Service Area: Notice and Mechanic’s Lien Services

Mechanic’s Lien on a Wind Farm Can Be Complicated

Posted on January 17, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Filing a Mechanic’s Lien on a Wind Farm? Keep These 7 Things in Mind.

Supplying materials or labor to a wind farm project? Securing mechanic’s lien rights is vital to protect your receivable. Make sure you always serve preliminary notices, carefully track your deadlines, and if you need to proceed with a mechanic’s lien on a wind farm, be sure to keep these 7 things in mind.

#1: Correctly Identify the Property Parcel(s)

Wind farms cover large portions of land, frequently occupying thousands of acres, across numerous parcels throughout multiple cities and counties. According to one report, the Roscoe Wind Farm in Texas is sprawled across four counties and over 84,000 acres.

Because of their massive size, it is often difficult to identify the exact parcel(s) where materials were incorporated, or labor was provided. Whenever possible, try and obtain specific project location information before you begin furnishing. Information that may help may include the project address, parcel ID numbers, a GIS map of the area, or even GPS coordinates.

#2: Correctly Identify the Property Owner(s)

In addition to identifying the correct parcel of land, you need to take the time to correctly identify the property owners. Often, there are just as many landowners as there are parcels.

Generally, mechanic’s lien laws dictate the property owner should be served with a copy of the lien. If you furnished to multiple parcels, you need to be sure you serve the owner for each parcel.

When you serve your preliminary notice, take the time to identify each owner. If you have the location information, you can usually obtain property owner information from the county assessor.

#3: Multiple Liens May Be Required

Occasionally these sprawling farms may be under sole ownership (i.e., one person or company owns every parcel of land), but it’s unlikely this would be the norm.

If your materials were incorporated in multiple parcels, you may need to file a lien on each parcel. For example, if you furnished to 8 different parcels, you may need to file 8 liens. It isn’t easy, some argue it’s a nuisance, but it may be a statutory requirement you need to comply with.

On the upside, there is also a chance one lien will cover you. How? There have been cases where courts have accepted one lien filed on multiple parcels, where the parcels had the same owner and were contiguous (i.e., touching one another). As a best practice, use an attorney local to the project, who has construction experience; their legal expertise is vital.

Multiple parcels, multiple property owners, multiple liens – you see where this is going, right?

#4: Title Work Could Be Expensive

It’s not rocket science, but title work costs may cause a bit of sticker shock.

Do the math:

Multiple Parcels X Multiple Owners = Multiple Title Reports

Multiple Title Reports = Expensive

One contractor reportedly filed 159 mechanic’s liens on the Chisholm View Wind Project.

If each of those mechanic’s liens required individual title work and the average cost of title work is $75 per parcel, simple math indicates that title work could cost $11,925.

#5: Preparation and Recording of Liens Will Take Time

Because of the extensive title work, research, and time it will take to properly parse and identify where you furnished, please understand it will take time to prepare the liens.

Don’t wait until the deadline to file the lien. Give yourself plenty of time to ensure all documentation is accurate. You don’t want to lose your security because you rushed and filed the lien against the wrong property.

#6: Be Aware of Easements

What is an easement? “An easement is the grant of a nonpossessory property interest that grants the easement holder permission to use another person’s land.” – Legal Information Institute

Let’s say there is a wind turbine on your property, an easement may be in place to allow the power company to access the wind turbine on your property. It’s your property, but the other party has the right to access a specific part of the property for a specific purpose.

There are several different types of easements, which we won’t go into here. Just know that you may encounter existing easements, which may lead to issues of lien priority.

(Speaking of easements and wind turbines, you may want to check out: Are Lien Rights Available on Wind Turbines?)

#7: The Lien May Be Limited to the Leasehold Interest

A leasehold interest is real property held by a lessee under lease. When liening a tenant improvement, the statutes vary as to whether a lien would be available against the property, the leasehold interest of the tenant, or both.

Often, energy companies will enter into lease agreements with the landowners. The landowner continues to own the real property and the energy company owns the equipment and the output generated.

If there are lease agreements in place, you will need to determine who is liable for the improvements to the project: the fee owner or the lessee.

Take Your Time, Be Thorough, and Protect your Lien Rights

It takes multiple contractors, subcontractors & material suppliers to successfully build one energy farm, which means there are multiple opportunities for payment issues. Supply chain issues, special fabrication, change orders, construction defects, and a company’s low liquidity, are common factors contributing to slow payment or no payment. Proactively securing mechanic’s lien rights on a wind farm will help protect your company in the event of non-payment.

North Dakota Mechanic’s Lien and Bond Claim Rights

Posted on January 10, 2022 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

North Dakota Mechanic’s Lien and Bond Claim Rights

“North Dakota. Be Legendary.” This might be my all-time favorite state slogan. It’s… well, it’s legendary! And although you may not know it yet, recovering funds through mechanic’s liens and bond claims is also legendary. Let’s check out North Dakota mechanic’s lien and bond claim rights.

North Dakota Mechanic’s Lien (N.D. Cent. Code 35-27)

If you are furnishing to a private project, you should protect your mechanic’s lien rights. North Dakota statute doesn’t require a preliminary notice; though, we recommend serving a non-statutory notice to let others know you are furnishing to the project and expect to be paid.

The lien is actually a two-part process. First, you should serve a notice of intent upon the owner at least 10 days prior to filing the lien. Then, you should file your lien within 90 days from last furnishing.

North Dakota is a bit unique, because you might be able to file a late lien (after the 90 day deadline but within 3 years from your first furnishing); however, the lien will be limited to the unpaid portion of the owner’s contract and will not be effective as to bona fide purchasers.

35-27-14. A failure to file within ninety days does not defeat the lien except as against purchasers or encumbrancers in good faith and for value whose rights accrue before the lien is filed, and as against the owner to the extent of the amount paid to a contractor before the recording of the lien. A lien may not be filed more than three years after the date of the first item of material is furnished.

Speaking of the lien being “limited to the unpaid portion of the owner’s contract,” North Dakota is an unpaid balance lien state.

35-27-02. Any person that improves real estate, whether under contract with the owner of such real estate or under contract with any agent, trustee, contractor, or subcontractor of the owner, has a lien upon the improvement and upon the land on which the improvement is situated or to which the improvement may be removed for the price or value of such contribution. Provided, however, that the amount of the lien is only for the difference between the price paid by the owner or agent and the price or value of the contribution. If the owner or agent has paid the full price or value of the contribution, no lien is allowed. Provided further that if the owner or an agent of the owner has received a waiver of lien signed by the person that improves the real estate, a lien is not allowed.

If you need to file suit to enforce your mechanic’s lien, you should serve notice upon the owner prior to filing suit. If you serve this notice via personal service, it should be done at least 10 days prior to filing suit. Serving it via mail? Then you must serve it at least 20 days prior to filing suit. The deadline to file suit is within 3 years from the filing of the lien or within 30 days from receipt of written demand to commence suit.

North Dakota Bond Claim (N.D. Cent. Code 48-01.2)

If you are furnishing to a public project, you should protect your bond claim rights (remember, you can’t file a mechanic’s lien against publicly owned property). Generally, payment bonds are required for general contracts exceeding $200,000. As a best practice, request a copy of the payment bond up front. Once you have a copy of the bond, carefully review the bond to ensure you are covered.

48-01.2-10. 1. Unless otherwise provided under this chapter, a governing body authorized to enter a contract for the construction of a public improvement in excess of two hundred thousand dollars shall take from the contractor a bond before permitting any work to be done on the contract. The bond must be for an amount equal at least to the price stated in the contract. The bond must be conditioned to be void if the contractor and all subcontractors fully perform all terms, conditions, and provisions of the contract and pay all bills or claims on account of labor performed and any supplies, and materials furnished and used in the performance of the contract, including all demands of subcontractors. The requirement that bills and claims be paid must include the requirement that interest of the amount authorized under section 13-01-14 be paid on bills and claims not paid within ninety days. The bond is security for all bills, claims, and demands until fully paid, with preference to labor and material suppliers as to payment. The bond must run to the governing body, but any person having a lawful claim against the contractor or any subcontractor may sue on the bond.

Much like private projects, there is no required preliminary notice; serving a non-statutory notice is recommended. If you need to make a claim against the payment bond, you should serve your bond claim upon the prime contractor within 90 days from your last furnishing. Suit to enforce the bond claim should be filed after 90 days from last furnishing, but within 1 year from completion and acceptance of the project.

What if a payment bond wasn’t required? It’s possible the owner won’t require the contractor to obtain a payment bond. If there is no bond, and it’s a public project, you would pursue your customer directly to recover funds owed. Sometimes this is referred to as “suit against the debtor.”

Need help with your North Dakota mechanic’s lien and bond claim rights? Contact us today!

Bankruptcy Proof of Claim: What if It’s Late?

Posted on January 3, 2022 by - Credit Risk Management

What Happens to Your Claim if Your Bankruptcy Proof of Claim is Late?

Bankruptcy proofs of claim are your key to ensuring the Trustee is aware of funds owed to you by the bankrupt party. And, just like filing UCCs or mechanic’s liens, there are deadlines in play for proofs of claim. What happens to your claim if your proof of claim is filed late? A Bankruptcy Court in North Carolina recently decided one creditor was not entitled to distribution of funds, because its proof of claim reached the court one day after the bar date.

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

The U.S. Bankruptcy Court’s official form includes fields for various pieces of information, such as creditor name and location, the amount of the claim, the basis of the claim, whether the claim is secured, if the claim is based on a lease, and whether the claim is subject to right of setoff.

The Bar Date

The bar date is a deadline by which all creditors must file their proof of claims within the bankruptcy court. It is critical that the proof of claim is filed correctly and timely, whether it’s secured or unsecured, to ensure creditors’ rights are preserved and to maximize any possible distribution.

A Day Late Means Your Hanging Out with the General Unsecured Creditors

In the bankruptcy case of North Carolina New Schools, Inc., the bar date was set for September 13, 2016. One creditor, WorkSmart, Inc., mailed its proof of claim around September 7, 2016, and its claim was received by the court September 14, 2016. One day after the bar date. The bankruptcy Trustee filed an objection to avoid the creditor’s claim, arguing the creditor failed to file its claim timely. The creditor filed a response, claiming a “…’mailbox presumption’ creates a rebuttable presumption that the Claim was received in the ordinary course of business.”

A mailbox presumption? Yeah, I didn’t know what it was either. According to the court “The mailbox presumption is a common law evidentiary principle that permits a party to prove receipt of a document that has been mailed.” Essentially, the creditor argued that because the document was allegedly mailed timely, it should be considered received timely. And although I initially chuckled at the word “common” it is apparently a popular topic. The court went on to explain that courts are split, and there isn’t a definitive answer as to whether the mailbox presumption should apply in the mailing of a proof of claim.

Unfortunately for this creditor, the court decided there is a difference between service of a document and the filing of a document (we just talked about this in another post), and it is the creditor’s responsibility to ensure the document is filed by the deadline.

“…applying the mailbox presumption to the mailing of a proof of claim would complicate, bring uncertainty, and cause undue delay to the bankruptcy claims process. Setting a bright-line rule for the filing of claims is vital to the timely administration of a chapter 7 case. Creditors, with minimal expense or inconvenience, can ensure that a proof of claim is received by the clerk’s office before the deadline by filing their claims electronically or directly at the clerk’s office counter, using some form of priority or overnight mail, or calling the clerk’s office to verify the receipt of the claim.”

And just like that, the creditor’s claim for $169,569 was not entitled to distribution, because it was filed a day late.

The Bankruptcy Proof of Claim Lesson

Make sure your proof of claim is received by the bar date. Navigating a proof of claim? Contact us today and let our experts help you!

Nebraska Construction Lien and Bond Claim Rights

Posted on December 6, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Nebraska Construction Lien (aka Mechanic’s Lien) and Bond Claim Rights

I once heard the state insect of Nebraska is the honeybee. So, I thought it’d bee great if we reviewed mechanic’s lien and bond claim rights in Nebraska! Oh, before we buzz through this information, preserving your lien rights falls under the Nebraska Construction Lien Act, which means Nebraska statute refers to the lien as a construction lien vs. a mechanic’s lien, but the terms are interchangeable.

OK, no more bee jokes, I know they sting.

Nebraska Construction Lien Rights

For private commercial projects, you do not need to serve a preliminary notice, though we recommend serving a non-statutory notice to alert all parties of your involvement. If you’re furnishing to a residential project, there is an optional notice. You could serve a Notice of Right to Assert a Lien upon the owner any time after entering a contract. This notice requires the owner to withhold sufficient funds from the prime contractor.

You should file your construction lien within 120 days from your last furnishing date, and for residential projects, be sure to serve a copy of the recorded lien upon the owner within 10 days from filing the lien. In the event you need to proceed with suit, you should file suit within 2 years from filing your lien, but within 30 days from receipt of written demand to commence suit. [Neb. Rev. Stat. 52-125 – 52-159]

Things to Keep in Mind

  • Nebraska is an unpaid balance lien state, which means the lien is only enforceable for the unpaid portion of the general contract.
  • A Notice of Commencement may be recorded by the lender to ensure the priority of their deed of trust over any subsequent mechanic’s liens.
  • The cap on retainage is 10%.
  • Under NE prompt pay statute, the owner should pay the GC within 30 days from payment request and the GC should pay its subs and suppliers within 10 days from payment request. This is, of course, assuming all work was performed in accordance with the terms of the contract.
  • If the owner or prime contractor records a payment bond, a lien may not be filed. Instead, your claim would be against the payment bond.

Speaking of payment bonds on a private project… You should serve bond claim notice upon the prime contractor within 90 days from your last furnishing and file suit to enforce your claim within 1 year from your last furnishing. [Neb. Rev. Stat. Sec. 52-141]

Nebraska Bond Claim Rights

Typically, payment bonds are required for State projects with general contracts exceeding $15,000.00, or for county board, city, village, or school district projects with general contracts exceeding $10,000.00.

52-118. (2) The labor and material payment bond or bonds referred to in subsection (1) of this section shall not be required for (a) any project bid or proposed by the State of Nebraska or any department or agency thereof which has a total cost of fifteen thousand dollars or less or (b) any project bid or proposed by any county board, contracting board of any city, village, or school district, public board, or officer referred to in subsection (1) of this section which has a total cost of ten thousand dollars or less unless the state, department, agency, board, or officer includes a bond requirement in the specifications for the project.

Much like the construction lien, you do not need to serve a preliminary notice to secure bond claim rights, but as a best practice, send a non-statutory notice to let parties know you are furnishing to the project.

The bond claim should be served upon the prime contractor within 4 months from your last furnishing and suit should be filed after 90 days from your last furnishing, but within 1 year from final settlement.

Need help filing your construction lien or serving the bond claim in Nebraska? We’re here for you!

Serve the Mechanic’s Lien and File the Mechanic’s Lien

Posted on November 8, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Make Sure you Serve the Mechanic’s Lien and File the Mechanic’s Lien

Serve the mechanic’s lien and file the mechanic’s lien. Two actions that are often lumped together or referenced interchangeably. But they are, in fact, two distinct and separate actions. What happens if you file your mechanic’s lien, but don’t serve the mechanic’s lien on the appropriate parties? It will depend on statute, but generally failing to serve the lien where required by statute means your mechanic’s lien is invalid.

Serve and File, What’s the Difference?

To serve a document means to provide a copy of the document to another party; to give them notice. For example, if statute says the owner must receive a copy of the lien, you will serve them with a copy of the lien, which alerts them of the lien being filed on their property. (We’ll get into types of service in a minute.)

To file a document means to provide the document to the appropriate county or state office for the office to record. Filing, also referred to as recording, creates a public record of the document. In the case of mechanic’s liens, the public record of the document is confirmation the property has a lien against it for funds due to the liening party.

Types of Service

State statute will define what is appropriate service of a document, but generally you can serve documents via certified mail, registered mail, overnight mail (e.g., FedEx), or personal service. Of course, each state is different, but here’s a look at a handful of states.

California

In California, the mechanic’s lien should be served “…by registered mail, certified mail, or first-class mail, evidenced by a certificate of mailing, postage prepaid, addressed to the owner or reputed owner at the owner’s or reputed owner’s residence or place of business address or at the address shown by the building permit on file with the authority issuing a building permit for the work…” [CA Civ. Code 8416 (e)]

What happens if you don’t serve a lien in California? Statute is clear: “Failure to serve the copy of the claim of mechanics lien as prescribed by this section, including the Notice of Mechanics Lien required by paragraph (8) of subdivision (a), shall cause the claim of mechanics lien to be unenforceable as a matter of law.”

Florida

In Florida, section 713.18 of the state’s statute provides a thorough explanation of service, but here some of the highlights:

(a) By actual delivery to the person to be served; if a partnership, to one of the partners; if a corporation, to an officer, director, managing agent, or business agent; or, if a limited liability company, to a member or manager.

(b) By common carrier delivery service or by registered, Global Express Guaranteed, or certified mail, with postage or shipping paid by the sender and with evidence of delivery, which may be in an electronic format.

(c)  By posting on the site of the improvement if service as provided by paragraph (a) or paragraph (b) cannot be accomplished.

Statute goes on to say “Failure to serve any claim of lien in the manner provided in s. 713.18 before recording or within 15 days after recording shall render the claim of lien voidable to the extent that the failure or delay is shown to have been prejudicial to any person entitled to rely on the service.”

Pennsylvania

In Pennsylvania, the mechanic’s lien should be served “…by an adult in the same manner as a writ of summons in assumpsit, or if service cannot be so made then by posting upon a conspicuous public part of the improvement.” [Title 49 P.S. Chapter 6, Sec. 1502. Filing and notice of filing of claim]

This means the lien can be served by a person (e.g., sheriff or personal server) or if that doesn’t work, you can also meet the statutory requirement by posting a copy of the lien at the project.

Does Serving the Lien Really Matter? Let’s Ask this Nevada Lien Claimant

The project, Phase 1 of the construction of a medical marijuana facility in Las Vegas, is owned by 4620 Eaker Street LLC (Owner) and for this construction, the general contractor and lien claimant is RL Jaehn Group Construction LLC (GC). Owner hired the GC and the GC hired various subcontractors and material suppliers. Ultimately, Owner fell behind in payments and the GC filed two mechanic’s liens. The first mechanic’s lien was filed for $241,761 and about 6 months later, the GC filed a second lien (adjusted for payments received) for $197,194.

At some point, someone with the Owner’s company did a lien search, and discovered mechanic’s liens had been filed on the project. Of course, there are other issues going on in this case (primarily focused on the frivolity of the GC’s liens) and the case ended up in court. One issue in court was presented by Owner, who argued the GC’s liens were invalid because GC didn’t comply with statute.

During the hearing, the GC confirmed he “never served either notice of lien through any method of service set forth in NRS 108.227.” But the GC claims the Owner had notice of the liens because the GC “sent the notices of liens through regular mail.”

Guess what? There’s no proof that “regular mail” makes it to the intended destination or party.

Hmm, if only there were a form of mail that included “proof” of receipt.

Wait a minute. There IS. Hello certified mail!

Nevada statute (NRS 108.227) clearly outlines the service of a mechanic’s lien, and “regular mail” isn’t on the list.

Nevada statute says, serve a copy of the lien upon the owner:

(a) By personally delivering a copy of the notice of lien to the owner or registered agent of the owner;

(b) By mailing a copy of the notice of lien by certified mail, return receipt requested, to the owner at the owner’s place of residence or the owner’s usual place of business or to the registered agent of the owner at the address of the registered agent; or

(c) If the place of residence or business of the owner and the address of the registered agent of the owner, if applicable, cannot be determined, by:

(1) Fixing a copy of the notice of lien in a conspicuous place on the property;

(2) Delivering a copy of the notice of lien to a person there residing, if such a person can be found; and

(3) Mailing a copy of the notice of lien addressed to the owner at:

(I) The place where the property is located;

(II) The address of the owner as identified in the deed;

(III) The address identified in the records of the office of the county assessor; or

(IV) The address identified in the records of the county recorder of the county in which the property is located.

As you can imagine, the court agreed with Owner – GC’s liens didn’t comply with statute, meaning the liens were invalid.

“We conclude that (GC) did not perfect its liens because it failed to serve (Owner) with notices of the same, rendering its liens invalid as a matter of law.”

In fact, the case ended there. There was no need to discuss the potential frivolity of GC’s liens, because even if they weren’t frivolous, GC still failed to adhere to statute and the liens would be invalid.

Remember, Serve AND File

If you don’t serve the mechanic’s lien AND file the mechanic’s lien, you may find yourself with nothing more than an invalid mechanic’s lien and an unpaid claim.

Need help serving and filing your mechanic’s lien? Contact us!

You can read the case text here: 4620 EAKER STREET LLC v. RL JAEHN GROUP CONSTRUCTION LLC, Nev: Court of Appeals 2021

Indiana Material Supplier Gets a Win in Appeals Court

Posted on November 1, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Appeals Court Determines Indiana Material Supplier Contracted with Subcontractor, Not a Material Supplier; It’s a Win!

In Indiana, a material supplier who contracts with another material supplier is not entitled to mechanic’s lien rights. However, one Indiana Court of Appeals’ judge dug in to further clarify what constitutes a material supplier versus a subcontractor. A case that started as “material supplier to material supplier” shifted to a case of “material supplier to subcontractor” and the lien claimant in limbo was granted mechanic’s lien rights.

Mechanic’s Lien Rights for Commercial Projects in Indiana

You are not required to serve a preliminary notice to secure mechanic’s lien rights on a commercial project in Indiana, though we recommend serving a non-statutory notice, which notifies all parties that you are furnishing to the project.

Your mechanic’s lien, or sworn statement and notice of intention to lien, should be filed within 90 days from your last furnishing. And, in the event you remain unpaid, you should file suit within 1 year from filing the lien and within 30 days from receiving a notice to commence suit from the owner. [IC 32-38-3]

Indiana is a full balance lien state, which means the lien is enforceable for the full amount owed, regardless of payments made by the owner. (This is important in today’s case.)

As mentioned earlier, in Indiana a material supplier contracting with a material supplier is not entitled to mechanic’s lien rights. Why not? Well, in the case we are about to review, the Judge stated:

“This Court has noted that the prohibition of supplier-to-supplier-based liens ‘promote[s] honesty and fair dealing among the parties to a construction contract.’ …If the supplier of another supplier has a right to a lien, any supplier—no matter how far removed from a project’s owner—has the same right… Thus, without the supplier-to-supplier prohibition, a distant supplier could assert a lien against an owner with whom it has had no contact by showing only that it furnished material for a project and that the material was used therein.”

Some may be inclined to argue that no matter how far down the ladder of supply you are, if you supply materials to a construction project and those materials are incorporated in the project, you should have the right to file a lien. In theory, I would agree with that – I think parties in the ladder of supply should be entitled to a right to recover payment. However, I do understand the Judge’s comments about remoteness. I understand that property owners would be at a disadvantage if there are oodles of random material suppliers filing liens on their property. But might I be so brazen and suggest Indiana look at instituting a preliminary notice? A notice that all parties would serve, alerting the owner of possible lien claimants. (A novel idea, I know.) I digress; on with the case.

A Subcontractor, not a Material Supplier

In the case of Service Steel Warehouse Co., L.P. v. United States Steel Corp., the ladder of supply looks a bit like this:

United States Steel Corp. (US Steel) contracted with Carbonyx Inc. (Carbonyx) Carbonyx contracted with Steven Pounds dba Troll Supply (Troll). Troll contracted with CPN Ventures LLC dba Texas Steel (TX Steel) to assist with fabrication and with Service Steel Warehouse Co., L.P. (SSW) to supply materials.

SSW supplied structural steel to the project. Most of the steel was shipped to TX Steel’s warehouse for fabrication (Troll helped with fabrication). At some point, a dispute resulted in US Steel paying Troll $1,780,249 for its fabrication work. However, Troll did not pay SSW the $563,084 SSW claimed it was owed. So, SSW filed a mechanic’s lien within 90 days from its last furnishing. When the lien failed to prompt payment from the owner (US Steel), SSW proceeded with suit to enforce its lien.

US Steel, having already paid over $1.7M to Troll, challenged the validity of SSW’s lien, arguing SSW and Troll were both material suppliers. And, as we now know, material suppliers to material suppliers do not have lien rights in Indiana.

Initially the court sided with US Steel, and that’s how we get here – to SSW’s appeal. Upon appeal, SSW argued Troll was a subcontractor, because Troll performed labor (off-site) in the fabrication of the structures for the project.

US Steel argued subcontractors must perform on-site labor, meaning they must be at the physical project location performing labor. And, since Troll didn’t provide labor at the actual project location, it must be a material supplier.

The Court of Appeals disagreed with US Steel’s argument because statute and case law don’t specify that labor must occur on-site.

“To qualify as a subcontractor, the party must perform some portion of the work for which the owner originally contracted. It is not necessary that the work be done at the construction site, but work must be performed to the contract’s plans and specifications. The work can be performed on material supplied to another subcontractor of the contractor, but the material cannot be generic, stock, off-the-shelf items or items generally available without modification—it must be fabricated uniquely or specially by the contractor for the requirements of the particular project.”

The Court of Appeals went on to say the labor must be substantial for a party to be considered a subcontractor.  What constitutes substantial? Apparently, the thousands of labor hours Troll provided to fabricate the structure components.

“Here, the designated evidence establishes that Troll Supply performed a definite and substantial portion of the prime contract between U.S. Steel and Carbonyx. Based on Carbonyx’s unique plans and specifications, Troll Supply fabricated the majority of the steel components needed for the Project. The components required thousands of labor hours to produce. And the Project’s carbon alloy synthesis process could not have functioned without them. We therefore find that Troll Supply was a subcontractor, not a material supplier, under Indiana’s mechanic’s lien statute.”

Earlier I mentioned Indiana is a full balance lien state. For US Steel, this means if SSW’s lien is valid and enforceable, US Steel will need to pay SSW for its claim – even though, US Steel already paid Troll.

“Accordingly, we hold that Service Steel’s mechanic’s lien is not barred by the supplier-to-supplier prohibition and the trial court erred in entering summary judgment in favor of U.S. Steel on Service Steel’s mechanic’s lien foreclosure claim.”

Not a Done Deal

Now, the case was remanded, which means the whole gang heads back to court to argue other points of the lien validity, like whether the lien was filed timely. But it’s a checkmark in the win column for this material supplier.

Pro Tip: Whenever possible, use a construction attorney when proceeding with suit. You want an attorney that will argue the finer points and details of construction related law; like whether on-site vs off-site work will determine whether a party is a subcontractor or material supplier.

Utah Mechanic’s Lien and Bond Claim Rights

Posted on October 11, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

What You Should Know about Securing Utah Mechanic’s Lien and Bond Claim Rights

Furnishing to a construction project in the Beehive State? Well, today’s post is just for you as we explore Utah mechanic’s lien and bond claim rights.

Utah Mechanic’s Lien Rights

If you are furnishing to a private construction project, you should file a preliminary notice with the State Construction Registry (aka the SCR) within 20 days from first furnishing. The SCR is an online database for required notices for commercial, public, and residential construction projects.

We are often asked “Can I send a late notice?” Yes, for projects in Utah, a late preliminary notice may be filed; however, the lien will only be enforceable for materials and services furnished 5 days or more after the notice is filed.

Need to proceed with a mechanic’s lien? You should file the lien within 90 days from the filing of the notice of completion or within 180 days from final completion of the original contract if no notice of completion has been filed. And you should serve a copy of the lien upon the owner within 30 days from filing the lien.

In the unlikely event you need to proceed with suit to enforce your mechanic’s lien on a commercial project, you should file suit within 180 days from filing the lien.

If the private project is residential, you should familiarize yourself with the Residential Lien Recovery Fund. If the owner can prove compliance with the requirements of the Residential Lien Recovery Fund, the lien will have to be released. The claimant can apply to the fund for payment of the claim provided a judgment has been obtained against the debtor and the claimant is registered with the fund. Suit to enforce a claim under the Lien Recovery Fund must be filed within the earlier of 180 days from filing the lien or 270 days from completion of the original contract.

Have you heard of the Preconstruction Service Lien? This lien is available to those who provide designing or planning services prior to construction. If you provide these services, you should file a Notice of Preconstruction Service on the database within 20 days from first performing service, then file the Preconstruction Service Lien within 90 days from completion of the preconstruction service, and file suit to enforce the lien within 180 days from filing the Preconstruction Service Lien.

Utah Lien Waivers

Utah is one of about a dozen states that has specific lien waiver requirements. Here’s a Utah Waiver and Release Upon Progress Payment followed by a Utah Waiver and Release Upon Final Payment.

Utah Lien Waiver - Partial

Utah Lien Waiver - Final

Utah Bond Claim Rights on Private Projects

Yes, you read that right, a payment bond may be issued for a private project in Utah (Utah Code Ann. 14-2). Generally, payment bonds are required on commercial projects exceeding $50,000, and if the owner fails to require a payment bond, the owner is liable to the claimant. To secure bond claim rights, you should file your preliminary notice with the SCR within 20 days from first furnishing.

There is no statutory provision requiring you to serve a bond claim. However, it is recommended you serve a bond claim upon all parties within 90 days from your last furnishing. If you need to proceed with suit to enforce the bond claim, you should file suit after 90 days from your last furnishing, but within 1 year from last furnishing.

Utah Bond Claim Rights on Public Projects

The process for securing bond claim rights on a public project is nearly the same as it is for private projects. You should file your preliminary notice with the SCR within 20 days from first furnishing or within 20 days from the filing of a notice of commencement, whichever is later. A late preliminary notice may be filed; however, the bond claim will only be enforceable for materials and services furnished 5 days or later after the notice is filed. A preliminary notice is not required if a notice of commencement is not filed.

Generally, there is no statutory provision requiring a bond claim notice. It is recommended to serve a bond claim notice upon all parties within 90 days from last furnishing. If the public entity fails to require a payment bond, the public entity is liable to the claimant and shall make payment to the claimant upon demand. Serve bond claim notice upon the public entity within 90 days from last furnishing.

File suit to enforce the bond claim after 90 days from last furnishing, but within 1 year from last furnishing. If the public entity fails to require a payment bond, file suit against the public entity within 1 year from last furnishing.

Retainage on Utah Construction Projects

Utah’s statute dictates retainage may not exceed 5%:

Utah Code Ann. 13-8-5(3)

(3) (a) Notwithstanding Section 58-55-603, the retention proceeds withheld and retained from any payment due under the terms of the construction contract may not exceed 5% of the payment:

(i) by the owner or public agency to the original contractor;

(ii) by the original contractor to any subcontractor; or

(iii) by a subcontractor.

(b) The total retention proceeds withheld may not exceed 5% of the total construction price.

(c) The percentage of the retention proceeds withheld and retained pursuant to a construction contract between the original contractor and a subcontractor or between subcontractors shall be the same retention percentage as between the owner and the original contractor if:

(i) the retention percentage in the original construction contract between an owner and the original contractor is less than 5%; or

(ii) after the original construction contract is executed but before completion of the construction contract the retention percentage is reduced to less than 5%.

Generally, any retention should be released pursuant to a billing statement from the contractor within 45 days from the date the owner receives a billing statement from the contractor, the date of final acceptance or the date a certificate of occupancy is issued, or the date the contractor accepts final payment, whichever is later.

Utah’s Prompt Pay Statute

The prime contractor should release progress payments to its subcontractors within 30 days after the owner remits payment to the prime. For final payments, the prime contractor should release funds to its subs 10 days after it receives final payment from the owner. [Utah Code Ann. 13-8-5]

Subcontractors should release progress payments to its subs/suppliers within 30 days after it receives payment from the prime. And, similar to prime contractors, the subcontractor should release final payments within 10 days after it receives its final payment from the prime contractor. [Utah Code Ann. 58-55-603]

Questions about securing Utah mechanic’s lien or bond claim rights? Contact us and speak with a specialist today!

Mechanic’s Lien Rights in Canada at a Glance

Posted on October 4, 2021 by - Mechanic's Liens & Bond Claims, Preliminary Notices & Construction Credit

Let’s Talk Mechanic’s Lien Rights in Canada

Over the last few years, several provinces in Canada have modernized or proposed amendments to their mechanic’s lien laws. Notably, Ontario paved the way for longer lien deadlines and prompt pay statutes, with its changes in 2018. Like lien rights in the U.S., each of Canada’s provinces has its own statute, which dictates when/if a notice should be served, when a lien should be recorded, and when a suit action must be initiated. So, let’s travel north and review the steps for securing mechanic’s lien rights in Canada.

Project Types: Private, Provincial Crown, Federal Crown

Although today’s post is primarily about mechanic’s lien rights in Canada, it’s worth noting that projects in Canada will fall into one of three categories:

  • Private: improvement contracted by a private entity, e.g., a person, company, or corporation
  • Provincial Crown: improvement of public works or building under formal contract made by Provincial government
  • Federal Crown: a contract for construction, alteration, or repair of any public building or public work of the Canadian government

Provincial and Federal Crown projects are generally not lienable, and any remedy available to claimants will likely be under a Labour & Material Bond. The Labour & Material Bond is a surety bond issued as assurance of payment to certain parties should the principal of the bond breach their construction contract.

10 Provinces, 3 Territories, 1 Requires a Preliminary Notice

Canada is comprised of 10 provinces: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland / Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, Saskatchewan, and 3 territories:  Northwest Territories, Nunavut and Yukon. Only one requires a preliminary notice to preserve mechanic’s lien rights: Quebec.

For those familiar with securing lien rights in the U.S., it may seem odd to not have a preliminary notice requirement. After all, most states require a preliminary notice and NCS’ research shows 97% of the time serving a notice will prompt payment, reducing the likelihood of a mechanic’s lien.

Though most Canadian provinces do not have preliminary notice requirements, you could serve a non-statutory notice. This gently worded notice alerts parties on the ladder of supply that you are (or will be) furnishing to the project.

Is 1 the loneliest number? If you are furnishing to a project in Quebec, you should serve notice (Declaration of Contract) upon the owner prior to furnishing or prior to the fabrication of specially fabricated materials. The lien (aka legal hypothec), when later filed, will be limited to the materials or services provided after the notice has been served.

I did say only 1 province has a notice requirement, and while that is technically the case, both Ontario and Nova Scotia provide claimants an opportunity to serve a written request upon the owner, prime contractor, or subcontractor for project information and a copy of any payment bond.

Also, Ontario, Prince Edward Island, and Saskatchewan have a Notice of Lien which may be served upon the payer (the owner, prime contractor, and subcontractor), requiring them to retain, in addition to the holdback, an amount sufficient to satisfy a lien.

Lien & Suit Deadlines Will Sneak Up on You

When you review the chart below, you may notice two things right away: the lien deadlines are often calculated from your last furnishing, and the deadlines happen quite quickly. In the U.S., we frequently see lien deadlines within 90-120 days from last furnishing (even 8 months in New York!). The same is not true for Canada, where lien deadlines are generally within 30-60 days from last furnishing.

Mechanic’s Lien Rights in Canada at a Glance

The National Lien Digest provides greater detail, but here are the general lien deadlines for all 13 provinces/territories:

[table id=3 /]

Earlier I mentioned Ontario recently modernized their mechanic’s lien statute. Part of the modernization included the implementation of a longer lien filing period, giving would be claimants an additional 15 days to file their liens. (Lien deadline used to be 45 days from last furnishing.)

Advice for Lien Rights in Canada

Because deadlines are short, carefully track your deadlines, monitor open invoices, and maintain an open line of communication with your customer.

If you have questions about securing lien rights in Canada or need assistance with filing a lien, please contact us! In addition to our network of attorneys in the U.S., NCS has a well-established network of attorneys in Canada who are prepared to assist with your claim.