case: In re U-Haul Co. of W. Va., 2:21-bk-20140 (Bankr. S.D.W. Va. Dec. 10, 2021)

Quick Backstory: About 10 years prior to the bankruptcy filing, there was a class action lawsuit against U-Haul. The Ferrell Class (the class action claimant) was comprised of over 320,000 claimants and sought over $53 million in compensation from the lawsuit.

Fast Forward to Bankruptcy Case: U-Haul Co. of W. Va. filed for bankruptcy protection June 2021. On July 23, 2021, the Clerk of Court set the bar date for August 25, 2021 (So, all parties with claims had a little over a month to file their claim.)

A separate order was entered to allow the Ferrell Class to file claims on behalf of the entire class – which makes sense — what a pain it would be to deal with 320,000+ individual claims. When the court entered the order for the Ferrell Class to file its claim, it included the following:

“The deadline for the Class Claims is August 25, 2021 at 11:59 p.m. The Class Claims must be actually received by the Clerk of the Court on or before that date and time, or such claims shall be forever barred.”

The order also included the various ways to submit the claims: file electronically, in person, via mail, etc.

Claim is Late, Debtor Wants the Claim Barred: OK, I’m going to paraphrase here, but essentially the attorney filing the claim on behalf of the Ferrell Class sat down at his computer late in the day on August 25. He goes to log in to PACER (court electronic filing system) to file the claim, but he can’t remember the login information. I picture someone saying “Uh, the dog ate my homework” but circa 2021/2022 with “Um, Judge, I can’t remember my password.” Because it’s after business hours, there is no one to help him reset his online access, AND since he waited till the last minute, he scrambled to try and do the next best thing… email?

According to the court opinion, the attorney “emailed the Ferrell Class Claim to all counsel in the case one hour and twenty-six minutes late and filed the claim nine hours and 45 minutes late upon obtaining the correct filing credentials.”

The court was not amused. I’m picturing a student being scolded by a teacher – “You’ve had ample time. You’ve done this correctly before. I don’t understand what the problem is.” Of course, the court wasn’t quite so casual or crass, and heard the attorney out.

But It’s an Honest Excusable Mistake: Ultimately, the debtor wanted the Ferrell Claim barred because it was late. The attorney for the Ferrell Class argued that “technical difficulties” (i.e., I can’t remember my password) made it impossible for him to file his claim, and the claim should be allowed as timely under the “excusable neglect” standard.

I will save you from the cringeworthy efforts and excuses (though you can click here to read it in the opinion) and summarize: the attorney pleaded with the court to not punish the class for the missteps of the attorney.

Alas, the court determined the attorney’s neglect was inexcusable. “The reason for the delay in filing was entirely within the control of counsel to the Ferrell Class… the Ferrell Class had ample notice of the Bar Date as well as the dire consequences that would result from missing the deadline.” 

Oh boy, here it comes:

“This failure to plan and allot necessary time to file the proof of claim was not due to any “technical difficulties” as the Ferrell Class asserts. The Ferrell Class does not allege that the late filing was caused by any defect of the CM/ECF system. It is no excuse that the Clerk’s office was closed when counsel attempted to file the claim after business hours on the night it was due. Counsel had over a month to file the claim, during which he could have contacted the Clerk’s office during business hours at his convenience. The deadline was missed in this case due to a careless disregard for the Bar Date, applicable Bankruptcy Rules, and the explicit terms of the Bar Date Order. Compliance with the deadline (or not) was entirely within the control of counsel to the Ferrell Class, and the failure to comply under these circumstances is inexcusable.”

What’s the saying?

“A lack of planning on your part does not constitute an emergency on my part.”

Yeah… it fits.

This is a painful – $53M painful – lesson in missed deadlines.

Creditor in a Bankruptcy? Always Remember

  • Be on Time: Too often, creditors miss the bar date to file. Today’s case in point!
  • 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? NCS can assist in filing your bankruptcy proof of claim, contact us today!

Material Suppliers’ Mechanic’s Lien Rights in Indiana

Posted on April 18, 2022 by - Mechanic's Liens & Bond Claims

gold gavel

Material Suppliers’ Mechanic’s Lien Rights for Projects in Indiana

In a significant legal reversal, a material supplier selling to a material supplier now has mechanic’s lien rights in Indiana. For over 100 years Indiana statute has dictated mechanic’s lien rights aren’t available to material suppliers if they are selling to another material supplier. But now… NOW… material suppliers rejoice! Let’s review the case that got us here and look at the steps to secure mechanic’s lien rights in Indiana.

The Case That Made the Difference for Indiana Material Suppliers

On March 10, 2022, the Indiana Supreme Court issued a ruling in the case of Service Steel Warehouse Co., L.P. v. United States Steel Corp. A ruling that reverses a 125-year-old precedent.  Material suppliers selling to material suppliers now have mechanic’s lien rights.  

United States Steel Corp. (the project owner) hired Carbonyx, Inc. (the GC). The GC contracted with Troll Supply, who was hired to fabricate steel for the project. Service Steel Warehouse Co., LP (Service Steel) sold steel to Troll Supply for fabrication.

indiana material supplier ladder of supply

Troll Supply failed to pay Service Steel $452,825.03 for the steel. Service Steel filed a mechanic’s lien and later sued to enforce its mechanic’s lien. The owner argued Service Steel wasn’t entitled to mechanic’s lien rights because Troll Supply did not perform any labor on the jobsite, and under Indiana statute, there are no lien rights for a material supplier to a material supplier. At the time, the trial court agreed and issued a decision in favor of the owner. Service Steel appealed.

The trial court’s decision was reversed when the case went before the Court of Appeals. The Court of Appeals determined the mechanic’s lien statute doesn’t require that Troll Supply provide on-site work, because the significant fabrication work Troll Supply completed off site counted as “substantial portion of the prime contract,” which makes Troll Supply a subcontractor, not a material supplier. If Troll Supply is a subcontractor, then Service Steel’s mechanic’s lien is valid, because supplier-to-supplier is no longer the issue. (I actually wrote about this appeal, you can check it out here.) Then, the project owner appealed the Court of Appeals decision and here we are.

In its decision, the Supreme Court said (and this might be my favorite line from the court opinions I have read) “A mechanic’s lien is a statutory tool to help collect payment for labor and materials that improve real property… It prevents landowners from enjoying their improved property while those who provided the labor and materials get the shaft.”

The Indiana Supreme Court acknowledged Indiana mechanic’s lien law had “long been interpreted to only confer lien rights on suppliers who furnished materials to a recipient who performed on-site work, which meant a contractor or subcontractor.” But the long-standing interpretation is wrong because it “conflicts with the statute’s plain language, which unambiguously allows any person who furnishes materials for the erection of a building to have a lien.”

The decision dives deeper into review of some previous case decisions. The court said there may be times when material supplier to material supplier’s lien could be invalid, but those decisions “rest with the legislature, not the court.” Ultimately, if a material supplier furnishes materials to a project, it is entitled to lien the project for which it supplied materials.

“Under Indiana’s mechanic’s lien statute, a supplier that furnished materials for the erection of a building, regardless of the recipient, can have a lien on that building and the accompanying land. Of course, the supplier must have furnished the materials ‘for the particular building upon which’ it bases its lien.”

Mechanic’s Lien Rights for Private Commercial Projects in Indiana

You aren’t required to serve a preliminary notice; we recommend you serve a non-statutory notice to let everyone on the project know you are furnishing materials and/or services. In the event you are unpaid, you should file your sworn statement and notice of intention to lien with 90 days from your last furnishing. Then, if needed, you should file to suit to enforce the lien within 1 year from filing the lien.

A Win!

Congratulations to Service Steel and its attorney, Joshua Casselman of Rubin & Levin, P.C., for fighting the good fight. Mechanic’s liens are a tremendous tool in construction credit; it’s wonderful to see the good guys win and pave the way for future material suppliers.

Worried about your lien rights? We’re here to help!

When Should the Clerk Record the Mechanic’s Lien?

Posted on March 28, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

hand holding gavel above sketched coins

In Florida, the Clerk of Court Should Record the Mechanic’s Lien on the Date the Lien Is Received

A recent decision by a Florida Court of Appeals was a win for the lien claimant whose mechanic’s lien was received by the Clerk of Court timely but recorded late. This decision, while victorious for the lienor, is a great reminder to always confirm your document has been received and recorded timely.

Review of Florida Mechanic’s Lien Rights

Before we jump to the court’s decision, let’s review Florida lien rights. If you are furnishing to a private project in Florida, you should serve your preliminary notice upon the owner and all parties within the ladder of supply, prior to or within 45 days from your first furnishing. (If you are furnishing specially fabricated materials, you should serve your notice prior to or within 45 days from the date fabrication begins.) The preliminary notice must be received within the 45-day period – not postmarked, received. Your mechanic’s lien should be filed within 90 days from your last furnishing and suit should be filed within 1 year from the filing of the lien.

The Lien Was Recorded Late, By the Clerk of Court

According to the court opinion, lien claimant Pritchett Trucking (Pritchett) supplied lime rock materials and trucking services to a Costco project in Duval County. Pritchett last furnished on January 26, 2018, which means its mechanic’s lien deadline was April 26, 2018.

Pritchett was owed $118,288.83, and in compliance with statute, Pritchett mailed its mechanic’s lien for recording via certified mail. The lien was received by the Clerk’s office on April 23, 2018 – 3 days before the lien deadline. Unfortunately, the Clerks’ office didn’t record the lien until April 30, 2018 – 4 days after the lien deadline.

When its lien was recorded late, Pritchett petitioned the court to have the Clerk re-record the document, backdating the recording to date to the date the Clerk received it (April 23). Pritchett and the Clerk had differing opinions on when a document is officially accepted for recording.

Pritchett argued the Clerk should have recorded it in compliance with section 28.222(3) of Florida statute, which essentially states the clerk will record documents presented for recording with proper payment for the recording fees. Pritchett did mail proper payment with its mechanic’s lien, so the Clerk should have recorded it when it received the documents.

The Clerk argued under compliance of section 695.11 of Florida statute, which states a document isn’t officially accepted by the Clerk until the Clerk affixes the register number.

They key difference in their arguments lies in the definitions of “accepted” and “received.” Here’s what the court had to say:

“We reject the Clerk’s contention…  Section 695.11 provides that a document is deemed to have been officially accepted by the clerk of court and officially recorded when the clerk affixes the register number that is required under section 28.222. The Clerk conflates the issues of when an instrument is required to be recorded, which is addressed by section 28.222(3), and when an instrument is deemed recorded, which is addressed by section 695.11. Here, there were seven days between when the duty to record arose and when the duty was carried out, which was not ‘upon payment.’”

Bottom Line in the Legal Lingo?

The court agreed with Pritchett. Pritchett’s lien should have been recorded the date the lien and fees were received by the Clerk, which was April 23, 3 days before the lien deadline, making the lien timely.

Now, as I mentioned earlier, as a lienor you should always confirm your document has been received and recorded timely. I would also add, waiting until just before the deadline is not ideal; you should allot adequate time for documents to be received and recorded. The onus is on you to ensure your lien rights are secure.

Changes to North Carolina Lien Waivers

Posted on March 14, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Changes to North Carolina Lien Waivers

As of March 1, 2022, North Carolina lien waivers on progress payments are only enforceable for the amount/payment actually received. This an excellent step by legislators to try and narrow the broad scope of lien waivers and improve protections for companies furnishing to construction projects.

Lien Waivers Are Void & Unenforceable Unless…

Under North Carolina’s previous statute, lien waivers were broad and mechanic’s lien rights could be easily, and sometimes inadvertently, waived. Under the new statute, the waivers are “void and unenforceable unless… payment actually received.”

Here’s the new statute:

22B-5. Waiver of liens or claims as a condition of progress payment invalid.

(a) Provisions in lien waivers, releases, construction agreements as defined in G.S. 22B-1(f)(1), or design professional agreements as defined in G.S. 22B-1(f)(5) purporting to require a promisor to submit a waiver or release of liens or claims as a condition of receiving interim or progress payments due from a promisee under a construction agreement or design professional agreement are void and unenforceable unless limited to the specific interim or progress payment actually received by the promisor in exchange for the lien waiver.

Statute is a little dry and frequently confusing, so here are the key points from the above:

Provisions in lien waivers…purporting to require a promisor to submit a waiver or release of liens or claims as a condition of receiving interim or progress payments… are void and unenforceable unless…payment actually received…in exchange for the lien waiver.

Now, despite the good news there is a caveat. This statute only applies to lien waivers for progress payments, it does not apply to lien waivers for final payment or settlement agreements.

22B-5. Waiver of liens or claims as a condition of progress payment invalid.

(b) This section does not apply to the following:

(1) Lien waivers or releases for final payments.

(2) Agreements to settle and compromise disputed claims after the claim has been identified by the claimant in writing regardless of whether the promisor has initiated a civil action or arbitration proceeding.

And the new statute applies to liens attached on or after 3/1/2022.

22B-5. Waiver of liens or claims as a condition of progress payment invalid.

SECTION 3. (b) This section becomes effective March 1, 2022, and applies to liens attached on or after that date.

Please remember, these legislative changes are not a substitute for careful review. You and your legal counsel should always review lien waivers before executing them.

Psst! Here’s a Conditional Lien Waiver Template

That’s right, here’s sample language for a conditional lien waiver.

CONDITIONAL – PARTIAL – WAIVER AND RELEASE

Property Name:

Project Location:

Undersigned’s Customer:

Invoice/Payment Application Number:

Payment Amount:

Payment Period:

Amount of Disputed claims:

Upon receipt by the undersigned of a check in the above referenced Payment Amount payable to the undersigned, and when the check has been properly endorsed and has been paid by the bank on which it is drawn, without any bankruptcy filing by __________________________________ within ninety days thereafter, this document becomes effective to release and the undersigned shall be deemed to waive any notice of lien, any private bond right, any claim for payment and any rights under any similar ordinance, rule or statute related to payment rights that the undersigned has on the above described Property to the following extent.

This release covers a progress payment for all work, materials or equipment furnished by the undersigned to the Property or to the Undersigned’s Customer, for only the Payment Amount or such portion of the Payment Amount as the undersigned is actually paid, and does not cover any retention withheld, any items, modifications or changes pending approval, disputed items and claims, or items furnished or invoiced after the Payment Period.  Before any recipient of this document relies on it, he should verify evidence of payment to the undersigned.                       

Dated:

By:          __________________________________ (Signature)

Its:          __________________________________ (Title)

Questions about a lien waiver? Contact us!

Mechanic’s Liens and Construction Credit, Common Terms

Posted on February 28, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

14 Common Words in Mechanic’s Liens and Construction Credit

Every business has its own keywords, phrases, and acronyms. Heck, one episode of NCIS will give you a full lesson in Naval Criminal Intelligence lingo. While mechanic’s liens and construction credit aren’t nearly as exciting as solving crime, the terms, phrases, and keywords are important. Here are some of the most common keywords and phrases you may hear in the land of mechanic’s liens and construction credit.

1. Key Dates

  • First Furnishing: The first furnishing date is the date on which you first provide materials or perform services for a project.
  • Last Furnishing: The last furnishing date is the date on which you last substantially provide materials or perform services for a project.
  • Completion: Completion is the date of fulfilment of the prime contract for work of improvement.
  • Acceptance: Acceptance is an official act where entry is made in the government records that a public work under contract is completed and accepted.

Note: If you are a subcontractor or material supplier, “completion” is likely not the date you finished furnishing to a project – think of “completion” as the entire project being complete, not just your part.

2. Notice of Commencement: A Notice of Commencement is a notice typically recorded by the owner of a construction project, in the county where the project is located, prior to materials or services being provided to the project. The information provided in the notice of commencement assists in the preparation and service of the preliminary notice.

3. Preliminary Notice: A preliminary notice is a notice typically provided to the owner and/or general contractor as a precondition to filing a mechanic’s lien or serving a bond claim. A preliminary notice may also be known as Prelien Notice, Notice of Furnishing, Notice to Contractor, Notice to Owner. Typically, a preliminary notice is served when you first begin furnishing to a construction project. A preliminary notice is NOT a lien or claim, nor does it reflect negatively upon on any party in the ladder of supply.

Pro-Tip: Preliminary Notices May Be Required on Private and Public Projects

4. Mechanic’s Lien: A mechanic’s lien (aka construction lien) is a lien against real property, filed by a party that provides materials or services to a construction project, when that party hasn’t been paid. It’s a form of security used in the construction industry to recover payment.

Bonus: Full Balance Lien vs. Unpaid Balance Lien

    • Full Balance Lien: the lien is enforceable for the full amount owed, regardless of payments made by the owner.
    • Unpaid Balance Lien: the lien is limited to the unpaid portion of the contract.

Filing in an Unpaid Balance Lien State? Even if your lien is filed timely, it may be unenforceable if the property owner paid the general contractor in full prior to the lien recording, so we recommend filing your lien ASAP.

5. Payment Bond: A payment bond, issued most often on public projects, is issued as assurance of payment to certain parties, should the principal of the bond breach their construction contract. Typically, on public and federal construction projects, the project owner will require the general contractor to obtain a payment bond. Then, in the event the GC fails to pay its subcontractors and suppliers, those parties would pursue a claim against the bond to recover payment.

6. Bond Claim: A bond claim is a written notice that a claimant (e.g., a subcontractor, supplier, distributor) looks to the recipient for payment. Bond claims are frequently served on the surety (the insurance company that issued the bond) and the principal (often the prime contractor/GC) of the bond.

7. Stop Notice: A stop notice alerts the party paying for work of improvement of money due, which can obligate that party to withhold sufficient funds to cover noticed amounts.

8. Lien on Funds / Public Improvement Lien: A lien on funds is a lien against the money owed by the project owner under contract with the general contractor.

9. Demand Letter: A demand served upon a debtor, advising legal action may be taken including, but not limited to, filing a lien or suit to enforce a lien, making a claim against a bond, or filing suit to enforce a bond claim, or whatever other remedies may be available, if payment is not received within a specified time. Copies may also be sent to the owner, prime contractor, and subcontractors on a construction project.

10. Suit to Enforce Your Claim (aka Suit): A suit, or lawsuit, is an action in a court of law to enforce a claim. Is this the same as foreclosure? Foreclosure is a legal action to enforce a lien against real property with the purpose of having the property sold to satisfy the lien. Suit may lead to foreclosure. It has been our experience that suit does not usually result in foreclosure/sale of the property; more often, during the suit phase, settlement agreements are reached without the need for sale of the property.

11. Retainage / Holdback: Retainage is an agreed amount of a contract price retained (or withheld) from a contractor as assurance that subcontractors will be paid, and the job will be completed.

12. 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. There are four types of lien waivers:

  • Partial Conditional: 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: 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: 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: 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.

Pro-Tip: a lien waiver and a release of lien are not the same thing.  

A lien waiver acknowledges receipt of payment whereas a release of lien releases a previously recorded document.

13. Joint Check Agreement: An agreement between two parties, allowing one to make payment through a joint check issued to two or more payees.

14. Release of Lien: A release of lien is a document recorded upon the satisfaction of a claim of lien. In other words, if you filed a mechanic’s lien and have been paid, you must release the lien.

Questions?

If you have questions on any of the above or there are any I haven’t highlighted here, please contact us! There is a lot to learn in mechanic’s liens and construction credit, and we’re here to help.

New Brunswick Mechanic’s Lien Changes

Posted on February 7, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Let’s Take a Look at Some Key Changes to the New Brunswick Mechanic’s Lien

Here’s a brief look at some key changes to New Brunswick mechanic’s lien statute, which came into effect toward the end of 2021.

When Do the Changes Take Effect?

For any contract entered prior to November 1, 2021, you should follow the old statute. All contracts entered on or after November 1, 2021, should follow new statute.

When Is the Lien Deadline?

Under previous statute, the mechanic’s lien deadline was different based on the materials or services provided:

  • File the lien within 60 days from last furnishing materials or materials and services.
  • When providing only services, file the lien within 30 days from last providing services.
  • Those who rent equipment to an owner, contractor, or subcontractor for use on a construction site are considered to have performed a service for which they may have lien rights. If providing rental equipment, file the lien within 30 days from last furnishing.

Under the new statute, all mechanic’s liens should be filed within 60 days, regardless of claimant type (GC, subcontractor, material supplier etc.), however, the 60 days is calculated from varying events. For example, if you are a subcontractor, your lien should be filed within 60 days of the earliest of the following:

Time for registering claim for lien – subcontractor

(a) a certificate of substantial performance is signed or a declaration of substantial performance is made in respect of the contract to which the subcontract relates;

(b) the contract to which the subcontract relates is completed, abandoned or terminated;

(c) the subcontractor last supplies services or materials for the improvement;

(d) a certificate of completion of subcontract is signed or a declaration of completion of subcontract is made in respect of the subcontractor’s subcontract; and

(e) a certificate of completion of subcontract is signed or a declaration of completion of subcontract is made in respect of a subcontract to which the subcontractor’s subcontract relates.

Clearly, there are several factors that could impact your lien deadline. As a best practice, you should always obtain a legal opinion, to ensure you are best protected. However, to be conservative, you should file your lien within 60 days from last furnishing.

Notice to Owner for Residential Projects

Previously, New Brunswick’s mechanic’s lien statute applied to commercial and residential, and neither had a preliminary notice (or Notice to Owner) requirement.

Under the new statute, there is now a preliminary notice requirement if you are a general contractor furnishing to a residential project. The Notice to Owner must be served within 45 days from first furnishing. If you’re a contractor and you fail to serve the notice, you will not have mechanic’s lien rights.

Fortunately for other parties in the ladder of supply (subcontractors & material suppliers), the Notice to Owner is not required, and if the GC fails to serve its notice, subs’ and suppliers’ lien rights won’t be impacted.

Holdback aka Retainage

Previously, holdback was 15% for contracts over $15,000. Now, holdback is 10% of the contract price on private projects and 5% for public (Crown) projects.

You Have a Right to Information

According to an article by Michael D. Heikkinen and attorney with Cox & Palmer, you can submit a request for information:

The new Act greatly expands lienholders’ rights to information. A party with a right to lien may provide a written request for information from an owner, contractor, subcontractor, Crown or local government, as the case may be. Examples of information that may be requested from an owner or contractor may include:

    • the names of all parties to the contract,
    • the contract price;
    • a copy of any labour and material payment bond;
    • a statement of whether the contract provides that payment under the contract shall be based on the completion of specified phases or on the reaching of other milestones;
    • the name and address of the financial institution at which a holdback trust account has been established, if applicable, and the name of the account holder;
    • a statement of deposits and withdrawals from any holdback trust account; and
    • information regarding the state of account between the owner and the contractor.

A party receiving a written request for information must provide it within twenty-one (21) days. A party who fails to provide the requested information within the twenty-one (21) day time limit or who knowingly or negligently misstates the information requested is liable to the person who made the request for any damages suffered as a result.

Seek a Legal Opinion

Please remember, today’s post is not an exhaustive list of the changes implemented under the new New Brunswick mechanic’s lien statute. If you have questions about your specific situation, please contact us and we will work with you and the attorney to obtain a legal opinion.

States that Require Lien Waivers to be Notarized

Posted on February 1, 2022 by - Mechanic's Liens & Bond Claims

Which States Require Lien Waivers to be Notarized?

We are often asked “Does this lien waiver have to be notarized?” and the answer is “Yes, in Georgia, Mississippi, and Wyoming.” Let’s review these three states and their lien waiver requirements.

Lien Waivers in General

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.

There are four primary types of lien waivers:

  1. Partial Conditional: A signed document agreeing to waive rights to a claim for a dollar amount or through a specified date, conditioned upon receipt and clearance of the partial payment.
  2. Partial Unconditional: A signed document agreeing to waive 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.
  3. Final Conditional: A signed document agreeing to waive 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.
  4. Final Unconditional: A signed document agreeing to waive 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.

Georgia Lien Waivers

In Georgia, there are two primary lien waivers: Interim Waiver and Release Upon Payment  and Waiver and Release Upon Final Payment. Soon, in January 2021, Georgia lien waivers will be changing (you can learn more about that here), but as of this writing, be sure your lien waiver format is in compliance with O.C.G.A. § 44-14-366. Here’s an example of an Interim Waiver and Release Upon Payment.

Technically, Georgia lien waivers require a witness and seal, which means a corporate seal could be used. In the absence of a corporate seal, notarize them.

Note the wording in the last paragraph of the waiver!  If a waiver is signed and payment is not received, you may reinstate your rights by recording an Affidavit of Nonpayment or a Claim of Lien within the time frame specified.  The requirements for the Affidavit of Nonpayment will also be changing as of January 1, 2021.

Mississippi Lien Waivers

Like Georgia, Mississippi (§85-7-419) also has two primary lien waivers: Interim Waiver and Release Upon Payment and Waiver and Release Upon Final Payment. The interesting thing about Mississippi lien waivers is the final waiver needs to be notarized twice! Here’s an example of the final lien waiver, note the two notary sections:

Also like Georgia, Mississippi allows for the recording of an Affidavit of Nonpayment to reinstate your rights when a waiver is given but payment is not received.

Wyoming Lien Waivers

Rounding out our list is Wyoming (Wyo. Stat. § 29-10-101). Unlike Georgia, Mississippi, and Texas, Wyoming’s lien waivers follow one general format. Though, within the document it clearly identifies whether there are unpaid funds. It also includes a note that if you have questions about the waiver, consult an attorney before executing the document.

Ask Before You Sign

Before you sign a lien waiver, or any document for that matter, take time to carefully review. If you don’t understand the language or have concerns about what you may be waiving, seek a legal opinion. You don’t want to lose mechanic’s lien rights!

*Updated as of 01/01/2022. Original post from 12/2020 – prior to Texas lien waiver changes.

Mechanic’s Liens on Arkansas Residential Projects

Posted on January 31, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Mechanic’s Liens on Arkansas Residential Projects

In some states, the preliminary notice requirements and deadlines for securing mechanic’s lien rights are different depending on whether the project is residential or commercial. Arkansas is one of those states. As one home improvement contractor recently discovered, following the statutory requirements are important to secure your right to file mechanic’s liens on Arkansas residential projects.

Arkansas Statute Changed Effective 2021

The case at the center of today’s post is from a contract entered into in February 2019. In 2019, Arkansas statute required a residential contractor to serve a preliminary notice, or the contractor would lose its mechanic’s lien rights and not be allowed to enforce any claim against the contract.

“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.”

This is important, because in July 2021, Arkansas legislature amended the statute: If a residential contractor fails to serve the notice to owner, the contractor will not have lien rights.  Although the contractor will not have lien rights if it fails to serve the notice, statute no longer bars a residential contractor from bringing an action to enforce any provision of the residential contract.

So, if this case were based on a contract executed after July 2021, we probably wouldn’t be writing this post.

Mechanic’s Liens on Arkansas Residential Projects Circa 2019 & Today

As I mentioned, in 2019 Arkansas statute required a residential contractor to either serve a preliminary notice or include the notice within the contract.

Then, and this part remains in effect today, In the event the party was unpaid, a notice of intent should be served at least 10 days prior to filing the lien and the lien filed after last furnishing but within 120 days from last furnishing.

Contractor Fails to Serve Preliminary Notice, Loses Lien Rights & All Claims

In Sluyter v. Wood Guys, LLC, 2021 Ark. App. 442 – Ark: Court of Appeals, 4th Div. 2021, the Sluyters hired Wood Guys, LLC (Wood Guys) to refinish hardwood flooring in their home. Wood Guys provided labor and materials totaling $5289.95.

Unfortunately, a dispute arose between the Sluyters and Wood Guys and the Sluyters refused to pay Wood Guys. Wood Guys did not serve the required preliminary notice, but it did file a mechanic’s lien and proceeded with suit to enforce the lien.

The circuit court ruled in favor of Wood Guys, stating Wood Guys was a “home improvement contractor,” not a “residential contractor.” An important difference under Arkansas’ then statute, because as a home improvement contractor, a preliminary notice was not required.

The Sluyters appealed the circuit court’s decision, and argued Wood Guys failed to serve the required preliminary notice and should be “barred from bringing any action to enforce the provisions of the contract, and the mechanic’s lien…”

The Court of Appeals sided with the Sluyters. The decision came down to the definition of residential contractors, residential building contractor, and home improvement contractor. More specifically, Wood Guys is classified as a “contractor” and the improvement was to a “residence.” Here’s what the Court of Appeals had to say:

“There is no dispute that (1) the Sluyters, as owners of the single-family residence, held an interest in the real estate; and (2) Wood Guys directly contracted with the Sluyters for the repair and replacement of wood flooring in the real estate. Therefore, pursuant to the mechanics’— and materialmen’s—lien statutes, Wood Guys is unquestionably a ‘contractor.’ While the term residence or residential is not specifically defined in the statute, the common usage of the word ‘residence’ refers to a place or dwelling in which a person or people live. Here, Wood Guys contracted with the Sluyters to repair the floors in a house in which the Sluyters lived. Consequently, we hold that Wood Guys is a residential contractor subject to provide preconstruction lien notice prior to commencement of work. Because Wood Guys failed to provide the required notice, it is barred pursuant to Arkansas Code Annotated section 18-44-114(a)(4) from bringing an action to recover on its contractual and equitable claims. However, our analysis does not end here.”

Wait, this doesn’t review the definition of “home improvement contractor.” Nope, it doesn’t, but don’t worry – the court covered that too. As a matter of fact, if Wood Guys is a home improvement contractor, they are still barred from the mechanic’s lien, because “Arkansas Code Annotated sections 18-44-115(a)(8)(A) & (B) expressly state that a home improvement contractor may not be a lien claimant under the direct-sales-notice exception.”

Guess what? Sluyters win and there are no recovery remedies available to Wood Guys. Of course, the court was sympathetic to Wood Guys, recognizing they did provide labor and materials to the improvement of Sluyters’ property, for which they remain unpaid.

“However, when the issues in this case arose, the relevant statute barred all claims, both contractual and equitable, without preconstruction lien notice. In 2021, the legislature amended the mechanics lien statutes removing the bar against equitable claims, instead providing only that residential contractors may not avail themselves of the benefit of a lien without giving notice before commencement of work. While this legislative amendment comes too late to aid Wood Guys, it now provides a way for residential contractors to seek redress, even when they fail to execute and deliver preconstruction lien notice.”

Pro-Tip: Serve the Notice, Always

Not all states require preliminary notices, and sometimes there is a preliminary notice that is only required based on the project type and who you sold to. In cases like this, if Wood Guys had simply served the preliminary notice – even if they believed it wasn’t required – they could have saved themselves thousands of dollars.

Preliminary notices are a low-cost step in securing your lien rights; as a best practice you should serve the preliminary notice, even if it isn’t required.