Service Area: Collection Services

Key Collection Questions & Important Documentation

Posted on July 22, 2019 by - Credit Risk Management

Prep to Collect: Key Collection Questions & Important Documentation

You’ve gone around and around with your debtor for weeks, maybe even months, but still haven’t received past-due payments. You decide you need collection assistance and think about hiring an attorney. These four collection questions can help determine the best debt recovery plan for your business and better assist in communicating with and demanding payment from your customer.

Four Questions to Consider When Placing Your Collection with an Attorney

How Much Am I Owed?

The amount of money you’re owed can greatly impact how you proceed with the collection process. If it’s a larger past-due payment and/or from a high-risk account, you may want to bypass an in-house placement and send your case right to an experienced attorney for review.

How Past-Due Is the Payment?

It’s important to know exactly how long your receivable has gone unpaid. There could be a pertinent underlying reason for late payments, such as your debtor experiencing financial distress, or maybe there are payment issues higher up the ladder of supply. It’s critical to get out in front on the collection process because the longer an amount goes unpaid, the harder it is to collect. Some studies indicate that after six months the collectability of a past-due amount can be reduced by as much as 52%.

Am I Involved In an Ongoing Dispute with the Debtor?

If you’re involved in an ongoing dispute with the debtor, over issues such as invoice discrepancies or quality-of-work, it could result in late payments. Therefore, we recommend placing your collection with an attorney who will work quickly to resolve dispute(s) and ultimately get you paid.

Is It a Secured Amount?

If you have security in place, such as a UCC filing, mechanic’s lien or bond claim, we recommend attorney involvement to best leverage your security. For example, if you have a lien on an unpaid project, an attorney can assist in resolving the balance owed, including, if necessary, foreclosing on that lien. Similarly, if there is a UCC in place, an attorney can proceed with replevin action or repossession through the courts.

Importance of Documentation in the Collection Process

Why Do I Need Supporting Documentation?

Any collection professional needs thorough, up-to-date information to best demand payment from your debtor. Providing the proper documentation at the start of the collection process will allow an attorney to efficiently and effectively handle your claim – putting you in the best position for receiving payment.

What Type of Documents Do I Need?

Supporting documentation? The more the merrier! Every collection attorney requires basic information such as the debtor’s full name, physical address and the amount owed. However, we recommend you also provide any additional paperwork that supports your claim. This could include signed invoices, written contracts or agreements, proofs of delivery and/or bills of lading. With access to proper backup documentation, the collector can speak more intelligently regarding your claim and even speed-up the collection process.

Important Documents to Include

  • Contract or Agreement
  • Credit Application
  • Invoices and Statement of Account: this should include copies of returned / NSF checks
  • Purchase Orders
  • Proof of Deliveries
  • Personal Guarantee
  • Trade References
  • Correspondence & Notes: this could include emails, letters (demand letters, payment requests & notices) and documented phone conversations
  • Corporate Certificate: this should include your debtor’s legal identity, including whether it is a corporation, partnership or proprietorship
  • Credit Report

Unfortunately, there’s no sure way of determining the collectability of a past-due account. Therefore, it’s best to weigh the costs against the potential debt recovery and be proactive in your efforts – start taking steps to secure future receivables today.

Are you caught up in past-due payments and need some collection expertise? Let our national network of attorneys, specializing in secured and unsecured commercial collections, help get you paid!        

Iowa Lien Attached to Building, Not Lessor’s Property

Posted on July 12, 2019 by - In Other Commercial Credit News

Who Is Responsible for The Costs Associated with The Construction of The Facility, The Lessor, Lessee or Both?

In Iowa, the Lien Attached to the Building, Not the Lessor’s Property

A lessor owns the real property, signs a 50-year lease with the lessee and the lessee builds a facility on the leased property. Who is responsible for the costs associated with the construction of the facility, the lessor, lessee or both? According to the Iowa Supreme Court, the costs are the responsibility of the lessee, which means the liens can only attach to the lessee’s building and not the real property.

The Case Before the Iowa Supreme Court

Cargill, Incorporated (Cargill) signed a 50-year lease with HF Chlor-Alkali, LLC (HF). Cargill owned the land and the lease was established to permit HF to build a manufacturing facility on the property. HF hired general contractors, who in turn hired multiple subcontractors and suppliers to build the facility. All construction contracts were made with HF – no one contracted with Cargill – and HF owned the building.

What happens next is no surprise: parties in the ladder of supply weren’t paid for the construction of the facility. Mechanic’s liens were filed, and the lien claimants pursued foreclosure actions.

Cargill objected to the foreclosure of the liens against its property and argued the liens could only attach to the building owned by HF and not the property owned by Cargill. Cargill’s argument relied on the 2007 and 2012 statute changes.

The Iowa Supreme Court agreed with Cargill.

Iowa’s 2007 & 2012 Statute Changes Made the Difference

Iowa modified its mechanic’s lien laws in 2007 & again in 2012. These legislative updates included a refined definition of “owner.” Here’s a quick recap from R. Zachary Torres-Fowler in his recent article, The Lessor of Two Evils: Iowa Supreme Court Holds That Mechanic’s Liens Will Not Attach to the Property of a Lessor for Work Authorized by a Lessee.

“…in 2007, the Iowa legislature removed contracts with ‘the owner’s agent’ as a basis for permitting a mechanic’s lien to attach to the owner’s property.  In 2012, the Iowa legislature further revised the mechanic’s lien statute to narrow the definition of ‘owner’ to exclude persons ‘for whose use or benefit any . . . improvement is made.’”

Iowa statute dictates a lien is available “Every person who furnishes…by virtue of any contract with the owner, owner-builder, general contractor, or subcontractor shall have a lien upon such building or improvement…” So, what does that mean for Cargill? The contracts weren’t with Cargill; thus, Cargill’s property is not subject to the lien. Because HF contracted for and owns the building, the lien can only attach to the building.

What Does this Mean for You?

This should be a warning to those furnishing to potential lessor/lessee situations. Don’t assume mechanic’s lien rights will extend to the property; rights may only be available on the leasehold interest, or as in this case, the building on the property.

Each state handles these situations differently and sometimes statute defers to the language within the contract between the lessor/lessee. You may recall a New York case we reviewed in April, in which the property owner was liable for the construction costs, because the lease specifically required the tenant to make the electrical improvements.

Review your contracts, review property ownership, review the lease whenever possible, and always seek a legal opinion.

Is Mediation or Arbitration Best for Your Business?

Posted on June 21, 2019 by - In Other Commercial Credit News

How to Know Which Is Best for Your Business

Have you found yourself in a construction dispute, trying to decide whether the dispute warrants trips to court for lawsuit litigation? Have you also wondered whether arbitration or mediation will quell tempers and resolve payment issues, while avoiding costly litigation? Then you may be interested in an article we shared via social media this week: Finding the Right Tool for the Job – Resolving Construction Disputes with Mediation or Arbitration, by Patricia L. Morrison and Theron Davis.

Mediation & Arbitration, We’ve Discussed Before

Mediation and arbitration have appeared in our blog before. In fact, in January we discussed the differences between arbitration, mediation, and lawsuits.

As a quick refresher, mediation and arbitration are two forms of alternative dispute resolution, where a neutral third party is present to facilitate resolutions. What is the primary difference between mediation and arbitration? One allows the third party to issue an enforceable (and appealable) decision regarding the dispute.

In mediation, the third party is there to facilitate discussions, not issue a decision to resolve the dispute; whereas, in arbitration, the third party can issue an enforceable decision to resolve the dispute. It’s important to note, in arbitration the arbitrator’s decision can be appealed, though it’s not commonly done.

While each dispute resolution process has its pros and cons, here are a few more items to consider, as outlined by Morrison & Davis in their article.

1 – Time.

According to Morrison & Davis, mediation tends to be easier and quicker than arbitration. Here’s why arbitration typically takes longer: “…arbitration hearings usually last much longer than mediations, require a considerable amount of planning and preparation, and often include some litigation-type steps such as the exchange of documents, possible examinations for discovery, and the preparation and exchange of expert reports.”

2 – Money.

Based on the amount of time and work that goes into arbitration, it’s not surprising to hear that mediation is often less expensive.

3 – Business Relationship.

This is an excellent point to consider: do you want to preserve the business relationship? “The biggest advantage of mediation over arbitration is that it avoids the adversarial process and, therefore, may preserve the business relationship. If the parties choose to do so, mediation can focus more on the business interests of the parties than on their legal positions. The parties are able to meet in a neutral environment, with an objective mediator, and concentrate on creating a solution to their dispute. The mediator will assist the parties in identifying the strengths and weaknesses of their positions while discovering the underlying interests at the heart of the dispute.”

4 – Control.

Morrison & Davis state that mediation allows for more control over how the dispute is resolved. In mediation, because the third party can’t issue a decision, the two parties must work together to come to resolution – they need to agree upon the resolution. As opposed to arbitration; when the arbitrator issues its decision, it’s quite possible that one or both parties are unhappy with, but bound to, the result.

As you may have noticed, Morrison & Davis seem to prefer mediation over arbitration. I can certainly see why. Mediation appears to be more relaxed/less formal. If I need to resolve a payment issue with my customer, and I don’t want to kill our relationship, I would be inclined to select mediation. I picture arbitration as the solution when my customer is refusing to communicate, making threats to pull business, in other words, kind of being a bully.

Best Practices for Success in Mediation & Life in General

Morrison & Davis provide a solid list of best practices on how to increase the likelihood of successful mediation; here are a few of the highlights:

  • Make an effort to understand the other side’s position
  • Ensure there is sufficient information and be prepared to discuss technical issues
  • Maintain a flexible attitude and open mind about your settlement options

Turns out, these may be excellent best practices for everyday business interactions – even life in general. Catch you next week!

Lien Dissolution Bond and Suit-To-Enforce Action

Posted on June 14, 2019 by - In Other Commercial Credit News

A Quick Story about a Lien Dissolution Bond and Its Trusty Suit-To-Enforce Action

A “lien dissolution bond,” which can be filed to remove mechanic’s liens from a property, is one of many names or phrases given to bonds of this type. Some other names or phrases you may recognize include: bonded off lien, discharge bond, bonding around/over lien, lien prevention bond, transfer bond, and a new one to me, a target lien bond. (Much to my dismay, “target lien bond” has nothing to do with shopping at the infamous Target.)

While today’s post has little to do with my shopping obsessions, it does focus on what happened in one Massachusetts case when the lien claimant took steps to foreclose on the lien dissolution bond.

Massachusetts Statute Allows for Liens to be Dissolved by Filing a Bond

We’ll get the technical aspect out of the way first. Section 14 of G.L. c. 254 (i.e. Massachusetts mechanic’s lien statute) provides that a lien dissolution bond can be filed with the Registry of Deeds to remove a mechanic’s lien filed against a property.

“Any person in interest may dissolve a lien under this chapter by recording or causing to be recorded in the registry of deeds in the county or district where the land lies, a bond of a surety company authorized to do business in Massachusetts and in a penal sum equal to the amount of the lien sought to be dissolved conditioned for the payment of any sum which the claimant may recover on his claim for labor or labor and materials. Upon the recording of the bond, the lien shall be dissolved…”

Section 14 also explains that a notice of the recorded bond and copy of the bond should be provided to the lien claimant whose lien has been dissolved. And, statute states “The claimant may enforce the bond by a civil action commenced within ninety days after the later of the filing of the statement required by section 8 or receipt of notice of recording of the bond, but such bond shall not create any rights which the claimant would not have had, or impair any defense which the obligors would have had, in an action to enforce a lien.”

Section 14 is referring to the deadlines laid out under section 8 for mechanic’s liens. Here are the mechanic’s lien deadlines from The National Lien Digest –

  • File a Statement of Account no later than the earliest of:
    • 90 days from the recording of a Notice of Substantial Completion,
    • 120 days from the recording of a Notice of Termination, or
    • 120 days from the last furnishing of materials or services by the prime contractor or the subcontractor.
  • File suit to enforce the lien within 90 days from filing the Statement of Account.

In other words, a claimant can proceed with suit to enforce the lien dissolution bond within the same deadlines as they would for a mechanic’s lien: 90 days from the date the lien was filed.

Yikes, That’s A Lot of Technical. What about the Case?

I know – the downside to some of these cases is the crazy technicalities that need to be explained prior to getting to the good stuff. So, on to the good stuff!

The question before the court was “if a claimant proceeds with suit against the bond, are they required to record an attested copy of their complaint?” Because the mechanic’s lien statute states an “attested copy” of the suit action must be recorded with the Registry of Deeds.

The short answer? Nope.

According to an article by Kevin Mortimer and Samuel Tony Starr, the surety is the party that contested the court’s decision.

“…when the supplier/lienholder filed a timely enforcement action against the subcontractor and bond surety, the surety moved for summary judgment—arguing that the lienholder had failed to comply with the strict requirements of Section 14 by failing to record an attested to copy of its complaint with the Registry of Deeds.”

And the lower court sided with the surety. But, what good is a case that isn’t appealed?

Upon appeal, the Supreme Judicial Court overturned the earlier decision, because the language within statute does not state there is a requirement for recordation of an attested copy. In fact, the court compared the lack of language in section 14 to the inclusion of language in section 12.

Essentially: if the statute wanted an attested copy to be recorded, it would have said so.

But wait, there’s more. The surety argued that an attested copy should be recorded to notify other parties of the suit, even if they are non-parties to the action.

“…the Court acknowledged the surety’s valid concern that many entities, including the general contractor and other subcontractors, may have an interest in knowing about a lien dissolution bond’s enforcement action. The surety asserted that since such entities are not named as parties to the action, they would not receive service, and therefore would not have knowledge of it.”

Perhaps We Will See New Legislation?

Well, it’s certainly possible. When the court acknowledged the surety’s concern about notifying interested parties of the suit action, it made a footnote comment that may be fortuitous “Any resolution of this issue, however, is for the Legislature.” So, it’s possible that new legislation may develop from this case.

You can read the court opinion here: City Electric Supply Co. v. Arch Insurance Co.

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!

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!

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!