Service Area: Notice and Mechanic’s Lien Services

How To Find a Construction Law Attorney

Posted on February 3, 2015 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

How to Find an Attorney that Understands the Intricacies of Construction Law

You sent your preliminary notice; your customer’s invoices became past due.

You sent a demand letter; your customer didn’t budge.

You filed a mechanic’s lien, miscommunication is running rampant between the parties within the contractual chain, and yet you still aren’t paid…

It’s Time to File Suit.

“Suit” is an action in a court of law to enforce a claim.  (When enforcing a lien, suit is also referred to as “foreclosure”.)  Since suit is an action brought before the courts, it needs to be handled by an attorney – preferably an attorney that specializes in construction law. But how do you find an attorney that understands the intricacies of construction law, is able to take on your case, and do so at a moderated cost?

Many credit professionals turn to NCS and say “Help!”, because our network of attorneys provides extraordinary expertise.  Due to the valuable relationship cultivated with NCS, our attorneys provide their services at lower hourly rates.  But for those who would prefer to take the path less traveled, begin the search for the right attorney.

Hiring an attorney, a new vendor, should be very similar to the way you hire employees and qualify customers for credit. Before you commit, make sure you can create a comprehensive picture of the attorney’s qualifications, experience & costs.  NCS recommends asking the following questions & taking the following steps when looking for an attorney to take on your suit/foreclosure efforts.

First: the daunting task of actually searching for & locating an attorney.

  • Ask for a referral: ask your business circles for attorney recommendations. Often times, social networks, like LinkedIn, may assist in this effort.
  • Search the web: there are many websites available, but do your due diligence to ensure you are selecting reputable sites.

Second: the interview process.

Yes, you need to interview a perspective attorney. They are going to become an extension of your business – you are hiring them to assist you with your accounts receivable. Here are a few interview questions:

  • What are your core competencies? i.e. Are you familiar with mechanic’s lien/construction law and do you practice these areas of law regularly? If you are interviewing an attorney that typically handles divorce cases, but once in a blue moon handles construction litigation, then perhaps it would be better to move on to the next attorney in your list. Think of it this way: If you need to have a tumor removed from your brain, would you want to go to a general surgeon who dabbles in many types of surgeries or a neurosurgeon that specializes in tumor removal?
  • Have you handled cases like this in the past? You aren’t asking for specifics on a particular case (which is protected by attorney-client privilege), you are simply asking if the attorney has represented a lien claimant in a suit case similar to yours.
  • What is your hourly rate and what is included in that hourly rate? It’s important to know what is included in that hourly rate. Some attorney’s charge separately for research, phone calls and document drafting & mailing, while others are willing to bill on a contingency fee basis.
  • How frequently will you update me on the events of the case? Open communication is imperative, so set an expectation up front. If the attorney provides updates monthly, are you OK with that? Would you prefer an attorney update you weekly? If so, ask.

Finally: embark on the relationship, but do so with caution.

Once you have found, qualified & committed to an attorney, trust the attorney to complete the task at hand efficiently and effectively, but do not go into auto-pilot mode, be an active participant in your case. Of course, if the idea of qualifying an attorney to handle your suit has successfully made your head spin and your stomach knot up with anxiety, contact NCS.

North Carolina Notice to Lien Agent

Posted on January 28, 2015 by - Mechanic's Liens & Bond Claims

North Carolina: the Lien Agent & the Notice

The mechanic’s lien law in North Carolina experienced a rather large change in April 2013: the introduction of the Lien Agent. I would like to believe that the Lien Agent is a super-secret spy infiltrating the construction credit industry on behalf of mechanic’s lien claimants everywhere! Alas, while the Lien Agent may have some super powers, like preventing hidden liens, it’s not quite the super spy I’d hoped for.

Why is there a Lien Agent in North Carolina?

North Carolina had a “hidden lien” problem with construction projects. The mechanic’s liens weren’t hiding under bushes or behind trees, but rather hiding from future property buyers and lending companies. So, the North Carolina legislature came up with a solution: designate a party, for each private construction project, who must receive notification from any contractor or subcontractor supplying materials or labor to said project.

Who is the Lien Agent?

The Lien Agent is designated by the property owner if the project is $30,000.00 or more at the time the original building permit is issued, or, if no building permit is required, at the time the contract is entered into by the owner. According to LiensNC “Only title insurance companies and title insurance agents licensed to do business in North Carolina can serve as Lien Agents”

When should I notify the Lien Agent?

Serve the Notice to Lien Agent within 15 days from first furnishing labor or materials OR before the property is conveyed to a bona fide purchaser.

Is the Notice to Lien Agent the same as the Notice of Subcontract?

NO! These are two separate documents and you should serve both notices in order to protect your mechanic’s lien rights.

  • Serve a Notice of Subcontract on the prime contractor if the owner or prime contractor has properly filed and posted a Notice of Contract.
  • Serve Notice to Lien Agent within 15 days from first furnishing labor or materials or before the property is conveyed to a bona fide purchaser.

Will I always need to serve the Notice to Lien Agent and the Notice of Subcontract?

No, there may be circumstances when one or both of these notices may not be required. However, it is a best practice to serve these notices on every project to avoid any surprises when it’s time to file a mechanic’s lien or proceed with suit to enforce the mechanic’s lien. It would be awful to find out that your mechanic’s lien is invalid because you didn’t serve a notice, serve the correct notice or serve the correct parties with a copy of the notice.

How do I find out who the Lien Agent is?

You could take advantage of a service provider, like NCS, or you could visit the LiensNC website.

“The LiensNC website is a collaborative effort of NIC Services, LLC (NIC) and LiensNC, LLC (LLC) to provide a web-based online system to facilitate the filing of notices to the mechanics lien agents (MLA). The singular goal of this massive effort is to make the filing and finding of MLA notices as simple and as fast as possible for all users. This has been a joint effort of the title insurance underwriter members of the LLC.”

Do you have additional questions about the Notice to Lien Agent or need assistance with serving the Notices? Contact us today!

Recovery via Judgment Liens

Posted on January 20, 2015 by - Credit Risk Management

Will I Ever Receive Payment on Old Judgment Liens and Mechanic’s Liens?

Will you receive payment on old judgment and mechanic’s liens? Short answer: maybe. We watch the markets and monitor index trends closely, because our business fluctuates as the economy fluctuates. Obviously this is no secret – all businesses see ebbs & flows with changes in the economy – that’s what makes the economy work (or not work, depending on who you ask).

This may be a bold statement, but I’ll say it anyway: the real estate market is recovering. Saying this is bold, because the term “recovering” or “recovery” is abundantly overused and has become somewhat diluted throughout this last recession. However, now that there is upward movement in the real estate market, we are seeing benefits trickle down to contractors, subcontractors and suppliers.

How does a rebounding real estate market benefit contractors, subcontractors and suppliers? Well, there is the obvious: more projects are underway, which means more work is available and of course that should mean more money. However, we are also seeing an increase the payment of old debt.

More and more title companies are calling to pay off old judgment liens and mechanic’s liens that remain of record. This makes sense, because you can’t sell your property if the title is clouded aka if there is an encumbrance on your property.

To help ensure you are putting yourself in the best possible position to get paid, we recommend you:

  • Consider getting a judgment, even if your debtor appears to be uncollectable. It’s important that you review your options closely and make sure it is the right fiscal choice based on what you are owed and the costs associated with placing the judgment.
  • Make sure the judgment is recorded as a lien in the county in which the debtor has property. 28 U.S. Code § 3201 – Judgment Liens section (a) Creation clearly states “A judgment in a civil action shall create a lien on all real property of a judgment debtor…”
  • Consider renewing old judgments before they expire. Again, review your options & weigh the costs vs. the benefits, but don’t let these securities lapse.

In a perfect world a mechanic’s lien and/or judgment lien filing will get you paid, but the reality is that recovering monies secured by any instrument can take time. As it turns out, patience may be the next best thing to judgments and mechanic’s liens.

*It is recommended you seek a legal opinion via an experienced attorney. Every situation is unique and may require thorough review.

Serve Notice After First Furnishing

Posted on January 14, 2015 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Serve the Preliminary Notice AFTER You Begin Furnishing

Did you know some states require the preliminary notice to be served after you begin furnishing? Georgia, Iowa, Nevada & Wisconsin case law and/or statute instruct the claimant to serve the required preliminary notice once furnishing has commenced.

Georgia, Iowa, Nevada, and Wisconsin

Georgia

  • Private Projects: Serve Notice to Contractor within 30 days after first furnishing materials or services or within 30 days from the filing of the Notice of Commencement, whichever is later.
  • Public Projects: Serve Notice to Contractor within 30 days after first furnishing materials or services or within 30 days from the filing of the Notice of Commencement, whichever is later.

Iowa

  • Private Projects: Serve notice within 30 days after first furnishing materials or services.
  • Public Projects: Serve notice within 30 days after first furnishing materials or services.

Nevada

  • Private Projects: Serve notice after first furnishing materials or services, but within 31 days from first furnishing materials or services.
  • Public Projects: Serve notice after first furnishing materials or services, but within 30days from first furnishing materials or services.

Wisconsin

  • Residential Projects: Serve notice within 60 days after first furnishing materials or services (10 days if a prime contractor).
  • Public Projects: Serve notice within 60 days after first furnishing materials or services.

Most of us are familiar with states like California: serve the preliminary notice within 20 days of first furnishing. Typically, in states like California, it’s OK to serve the notice before you begin furnishing, as long as you serve the notice within the 20 days. But, as with everything in the construction credit industry, not all state statutes are the same.

Additional Resources from NCS

Interested in knowing which states have preliminary notice requirements for private projects (commercial & residential) or public projects? Check out these NCS Quick References!

For additional clarification on each state’s statute, please take a look at The National Lien Digest© or consult an attorney.

Bankruptcy Payout Priority – Secured Creditors Make Bank

Posted on December 23, 2014 by - Credit Risk Management

Bankruptcy Payout Priority – Secured Creditors Make Bank

As a credit professional, you’ve likely heard this once or twice: “It’s better to be a secured creditor than an unsecured creditor.” After all, credit is how the majority of us do business in today’s economy and, as credit professionals, we want to insure we are paid for the goods & services we provide.

I often hear secured-credit-skeptics say “If my customer files bankruptcy, I won’t see a dime, why waste my money on a UCC or lien” or “Once the courts get paid, there won’t be anything left for me” and, my favorite, “My customer and I have a great relationship, they’ll never fail & I will always get paid.”

“If I file a UCC Financing Statement is it a guarantee that I will get paid?”

As with everything in life, there are no guarantees – with the exception of death and taxes. No, you are not guaranteed to be paid in the event your customer files bankruptcy; however a perfected UCC filing will make you a secured creditor, which would put you in the best possible position to get paid.

“If a company files bankruptcy, which creditors get paid first?”

The bankruptcy code is specific, detailed and, well…it’s long – but here is the basic payout priority:
Payout Priority in Chapter 11 Bankruptcy

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

“Do creditors really get paid?”

Yes, creditors really do get paid – although every bankruptcy exit plan is different. Let’s take a look at a few bankruptcy cases, which demonstrate the immense benefit of being a secured creditor rather than an unsecured creditor.

  • Filene’s Basement “Secured creditors have been paid in full, holders of priority claims and convenience class claims have received 100% of their allowed claims, and unsecured creditors have been paid 50% of their allowed claims.”
  • Uno “The plan gives the holders of $142 million of senior secured debt 100 percent of the stock in the new company. Unsecured creditors who sell their claims will receive about 13 percent.”
  • HomeBanc Corp.  “The accompanying disclosure statement says that unsecured creditors with $223.5 million in claims would recover between 1 percent and 10 percent. Secured creditors with claims of $69.6 million would be paid fully.”
  • Intermet Corp. “The disclosure statement says first-lien creditors should expect a 70 percent recovery while second-lien term loan lenders, owed $107 million, and unsecured creditors with $93 million in claims, could realize around 1 percent.”

Although there are no guarantees, time and time again we see secured creditors receiving more funds than unsecured creditors.

The information presented here illustrates that secured creditors are in the best possible position to get paid. However, this assessment does not guarantee a payout in future bankruptcies.

Small Mistake High Price in Mechanic’s Liens

Posted on December 2, 2014 by - Mechanic's Liens & Bond Claims

In the Field of Mechanic’s Liens, a Small Spelling Error has Large Price Tag

Mechanic’s Lien laws are notoriously complex and courts across the nation are often strict when determining compliance with statutes.  A New York court issued a decision which highlights the high costs of seemingly minor technical mishaps in the filing of a mechanic’s lien.

The Supreme Court of New York

New York County ruled in A. & L. Construction Corp. v. East Harlem Developers, LLC, that the plaintiff, A. & L. Construction Corp., lost the ability to foreclose its mechanic’s lien due to a minor error in the spelling of its name on the lien.

A. & L. Construction (A. & L.) filed proceedings to foreclose a mechanic’s lien against East Harlem Developers in the amount of $150,229.79.  The defendant, East Harlem Developers, filed a motion for summary judgment alleging the mechanic’s lien was invalid because the plaintiff, A. & L. Construction, is not the corporation named on the mechanic’s lien and the contract.

Evidently, on both the mechanic’s lien and the contract, the entity listed is “A&L Construction Corp.,” not “A. & L. Construction Corp.”  The defendant alleged it never did business with A&L Construction, which had different owners than A. & L., never did business with the defendant, and was dissolved three years before the parties contracted and work begin on the project.

The court explained that A. & L. had actually filed a previous action to enforce its mechanic’s lien which was dismissed for lack of standing.  A. & L. was instructed to re-file an action with its correct legal name and to correct its corporate name on the mechanic’s lien.  While A. & L. filed the current action with the correct name, it did not amend the existing mechanic’s lien.

“The Mechanic’s Lien is Unenforceable!”

A. & L. contended it was a mere scrivener’s error that misspelled the corporate name on the contract and mechanic’s lien. It urges that this minor error should not affect the validity of its mechanic’s lien.

The court, however, disagreed.

It turned to the language of the lien statute which requires the notice of lien state the name of the lienor. It found A. & L. failed to provide any evidence that the spelling was a scrivener’s error besides the plain assertion.  Accordingly, the court held the lien to be unenforceable and granted summary judgment to East Harlem.

The case of A. & L. illustrates the harsh consequences of even a minor error in the realm of mechanic’s liens. The difference between “A&L” and “A. & L.” is miniscule.  It is hardly even noticeable; a difference of two periods and two spaces.  A. & L. had likely taken to referring to itself as the simplified A&L for shorthand purposes, and failed to correct itself on official documents.

To a layperson, the error appears minor and understandable.  However, to the New York court, the error was significant enough to cost A. & L. a $150,229.79 mechanic’s lien.

Attorney for Construction Litigation

Posted on November 24, 2014 by - Preliminary Notices & Construction Credit

When to Use an Attorney Who Specializes in Construction Litigation

Selecting the right attorney has a substantial impact on your ability to secure your receivables. There are many considerations when weighing your options.

Why is it important to utilize attorneys who are experts in construction litigation for construction collection cases?

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 your construction attorney local to the project?

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 in close proximity to the project and/or familiar with the parties involved.

What are the consequences if an attorney files a mechanic’s lien in a state where they are not licensed?

Courts have ruled against attorneys who have prepared, signed, filed and pursued mechanic’s liens in a state where they are not licensed to practice law. As a result, any related filing might be ruled invalid.

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 actually provide your organization with more legal expertise and a better overall value.

When hiring an attorney on an hourly basis, does the hourly rate tell the whole story in terms of cost?

Although the hourly attorney rate is important, the expertise of your attorney and method of billing is critical. Below are some questions to ask when evaluating a construction collection attorney:

  • Do I have a trusted relationship with this firm and/or attorney?
  • Is the hourly rate competitive for the region? (i.e. Hourly attorney fees in New York, NY will be higher than in Des Moines, IA).
  • What is the firm’s methodology for billing?

Consistency is the key!

What Are Joint Check Agreements?

Posted on November 18, 2014 by - Preliminary Notices & Construction Credit

What Are Joint Check Agreements?

No, it has nothing to do with twisting your arm while depositing a check at the bank, although I’m certain some may believe this to be true. A Joint Check Agreement is an agreement between multiple parties, allowing one party to make payment through a check issued to two or more payees. These types of agreements require the consent of multiple parties (i.e. the GC & the Sub or the Owner & the GC) and are often used as an additional tool in managing risk associated with construction credit.

What’s the benefit of a Joint Check Agreement?

The primary benefit of a joint check agreement is the additional security it can provide.

  • General Contractors like joint check agreements because they help to ensure the subcontractor will pay its suppliers with the appropriate funds (i.e. Circumvent robbing Peter to pay Paul).
  • Material Suppliers and other parties contracted with subcontractors like joint check agreements for added security on a potentially risky credit situation. (i.e. perhaps there is a lack of solid credit info on the general contractor)

What information should be included in a Joint Check Agreement?

Let’s break down the contents of a sample Joint Check Agreement provided by The Credit Research Foundation.

First, include the date of the agreement, the invoice(s)/purchase order(s) to be covered under the agreement, your company name & address as well as your customer’s name & address.

Date Purchase Order Number
Your Company Name Your Customer’s Name (Party 2)
Your Company Address Party 2 Address
Your Company City/State/Zip Party 2 City/State/Zip

Gentlemen:

YOUR COMPANY NAME has been requested by PARTY 2 to furnish certain (specify:  parts, components, etc.) on credit under purchase order number: ___________________ dated: ________________. The project is identified by PARTY 3 purchase order # __________________, dated: _________________.

Next, identify the authorized signors (the individual at each company that is permitted to execute this type of agreement) as well as the terms and conditions of the sale.

PARTY 2 and PARTY 3 understand and agree that: (1) the undersigned signors are authorized agents of said companies and are duly empowered to enter into and make a binding agreement on behalf of their respective companies; (2) YOUR COMPANY NAME standard terms and conditions of sale which appear on each of YOUR COMPANY NAME invoice and the application of credit shall govern all sales of goods and/or equipment from YOUR COMPANY NAME to PARTY 2 in accordance with its contract with PARTY 3.

Make sure to include wording that covers the materials/labor provided for the particular project. Including a specific project helps alleviate “robbing Peter to pay Paul” (i.e. monies paid are for that particular project).

Applicable only to the products furnished by YOUR COMPANY NAME and as a condition precedent to furnishing said materials for use and incorporation in the aforementioned project, YOUR COMPANY NAME requests that until it is paid in full, all payments made or to be made by PARTY 3 to PARTY 2 with respect to said project, be made payable by check or checks jointly payable to PARTY 2 and YOUR COMPANY NAME. It is understood that all payments shall be timely and in the form of an immediate and unconditional negotiable instrument. Upon issuance of a check by the PARTY 3, it shall be promptly endorsed by PARTY 2 and delivered to YOUR COMPANY NAME. It is understood that this is a continuing Agreement applicable to the original purchase order and the YOUR COMPANY NAME invoice(s) and to any subsequent billing related to this project only.

Identify what actions should be taken in the event one party fails to uphold their end of the agreement. Lastly, include language prohibiting the altering of said agreement and include spaces for all three parties to sign.

Should PARTY 2   refuse to endorse any joint check tendered by PARTY 3, then upon demand by YOUR COMPANY NAME, PARTY 3 agrees to issue a single party check payable to YOUR COMPANY NAME for the amount shown upon the unpaid invoice (s) relating to the goods/materials furnished to and used by  PARTY 2 under purchase order #: __________________________   dated: __________________.
Notwithstanding any additional contract terms that may now or hereafter exist between PARTY 2 and   PARTY 3, this agreement may not be altered or modified without the written consent of YOUR COMPANY NAME or its authorized representative.
This agreement will assist YOUR COMPANY NAME in fulfilling the requirements of PARTY 2 under its contract with   PARTY 3 and is for the mutual protection of each party. In no way should it be interpreted as casting doubt on the ability, integrity or credit worthiness of any interested party. Duly authorized signors should promptly execute this Agreement in the spaces provided below and upon completion, return this original Joint Check Agreement to YOUR COMPANY NAME. An acknowledgment will be mailed to you.

Your Company Name Party 2 Name            Party 3 Name           
By By By
Title Title Title

At-a-Glance: Joint Check Agreement Content Breakdown

  • The name and address of each party associated with the agreement
  • The name/address of the project to which the materials/labor are being supplied
  • The date the parties entered into the agreement
  • The credit terms
  • The steps to be taken, in the event the agreement is not upheld
  • Signatures of all parties involved

Although joint check agreements are an excellent tool for mitigating risk, there are potential pitfalls. Before entering into Joint Check Agreement, or any contractual agreement, it is always best to have legal counsel review the document & its terms.